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Trade wars are not fun for customers or suppliers. During high China tariffs times each company will take a hard look at their needs to try to determine if they should move forward with projects that are affected by new higher tariffs (usually temporary).
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China Tariffs, Injection Molding and How to Save Trade wars are not fun for customers or suppliers. During high China tariffs times each company will take a hard look at their needs to try to determine if they should move forward with projects that are affected by new higher tariffs (usually temporary). There are several factors to consider, such as: Do they want to disrupt existing offshore supplier relationships? Can they find alternative domestic suppliers to deliver on the project if they don’t have existing relationships? But like many things in business it comes down to price. Do the new higher China tariffs adversely affect the the project budget so much so that there is no longer any financial benefit to doing business in China. This is of course the point of a punitive tariff, to discourage offshore work and encourage domestic spending. Because price is such an important factor let’s take a look at the math and a case study. An apples to apples project comparison quote to help tell the full story of how a normal 3.1% tariff that is now 28.1% tariff affects the bottom line price of an injection mold that is made in China and imported into the USA. China Supplier with 28.1% Tariff & DDP Shipping USA Supplier with 0% Tariff 8 Cavity Mold – $75,750 Base Quote 8 Cavity Mold - $150,640 Base Quote Delivered with Duty Paid - $88,592 Final Price Delivered - $151,320 Final Price Even with the current high 28.1% tariff on China injection molds that is still a $62,000 savings when you find a supplier who can offer you a legal DDP shipping option. Using the same numbers and a supplier who cannot offer DDP shipping you will still save roughly $50,000. NOTE: the vast majority of China injection mold makers cannot offer you a DDP shipping option but some can. So, what are the takeaways? 1. After China tariffs have been paid, if saving between $50,000 - $62,000 is not enough for you to continue working with a China injection mold maker then working with a USA based injection mold maker and their higher price is the option you are left with. 2. If saving between $50,000 - $62,000 is a plus to you then you will likely stay the course and adjust your existing budgets up a bit to compensate for the new China tariffs…because you are still receiving substantial savings even with the higher tariffs. It is also important to note that many China suppliers will say anything to win your business and will suggest some crazy things to you that are illegal and will land YOU, not them, in big trouble with customs in the USA. One quick example, a supplier may tell you to create two separate PO’s, one for engineering and one for the mold as a way to save on tariffs. This is bad advice and an illegal maneuver. Carefully vet the “solution” that your China supplier offers when it comes to tariffs because most of it is nonsense that comes with heavy repercussions on the back end for you. At the end of the day you will save time and money if you direct your efforts into finding suppliers who can offer you legal solutions to reducing tariff burdens.
