Trade War With China: How Tariffs Affect the Cleaning Industry (Update)
Tariff increases are coming!
[Updated September 3, 2019]
As you may have heard on the news, there is a new 15% tariff assessment which has been announced on yet another group of products imported from China–and this new tariff may have the potential to lead to price increases for a new group of products which are used in the cleaning industry. In addition, products imported from China which have already received a tariff of 25% earlier this year, will now be subject to a tariff of 30% in the very near future–and this slight increase in the tariff amount may also lead to other price increases. As of this writing in early September, neither of these tariffs have led to any specific price increases, but is possible that they may in the future.
View previous June 10, 2019 update.
How Did We Get Here?
As the current trade war with China was heating up last year, there were a series of articles written on the WAXIE website which are helpful to recall as the stage is set for this most recent round of tariffs which have been announced on August 23 , 2019, and are now driving price increases for many products which will go into effect as soon as September 1, 2019.
Article I –Made in China
First, we explored the “Made in China” phenomenon, and how over the course of the last 20 30 years the global economy has increasingly come to rely upon China for the manufacturing of a large number of products including many which are used in the cleaning industry. This article further explored the environmental costs of the way the factories in China have tradition ally been operated, the steps the Chinese government was now taking to mitigate those environmental costs, and the subsequent impact those steps were having on pricing and product availability for many items used in the cleaning industry, such as seat covers, gloves, microfibers and even the packaging used to ship each of these products. By working closely with its supply chain partners on an ongoing basis throughout 2018 and 2019, WAXIE has been able to help minimize the potential impacts these factory shutdowns have had on pricing and availability for customers who use these products, and WAXIE continues to work with its supply chain partners to help mitigate further impacts.
Article II –China National Sword Policy
The “Made in China” article also introduced the China National Sword Policy, which the Chinese government is calling a “ban on foreign garbage”, and this article described the imp act this policy was having on the flow of recycled materials into China and the subsequent influence these changes were having on the cost of packaging. This topic was further explored in another more recent article which described the dramatic influence this policy was having on the global recycling industry, and some suggested steps we can take here in America to help minimize this influence namely by making a move to standardized bin labelling to help decrease the amount of contamination in the recycling stream in order to allow for recycled commodities to keep their economic value. WAXIE continues to work with its vendor partners and customers to help identify solutions to most effectively divert waste from the landfills and help customers reach their waste diversion goals.
Article III –Trade War With China
Next, we explored the current trade war between the United States and China, described the role tariffs can play in trade wars, highlighted the reasons the United States has decided to levy these tariffs on products imported from China at this time, provided an overview of the types of products included in the first several rounds of tariffs and their initial impacts, and then reported the effects these tariffs were going to have on the cleaning industry. At the time the article was published in December 2018, a tariff of 10% had already been levied on many products used in the cleaning industry effective September 24, 2018, with the tariff rate for this same group (or tranche) of products originally scheduled to increase again up to 25% on January 1, 2019. This deadline was subsequently extended for 90 days pending the results of further negotiations between the U.S. and Chinese governments, and at that time we stated in the article that we would keep you updated on any further impacts these tariffs were going to have on the global economy and the cleaning industry. A subsequent update was provided at the beginning of June, and the time has come to provide another update.
Update on China Tariffs and Impacts for the Cleaning Industry
Most observers involved in the cleaning industry supply chain (as well as the U.S. stock market and the global investment community for that matter) continue to be surprised by the results of the ongoing negotiations between the two governments. Where once there was a belief that the two sides would ultimately be successful in reaching an agreement some time in 2019, now there is increasing uncertainty. And although it has been difficult, WAXIE has been able to work closely with its supply chain partners through all of this market confusion to help minimize the impact these tariffs have had on pricing of products to this point.
However as discussions between negotiators for the two countries have appeared to break down, we are seeing that now the tariffs for the last round of products have officially increased from 25% to 30% effective October 1, 2019 – and a new tariff of 15% in going to be assessed on virtually everything else being imported from China that hasn’t already been impacted which will be effective either September 1 or December 15, 2019 depending on product category.
As a reminder, the following product categories were included in the last tranche of products which will now be subject to a 30% tariff on October 1 (up from 25% on July 1):
- Sanitary paper products
- Vacuum cleaners and parts
- Sprayers (including trigger sprayers)
- Components for brushes and brooms
- Components for mop buckets and applicators
- Components for janitor carts and refuse carts
- Lighting
- Amenities
- Cleaning product formulations
As stated previously, these product categories have already been receiving a 25% tariff since July 1, and now these product categories are going to receive a total tariff of 30%. As of this writing in early September, WAXIE has not received a specific price increase tied to this increased tariff amount going into effect October 1, 2019, and as always is working hard with its suppliers to help mitigate any price increases for customers.
In addition, there will now be a new tariff of 15% assessed on everything else that hasn’t already received a tariff, including the following product categories in the cleaning industry:
- Seat covers (effective September 1)
- Microfiber products (effective September 1)
- Vinyl gloves (effective December 15)
For the most part, tariffs in this round are impacting consumer electronics and clothing. As of this writing in early September, WAXIE has not received specific price increases tied to this new tariff assessment either, and will continue to work with its suppliers to help mitigate any associated pricing impacts.
What’s Next?
These tariffs continue to receive a lot of attention in the media, and negotiations between the two governments is ongoing and may ultimately lead to an agreement – however it is not prudent to rely on this eventuality, and as a result the manufacturers will continue to incorporate the tariff amounts into pricing for distribution. And while WAXIE will continue to do its best to keep these increases to a minimum, there are many items for which there is not a viable alternative other than to pass along the price increase.
Please know that WAXIE continues to search for domestic manufacturing for products wherever possible, and we are proud to say that the vast majority of WAXIE products are made in the U.S.A. The reality is that there are some products which do not have a domestically made option from which to source, and for many of the products which do have an alternative made in the U.S. or elsewhere, the product made in China is still less expensive even with the price of the tariff added.
WAXIE continues to thank its customers for their ongoing partnership, and for the confidence you have placed in us to be your trusted source for cleaning supplies and consultation. We recognize that these price fluctuations impact your operations, and we will continue to strive to offer the most cost effective solutions available while keeping you updated on how any further changes to these tariffs will affect the global economy and the cleaning industry.
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