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How tariffs are affecting our industry?

Today’s political climate has led to a number of changes in international business. Each day we see or hear comments and updates regarding different legislation on TV, social media, newspapers, or just from friends and family. But what do all of these changes mean for the average person? How is the average consumer impacted by legal changes we see taking place? One area of particular interest and importance for individuals who are involved in the field of metrology are the tariffs put on imported products from China. Today we are going to examine what these tariffs are and who they are effecting the most.

First of all, what is a tariff?

Simply put, a tariff is a tax put on any good or service imported from another country. Importantly, the financial burden of paying a tariff falls on the company importing the good or service, and not the nation or country that imposed the tariff in the first place. What this means is that any tariff put onto products or materials that are being imported from China and used in the metrology industry in the United States must be paid by the company in the United States that needs that product. The theory behind using a tariff is that it might motivate consumers to make purchases from more local sources. The reality in this case, however, is that most of the products being purchased from China need to be purchased from China, leaving the companies you know like Higher Precision left with no choice but to figure out how to handle the cost.

Ok, so what are the tariffs in place now?

Originally, in June of 2018 a 25% tariff was placed on machine tool accessories, as well as all parts and accessories for these products groups, hardness tester parts and their related accessories. Then, in September of 2018 a 10% tariff was put onto all other testers, instruments, and precision tools. This includes any parts and accessories in addition to the devices themselves. As of June 2019 all of the tariffs that were at 10% were raised to 25% with a few exceptions that instead were raised to 15% tariffs. The Office of the United States Trade Representative has published a report listing the hundreds of materials and tools impacted by these tariffs. It does not look like there will be any changes or decreases on these fees in the near future. Certainly no improvements will be seen until the United States and China can agree upon some type of trade deal.

So how does this impact us customers?

Unfortunately, this tariff battle on imported materials from China impacts the customer more than anyone else. Because the burden of paying the tariffs falls on individual companies and not the nation, often that company passes it onto the consumer. Keep in mind that this is not done maliciously. In fact, in order to keep producing the precision measurement tools we know and love, companies pretty much have to pass on the added cost of the tariff. Most metrology producers are not happy burdening the customer, but in order to continue to supply their products it is a necessity. These pricing adjustments are seen at the customer level and help to cover the extra cost. This will explain why some of your regular products may have increased in price over the past year or so.

What can be done about this to help the customers

Unfortunately, not a lot. One course of action to be taken is to contact any local representative in your town, city, or state to alert them to how these tariffs are impacting the customers and businesses. Tariffs are an older method of economic confrontation. They often hurt the economy in the nation that sets them and as we have seen, hurt the individual. While they are intended to discourage foreign imports, this is not realistic when it comes to how many metrology businesses function. We are hopeful that the United States and China can resolve their issues and that with time these tariffs will be revoked resulting in a price decrease for you. However, we are not sure that this will happen soon. We at Higher Precision are also available to answer any other questions you may have about the tariffs.


FREQUENTLY ASKED QUESTIONS

What are tariffs and how do they impact the economy?

Tariffs are an added tax on any good or service that is imported from a foreign country. Sometimes called levies or duties, tariffs raise the price of a product in the nation that collects the tariff. The goal of a tariff is twofold—one, to increase the revenue of the government and two, to protect domestic industries from foreign competition. The idea is that the added tax discourages the importation of foreign goods, punishing the foreign entity, and reducing competition from the foreign companies. However, in practice tariffs do not necessarily have this affect. The current tariffs on imported materials from China to the United States are having a negative impact on the field of metrology. Companies that produce different precision measurement tools and devices rely on imported materials and goods from China and so must take on this additional cost in order to keep supplying these products. Since we in this field rely on imported parts, these tariffs on Chinese materials leave us at a disadvantage and make other countries products better in the price competition.

Who is the most impacted by the tariffs on China?

Unfortunately, the burden of paying the current 25% tariffs on Chinese good falls on the everyday metrology consumer. Because companies themselves are responsible for paying the additional cost resulting from these tariffs, they must pass along this cost to the customers by tacking it onto the current prices. If the companies themselves paid this fee, they would no longer be able to remain in business and therefore unable to supply the parts and tools we all rely on. So while the tariffs of today’s politics are intended to hurt the Chinese economy, they are actually having negative repercussions on the American people. In the case of precision measurement, these tariffs are not helping to encourage buying from local businesses because the makers of these devices rely heavily on imported materials. This all trickles down to customers having to pay more to buy what they need.

What tariffs are in place and what has the timeline been for Metrology products?

Some of the current tariffs being imposed by our government are between the United States and China. The first tariff that was initiated occurred in June of 2018. Machine tool accessories, hardness tester parts, and all the extra parts and accessories for these products groups were given a 25% tariff when imported from China. As of September 2018 all other testers, instruments, and precision tools are given a 10% tariff, which were then raised to 25% in June of 2019. While there are a few exceptions in this group that currently have a 15% tariff, hundreds of materials and products imported from China currently have an additional 25% tax, which is enormous compared to the national average tariff of 1.6%. There do not seem to be any upcoming changes that will decrease these costs and there continues to be a risk of further increase. Until an agreed upon trade deal is reached between the United States and China, it is possible that the tariffs on imported materials and tools that directly impact the field of metrology will continue to rise.

GLOSSARY TERMS

Tariff

A tariff is a tax that one nation imposes on any imported goods or services from another country. Importantly, a tariff is paid for by the company that is importing the good or service and not the nation that imposes the tariff. Also known as levies or duties, tariffs impact the price of metrology products at the level of the consumer since often companies are forced to raise the cost of their parts and tools. Tariffs are intended to decrease foreign competition and increase government revenue. Used as an economic tool to negatively impact the foreign country from which the good or services are imported, more often tariffs result in a negative impact on American consumers.

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