Between tariffs already in effect and the potential for more, a new analysis shows the outdoor recreation industry could face $1.5 billion in additional costs per month if the U.S.-China trade war continues to escalate.
The Outdoor Industry Association released the data Tuesday, the opening day of Outdoor Retailer, the outdoor recreation industry’s premier trade show, which is in its second year in Denver. The review by The Trade Partnership, an economic research and consulting firm in Washington, D.C., found the last round of tariffs, imposed on $200 billion worth of imports, cost outdoor recreation companies a total of $1.1 billion from September 2018 through April of this year.
That was before President Donald Trump’s administration raised tariffs to 25 percent from 10 percent. And the last bunch of duties covered a limited variety of outdoor goods.
Tariffs are among the top subjects of the Outdoor Industry Association’s discussions and a hot topic of conversation among businesses gathered at the trade show, which runs through Thursday at the Colorado Convention Center in Denver. The trade group planned a panel discussion on tariffs at 2 p.m. Tuesday at the Hyatt Regency.
“We have been hearing anecdotally about the impact that this has been having on the industry, so we thought it was important to take a comprehensive look at the actual monthly data on the amount of tariffs that are being paid,” said Patricia Rojas-Ungar, OIA’s vice president of government affairs.
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The Trade Partnership said the last group of tariffs added $1.1 billion to the $650 million outdoor recreation companies had expected to pay. Those tariffs applied to about $14 billion in products imported by outdoor recreation companies from China.
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The new set of proposed tariffs would likely cover $61 billion in outdoor recreation goods, or just about everything the industry gets from China. If the administration slaps on tariffs of 25 percent, The Trade Partnership said the industry could end up paying $1.5 billion more a month, which companies would have to absorb, pass along to customers or both.
“Particularly for small- and medium-size businesses, there’s just a great deal of uncertainty about if they’re even going to be able to survive,” said Rich Harper, OIA’s manager of international trade.
Nationally, the industry generates $887 billion in annual spending and supports 7.6 million direct jobs, according to the OIA.
In Colorado, the industry’s economic impact rose to $62.5 billion in 2017 from $34 billion in 2013, according to a state report released in 2018. The report said outdoor recreation supports 511,000 jobs.
“Despite what the president says, these tariffs are not paid by China — they are paid by American companies and American consumers,” Democratic Rep. Diana DeGette said in an email. “Colorado’s outdoor industry is a multi-billion-dollar industry and a key driver of our economy. Instead of enacting more costly tariffs that will do real harm to this industry, the president should be working with Congress to help us pass legislation — like the Colorado Wilderness Act that I introduced — to help this industry grow even more.”
Instead of spending time at Outdoor Retailer this week, Harper is attending hearings by the Office of the U.S. Trade Representative on the new levies proposed on $300 billion in imports from China. Trump has said he wants to meet with Chinese President Xi Jinping at the Group of 20 summit at the end of this month to discuss the trade conflicts.
The trade dispute and retaliatory tariffs by China that have hit U.S. agriculture especially hard ignited last year when the Trump administration took aim at practices assailed by previous administrations. U.S. political and business leaders have long accused China of stealing U.S. intellectual property and forcing transfers of technology when American companies want to sell their goods in China.
“That’s not something that any American should support or stand behind and neither do we,” Rojas-Ungar said of the practices targeted by the Trump administration. “However, the leverage that’s being used is coming on the backs of American companies and consumers and we don’t think that is the right approach.”
The goods imported by outdoor recreation companies on the last list of tariffs included hats, camp chairs, stoves, backpacks, kayaks, bicycles and bicycle parts. Outdoor shoes, apparel and helmets, which were dropped from the last round, are proposed for the next round of higher taxes.
For decades, the outdoor recreation industry has paid higher tariffs than other industries for reasons that aren’t entirely clear, Harper said. The tariffs average about 14 percent, with some significantly higher. The routine levies on hiking boots are 37.5 percent.
Companies are looking at moving production from China to other countries, but that can take years to complete, Harper and Rojas-Ungar said. Companies have built relationships with Chinese manufacturers.
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“They’ve spent years in some cases training employees in these manufacturing plants. Our products are very, very specialized,” Rojas-Ungar said.
Because of the timing of the tariffs, and the fact that many orders and contracts were already set, companies have just absorbed some of the increases, she added.
“But I think that is going to change going forward,” Rojas-Ungar said. “I think companies are going to be faced with having to pass some of that additional cost on to the consumer. “
