The Nuts and Bolts of U.S. - China Tariffs

"Earlier today, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion."

This statement has, quite understandably, created some uncertainty about future cost of goods.

We hear about 25% tariffs and it sounds like the price on a lot of fasteners supplied by distributors like Western Fastener may increase by 25%, but this is not the case, for a couple of reasons.

First and foremost, a relatively small percentage of our inventory is affected by the tariffs. We’ve done the math and determined that only 7% of Western Fastener’s current inventory originates from China, which means that 93% of the fasteners we supply are unaffected by the trade tariffs.

Second, we must remember that the 25% tariff is not necessarily a direct increase in price. The importer pays the tariff based on their cost and may pass some or all of this on to their customers. Most importers and suppliers like Western Fastener are currently bearing some of the burden, netting lower margins rather than passing the entire increase on to customers.

These tariffs are, in many ways, a very big deal. In terms of our customers overall cost of goods however, it will likely have much less impact than one might expect.