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Beating the New US Tariffs - An Opportunity

by Importexport
12 replies
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There is a lot of doom and gloom about the impact of the ever-increasing tariff conflict between the USA and China. Many online sellers are worried about the increased cost and whether they will still be able to make money on sites such as Amazon and eBay.

The Good News is that there is a simple way to overcome the problems of increased tariffs being imposed on imports to the USA of goods made in China. It is simply to source products from countries other than China.

It is possible to buy unique products that you can sell without competition and often my book readers have found that they can buy better quality at lower prices than they were paying in China.

I have taught this simple method for a number of years, and it was included in my safe sourcing and importing book as far back as 2013. In fact I posted what proved to be a very popular thread on the subject in August that year Importers should consider countries other than China

The thread has been closed, but it contains a lot of information that many could find helpful, so it's worth looking at but if you want to ask questions about safe sourcing and importing, see my AMA thread: Product Sourcing the Safe Way

Walter Hay,
Importexport
#beating #china #importing #opportunity #tariffs
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  • Profile picture of the author brettb
    Good advice thanks. Currently living in China and not liking the direction the country is going in.


    Actually I run a niche site and I found out a new manufacturer in my niche. They're actually based in Thailand. Now that's a much nicer country to do business with.
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  • Profile picture of the author Importexport
    Thailand is well worth consideration but, like many Asian countries waking from a long sleep allowing China to corner a big slice of the world's low labor cost manufacturing, Thailand is not so easy when it comes to sourcing.

    To illustrate this, let me point out that in the 2018 edition of my safe sourcing and importing book I listed over 2,000 suppliers who supply KMart, but only two companies in Thailand are in that list.

    KMart have teams of staff sourcing products around the world. They only choose ones that meet their very demanding requirements, and so far they have only found two in Thailand. That might be because they have only recently chosen to source there.

    Having myself visited that country and sourced products there for my importing and marketing business that I expanded to 4 countries by selling franchises, I know that it is possible to buy excellent quality, sometimes unique products from Thai manufacturers and enjoy outstanding service.

    My franchisees loved dealing with them.

    But don't despair - it's possible to find good suppliers in a multitude of countries, and I would not give up on Thailand.

    Walter Hay
    Importexport
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  • Profile picture of the author dave_hermansen
    Amen, to not thinking that China is the be-all and end-all of product sourcing.

    I can't help but wonder how much of an impact the tariffs really would make for most people here, anyway. Most are buying products that cost $4 or $5 shipped. What's a tariff going to do? Take that cost up a dollar?

    And, it's not like the same thing won't happen across the board. All of your competition will be facing the same scenario. Many people will raise their prices a dollar or two; others will cut their profits a dollar or two. I honestly doubt this is a "puts me out of business" type of thing.
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  • Profile picture of the author Importexport
    You are quite right @dave_hermansen. Whenever things like this happen there is a strong tendency to panic, but as you have pointed out, most small importers handle low cost items and the increase in costs will hardly break the bank.


    For most of them, changing their sources would not make a lot of difference, but for those who import large volumes or bigger ticket items, it is probably a good time to start looking away from China.


    The biggest problem when looking at this from a wider economic perspective is the fear. As Franklin D Roosevelt said: "the only thing we have to fear is fear itself".


    If people will just get on with their normal business and daily lives they can minimize any impact the current tariff worries might cause.


    There is still plenty of money to be made from importing.



    Walter Hay
    Importexport
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    • Profile picture of the author dave_hermansen
      Originally Posted by Importexport View Post

      For most of them, changing their sources would not make a lot of difference, but for those who import large volumes or bigger ticket items, it is probably a good time to start looking away from China.

      Walter Hay
      Importexport
      For sure, it is the large ticket items that pose a problem.

      This is very similar to the new sales tax ruling that has so many people up in arms and sneaky tax software companies feeding that fear. The fact is, an extremely small percentage of online stores are going to be impacted by the economic nexus laws. Most do not do 200 or more per year sales in a single state and even fewer hit the $100,000/year dollar volume threshold to a single state.

      The few that are selling tons of cheap products (sourced from China, no doubt) might have one or two states where they hit that 200 sales/year figure but on things that cost $20 or so, the tax bill is not going to be "put me out of business" money.

      The even fewer that hit the $100,000/year in dollar volume to a single state are the ones that have the most to fear. That's going to create a whopper of a tax bill in a state or two for them.

      I think that if I suspected that I was going to be in either of those situations, I would closely monitor things and just before I hit the volume or dollar value threshold for a state, (probably November or December) I'd shut down sales to that state temporarily until the New Year rolled around and I could reactivate that state. I'd much rather lose a few sales for a month or two in a state than have to report and pay sales tax for all of eternity to that state (and also lose my competitive advantage over the Big Boys).
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  • Profile picture of the author dvduval
    There might also be a great opportunity to make arrangements with Chinese sellers during a down market. The political climate could change in the US, and have the tariffs removed. In many cases, there are Chinese sellers who simply make the best product for the money, and other countries lack the infrastructure to catch up anytime soon.

    Inflation is becoming increasingly relevant. Oil is already up from two years ago, almost double. That has a huge impact on the transport costs. Interest rates are on the rise. The effects of the tariffs usually start to be felt about 6 months later. I would venture that the tariffs will not be popular politically 6 months from now, but we will see.
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    • Profile picture of the author dave_hermansen
      Originally Posted by dvduval View Post

      There might also be a great opportunity to make arrangements with Chinese sellers during a down market. The political climate could change in the US, and have the tariffs removed. In many cases, there are Chinese sellers who simply make the best product for the money, and other countries lack the infrastructure to catch up anytime soon.

      Inflation is becoming increasingly relevant. Oil is already up from two years ago, almost double. That has a huge impact on the transport costs. Interest rates are on the rise. The effects of the tariffs usually start to be felt about 6 months later. I would venture that the tariffs will not be popular politically 6 months from now, but we will see.
      Again, this is an across-the-board issue that affects all sellers equally. It DOES NOT have a negative competition effect because all of your competitors would be facing the exact same price increases. Unless, of course, you believe that the relatively modest tariffs will suddenly make it possible for American companies to produce the same products for the same incredibly cheap prices that China will have after the tariffs (not likely). The consumer may not like the small price increases, but it will have very little effect on retailers if they are products that people actually want and need.

      And, of course, you are assuming that this will drive wholesale prices up. The manufacturer may very well eat the tariff in order to stay competitive. Or, China may manipulate their currency again in order to absorb them.

      Oh, and I must add, I don't know where you live but the price of gas isn't even close to "almost double" what it was two years ago. It's up about 32%. If you go back a little further than 2 years, it was at a decade low in February 2016. The price of gas is pretty close to being what the average price for the past decade has been.
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  • Profile picture of the author Importexport
    Yes this is one of the real opportunities, because business will be slowing down for many Chinese manufacturers. This will give them excess production capacity and they will need to use that capacity because it cost money just to have equipment sitting idle.

    Just beware of the fact that lower quality standards have been almost forced on many Chinese manufacturers by greedy buyers haggling to cut prices to the bone.

    Be reasonable in your negotiations. I have taught many people how to negotiate gently, and it works.


    Walter Hay
    Importexport
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  • Profile picture of the author denev
    well that will be hard, china got the best prices
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    • Profile picture of the author Importexport
      Originally Posted by denev View Post

      well that will be hard, china got the best prices
      That is the traditional view, but it is not always true.

      I recently received an email from someone who is using the information in my safe sourcing book to locate suppliers in countries other than China.

      He said he had been able to buy a product in another country at half the price he would have had to pay in China, and the quality was excellent.

      People continue to have tunnel vision about China, thinking it is always the lowest cost producer of just about everything.

      There's a whole big world outside of China. Just because it seems so easy to go online and find a supplier in China does not mean China is the best or cheapest source.

      As someone who teaches sourcing and importing, I will admit that in many cases it will take you a bit more effort to locate suppliers in other countries, but with over 20 links in my book to sources other than China, I have done a lot of the hard yards for buyers.

      Walter Hay
      Importexport
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  • Profile picture of the author jsc420
    Im currently living in SE-Asia and I can safely say that Thailand and Vietnam are huge players here. Both have very specific industries and good regulatory climate.

    You can even go deeper and export from countries that fall under the 'anything but arms' scheme. Which means 0% import tax for everything besides weapons.

    This is why 90% of the world's clothing is made here.
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  • Profile picture of the author Importexport
    Yes, both Thailand and Vietnam are great places to look for products that can compete on both price and quality with things produced in China.

    Both countries present some difficulties for newbies looking for alternatives to China, because they lack easy to search B2B platforms with massive listings.

    This is why I have devoted many pages to those countries in the latest revision of my safe sourcing and importing book.

    I began sourcing products in Thailand for my own importing business back in the late 1980s before the days of the internet. I turned to Vietnam in the early 90's, and obtained absolutely superb quality manufacture of a product that did not exist before I gave them a design. Their skill and the care taken were great, and the service was fast.

    With communication in those days via fax or the old fashioned cable method, I found it essential to visit the countries where I wanted to source products.

    Since I wrote the first edition of my book in 2010, I have taught thousands how to source from China and many other countries, and very few of them have found the need to visit those countries, although I highly recommend it.

    Nothing can beat face to face communication. That is particularly valuable when dealing with Asian suppliers because it helps develop a good relationship.

    Walter Hay.
    Importexport
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