As the trade war with China continues to evolve, another round of increased tariffs is fast-approaching. While raising the tariffs on Chinese imports may have its benefits to the United States government, U.S. manufacturers that rely heavily on materials from China are taking the biggest hit yet, and it will affect your award program.
Since these materials are necessary to manufacture certain products, tariffs are challenging the pre-existing cash flow of these businesses. The tax burden continues to transfer, creating a ripple effect through the supply chain, leading manufactures to ultimately displace the cost to the end consumer.
Essentially, it is now more expensive to import goods from China. Although the tariffs have not been around long enough to expose major effects on consumers, the impending fallout is inevitable. The more tax these businesses encounter, the less likely they can absorb a compounding cost.
WHAT MANUFACTURERS DID NOT PREPARE FOR
If you started a recognition business in the past ten years, chances are you source many of your awards materials from China. Whether you are sourcing metal or crystal, Chinese materials have had a consistently lower cost than most countries, including America.
A previous advantage of the low cost of sourcing and importing materials from China is that consumers can buy products at a cheaper rate than industry averages. Unfortunately, this process of thought is training consumers that cheap is the best solution.
By significantly devaluing the cost of recognition projects, American manufacturing of awards materials is almost obsolete. Many of these businesses now depend on Chinese imported goods and find themselves in a vulnerable state that affects cash flow.
THE ACTUAL COST
A chain reaction will inevitably follow. After the initial cash flow disruption, manufacturers will raise prices to offset the internal cost. A metal statue that was originally quoted at $120 could now end up costing you $180-200 per piece. If you have a recognition program that is not quoted out years in advance, this may drastically upset your budget.
Although this is a major factor to work out with your awards manufacturer, there is another consequence to consider. As the costs of awards continue to rise, you may have to compromise the quality of the pieces. This can diminish an existing rapport within the company. Employee engagement may decrease, while the award program recipients and honorees may end up feeling slighted.
WHAT TO DO NOW
If you are in the habit of cutting costs for your award program, you may soon find yourself at a crossroad. Cristaux has come up with a few guidelines to help you navigate through this process:
- Do not wait until it is time to place an order for your event to check in with your vendor. Speak to them now about the impending surge in prices before it is too late.
- Find out if your vendor has been proactive during this time. If they have been sourcing materials from other countries and have a way to offset some of these tariffs, that is a great indicator that you will not incur an extreme change in pricing.
- Consider budgeting for the tariff costs. If there is a way to allocate more funds to cover the rise in prices, allow that to be the buffer moving forward.
- Allow yourself to get fair market quotes every few years. You should have quotes to assess against, even if you have an annual program.
At Cristaux, we take these situations into account in advance. Our priority is and has always been consistent pricing. In turn, we provide high quality products for our customers so they can focus on the success of running their program.
By becoming self-sufficient, we anticipated a shift in the marketplace. Our expansive vendor database allows us to source materials from various countries in order to offset some of these costs. With design and manufacturing experts in-house, we can reengineer any design to meet your needs. No matter the vision, we are dedicated to educating the consumer to find the best possible solution.
Connect with a member of the Cristaux team to learn what other methods you can implement now to avoid added costs down the road.