Research from the Peterson Institute for International Economics shows that a reduction in tariffs by 2 percentage points can reduce inflation (measured by the consumer price index) by 1.3%. Much of America’s current tariff policy comes from The Donald Trump administration’s trade war with Chinaunder which the United States placed 25% import duty on some goods.
In 2019, “Marketplace” hosted Kai Ryssdal spoke with Kevin Feig about how the tariffs affected his company, Foreign Parts Distributors in Miami. Ryssdal checked in again with Feig, who is now chairman of the company, to hear how things are going. The following is an edited transcript of their conversation.
Kai Ryssdal: So it’s been three years – almost three years now, I’m guessing – since we spoke to you back in the days of the very high – profile trade war, which was the economic headline of the day. Now the headlines are different, but your situation, how has it been?
Kevin Feig: Yes, so much has changed in the last three years since we talked. You know, the situation with the tariffs has not changed a bit. We still pay 25% duty to the US government on every product we import from China.
Ryssdal: Give me an example. How much do you pay to the US Treasury Department, right? Because as we talked about in this first interview, not only consumers pay, but companies pay too. What are your – I do not know how you categorize it – monthly rate-induced costs, would you say?
Fig: Yes, so the monthly payments are tenfold. Traditional tariffs, most products were at 2.5%, so go to 25[%], you know, it’s a significant increase. We used to pay anything from maybe $ 30,000 to $ 60,000 a month in duties to the US Treasury Department. Now you look at $ 300,000 to $ 600,000 a month.
Ryssdal: It is not the case that you can change a supply chain for car parts on the go. And we talked about that three years ago, when rates were still relatively new. That said, three years have passed. Have you been able to pick up your stuff from a place that is not as heavily taxed as Chinese imports are?
Fig: Yes, absolutely. It has taken time, it has taken a lot of resources. But we have been able to move maybe 15% to 20% of our purchases away from China. However, if you move certain key part numbers from a factory in China, where you have a long-term relationship, over to India, you may be able to reduce your country costs, but you risk, you know, lack of supply chains, longer lead times, maybe quality problems – like, if you are dealing with car parts is a big, big risk factor.
Ryssdal: I would guess, yes, maybe not the US Trade Representative himself, but you could probably get some people in the USTR’s office on the phone and jump up and down on their desks figuratively. Have you done it?
Fig: So funny you have to mention. I was on an industry call with the USTR representatives a month ago. You know, we told all these guys, “Hey, look, the only people who get hurt by the tariffs are American companies and American consumers. It’s self-inflicted financial pain.” They know – and USTR Tai knows she’s a brilliant woman, you know, just to do a little quick math, I’m saying I bought a ball joint for $ 5 four years ago. That item would land here in Miami. , you know, about $ 6. You include the 25% for the tariffs, plus the huge explosion in shipping that we have not touched yet, the same item that landed at $ 6, now lands at $ 9. Where will the $ 3 of? must find it somewhere.You know we pass it on.And many of the customers we sell to are large, national retailers and they make their markings.And you know, my cost rising $ 3 ends up a $ 15, $ 20 increase at the registry.
Ryssdal: I did not mention shipping, because honestly, I just figured everyone was well aware increased shipping costs in the pandemic, and we’ve talked about it so many times. But that was obviously my bad. But let me ask you this: I do not want to mischaracterize what you say, but you sound deeply frustrated, a little bit bitter, a little angry, but you have protected that this is the way it’s going to be. be and you just have to run your business.
Fig: Yes, I mean, look: you have to deal with what you get. And right now we have accepted that the tariffs will not disappear. We have accepted that freight has somehow gotten out of control. No matter what price increases we pass on, they always lag behind our cost increases.
Ryssdal: So you make less money, that’s what I hear you say.
Fig: Yes, absolutely.
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