Tariff Implications from 1st September

[Jim Costello]

Following the US governments decision for a 10% tariff on products from China, BLI have advised of a 7% price increase on products supplied and delivered from the 1st September.
For us down under  our retail prices will increase even further with a continued fall in the exchange rates,increased freight rates a $US 100 product will now cost us over $Au 200.

Hopefully,I will not need too much that comes from China

Jim Costello

[up1950s]

BLI email today

On September 1, 2019, the US will impose a 10% tariff on Chinese imports which will affect Broadway Limited Imports products arriving on or after September 1, 2019. Please see the table below for the price increases for five projects that have already been announced, but arriving after September 1—HO PRR T1, HO Baldwin Sharknose, HO GG1, HO EMD F3, HO Streamlined PRR K4. This price increase of 7% is effective retroactively, regardless of whether a preorder has already been placed. Broadway Limited Imports reserves the right to make additional tariff-based price increases depending upon delays (manufacturing or otherwise) that push additional previously announced products into the window of the September 1 tariff. Future announcements will have the tariff already factored into the price.

[EspeeGoldenState]

Prices will go up, but I'm sure if/when the tariff's are reduced/removed, the prices wont go down.

Chris

[ridinshotgun]

Prices will go up, but I'm sure if/when the tariff's are reduced/removed, the prices wont go down.

Chris

Fun fact.  Tariff amount is levied against the commercial invoice price of a product (ie what the importer pays the manufacturer) and not final retail cost.

No possible way that it is 7% of the retail price.

[DKS]

Fun fact.  Tariff amount is levied against the commercial invoice price of a product (ie what the importer pays the manufacturer) and not final retail cost.

No possible way that it is 7% of the retail price.

But the margins on hobby stuff is quite slim... nothing like ordinary merchandise. Clothing, for example... 200-600% markup. Model trains? I'm guessing no more than 10-20%. So the tariff has much more impact on us than most.

[ridinshotgun]

But the margins on hobby stuff is quite slim... nothing like ordinary merchandise. Clothing, for example... 200-600% markup. Model trains? I'm guessing no more than 10-20%. So the tariff has much more impact on us than most.

With close to 20 years working either for, or with, the agency that collects any duty or tarriffs I can say while you are correct that hobby material margins are not as much as general merchandise they are not as low as you guess.

[MK]

Prices will go up, but I'm sure if/when the tariff's are reduced/removed, the prices wont go down.

Chris

That's like gasoline.  Hiccup on Wall St. or the Middle East and it shoots up immediately.  Then it take forever to settle back down.

[Bill H]

The media presents this from an entirely incorrect perspective, immediately wailing away about how this will impact US consumers. The media simply fails to mention, or are not aware, or do not know what it means, that China again devalued their currency almost exactly 10%, so the actual effect to US importers is nil as the cost of the goods produced in China - in US dollars dropped the equivalent of the tariff. but I am sure that some manufacturers will use this to their advantage and the vast majority of the buying public will buy it.

From the WSJ a few days ago "The People’s Bank of China, that country’s central bank, took steps on Sunday to limit the impact of Mr. Trump’s next round of tariffs by letting its currency weaken past the psychologically important point of 7 renminbi to the American dollar for the first time in more than a decade. A weaker currency can make goods cheaper to sell abroad, allowing businesses and consumers to help offset the additional tariffs Mr. Trump plans to impose on Sept. 1."

Kind regards,
Bill

[RBrodzinsky]

The yuan’s devaluation absorbing the cost of the tariffs only works if the merchandise is costed in yuan. If, on the other hand, the importer agreed to purchase price in dollars, than the tariff gets added.

[Steveruger45]

Just received the following from scaletrains

The U.S. government is planning to assess a 10% tariff (tax) on Chinese imports not already subject to previous tariffs.  This includes model trains and is scheduled to take effect on September 1st.
As you know, our locomotives and freight cars are priced in the lower to middle tier of the marketplace which makes them a tremendous value for our customers.  This also means we make less profit than other manufacturers who price their products at the top-end of the market.
We also invest significantly in the future.  This year, we will spend over $1,000,000 dollars in new tooling.  That's likely more than any other HO or N scale company.
The Trump Administration has been unpredictable about tariff percentages and implementation dates.  Since the government's strategy can change at any moment, we've decided to focus on the inbound Operator and Rivet Counter HO Scale DASH-9 shipment for the time being.
Unfortunately, the ship carrying the DASH-9s is slated to dock on September 2nd which is one day after the new tariff takes effect.   At this point in time, we will be required by the U.S. government to pay $10s of thousands of dollars to U.S. Customs and Border Protection for the value of the DASH-9 shipment.
As much as we'd like to absorb the entire cost of the tariff, we're unable to.  If the tariff takes effect on September 1st as proposed, we’ll reluctantly raise prices slightly to share in the increased cost of the DASH-9s.
Operator DASH-9 1st Run
DC/DCC Ready version - increase $5 to $104.99; 5% change
DCC & sound - increase $6 to $155.99; 4% change
Rivet Counter DASH-9 1st Run
DC/DCC Ready – increase $7 to $181.99; 4.2% change
Rivet Counter DCC & sound - $10 increase to $274.99; 3.8% change
If your first reaction is to cancel your preorder for a modest $5 to $10 price increase, please take a moment and consider the only ones hurt in the process are small businesses like ours and our people.
We estimate the tariff will cost us upwards of $100,000 this year and well over $200,000 next year.  We are planning to increase our warehouse size by 67%, hire 1-2 new employees, continue investing greatly in new tooling, and much more.  If we do not share in the cost of the tariff, we will not be able to expand our business and continue our high service levels.
If you're frustrated by this situation, please join us in writing respectful letters to your Federal elected officials to express your concern about how this tariff affects you and the small businesses you support.
We appreciate your understanding and continued business.

[sundowner]

Bottom line consumers always pays

[Steveruger45]

Bottom line consumers always pays

Ain’t that the truth

[Bob]

It is indeed the small businesses that are hit hard by trade wars - consumers pay and so too do small businesses.  It is important that we modelers support the small cadre of manufacturers that play such a major role in keeping our hobby vibrant.  I have really loved the cars and locomotives I have gotten from ScaleTrains, and look forward to my first Dash-9, regardless of what happens with tariffs.

[sundowner]

Good point Bob, most of our manufacturer are small businesses and like the Scaletrains letter explains they get hurt too and can only do so much to take the hit.

[Steveruger45]

It is indeed the small businesses that are hit hard by trade wars - consumers pay and so too do small businesses.  It is important that we modelers support the small cadre of manufacturers that play such a major role in keeping our hobby vibrant.  I have really loved the cars and locomotives I have gotten from ScaleTrains, and look forward to my first Dash-9, regardless of what happens with tariffs.

Totally agree, my last comment was meant more generally rather than specifically to scaletrains and others that support our hobby.   I’m looking forward to getting my currently on pre-order locos from them still..  I’m really smitten with their rivet counter locos in particular.  This trade wars price increase is sad for all of us small company and consumer.  The quality of the product scaletrains produces is IMHO very much worth my continued support for them.  I really want them to produce an SD70M flat rad in SP livery as soon as they can in n scale.