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Next Round of Chinese Tariffs Could Have Expensive Effect on Snowsports Industry

The most recent list of products includes a bounty of winter sports equipment.

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UPDATE: List 4 Products, including skis, helmets, and winter jackets, set to have tariffs imposed on September 1, 2019

President Trump announced on August 1, 2019, via Twitter that 10% tariffs on more than $300 billion worth of products, including winter sports goods, will go into effect September 1.

Skis, helmets, jackets, and more remain on List 4 despite testimony against their inclusion to the Office of the US Trade Representative (USTR) in June. A federal register notice providing an updated list and timetable was expected in the weeks following the hearings, but the updated list has not yet been released. Based on prior tariffs, there is little hope that the list will be changed, but a notice is now expected on the same day that the tariffs go into effect, according to customs and trade expert Larry Ordet of Sandler, Travis, and Rosenberg Law Firm.

“Make no mistake, this is a tax on US consumers and it’s become more real by the day,” said Nick Sargent, President of the Snowsports Industries of America (SIA), in a statement issued on August 2. “This knee jerk diplomacy has severe implications for our manufacturers who will most likely try to absorb the costs in the short term, wiping out any margins they may have had, but also across our retail network and their consumers who will have to deal with unrealistic price increases. Our main selling season begins soon and if we’re going to grow as an industry, these tariffs have to be rescinded. SIA is working hard to let our lawmakers know that these decisions are not in the best interest of the snow sports industry and American business.”

USA/China Trade Negotiations Fail

On Saturday, June 29th, while attending the 2019 G20 Summit in Japan, President Trump and Xi Jinping of China announced they would resume trade negotiation and halt the introduction of tariffs on an additional $300 billion worth of Chinese-manufactured goods, just days after public hearings on those tariffs concluded in Washington, D.C. As of August 1, 2019, those trade negotiations have apparently failed and the tariffs are scheduled to be introduced on September 1.

The public hearings occurred between June 17 and June 24, with leaders of hundreds of American businesses testifying to the USTR about the newest round of proposed tariffs, known as List 4, the tariffs would have affected many items essential to the snowsports industry, including ski and snowboard boots, safety headgear, and toboggans. A decision as to which products remain on the list will be made and released in the coming weeks, according to a representative from the USTR.

Trump’s pause on the tariffs was preferable to none at all, but now mean little unless the USTR removes winter sports products from the list. According to CBS News, the previous eleven rounds of negotiations between Trump and Xi have failed, which foreshadowed this latest development.

The round of negotiations follows the List 3 tariffs that were set in motion in September 2018. Originally taxed at a 10% rate, List 3 products—which have a total import value of about $200 billion—were hit with a 25% fee on May 10 after trade talks between the US and China deteriorated. When List 4 was announced three days later, the situation intensified for many ski industry companies.

The American Snowsports Industry Reacts

Chris Steinkamp, communications director of SIA, testified at the June hearings and painted an intense picture of the proceedings. SIA has been instrumental in organizing opposition to the tariffs within the snowsports industry.

“I didn’t see anybody that was testifying in favor of the tariffs,” he says. “It wasn’t just the snowsports industry. It seems like everybody that was there was talking about getting put out of business.”

A letter to the President, organized by business coalition Tariffs Hurt the Heartland and signed by 661 American companies, describes the potential economic effect of the proposed List 4 tariffs. The letter claims that the tariffs would eliminate more than two million domestic jobs and cost the average American family more than $2,000.

The weight of the proposed List 4 tariffs would not average out uniformly, however, with some industries bearing the brunt more than others. Snowsports specialty retailers would take an especially hard hit. The selling season typically begins in the fall, and most orders have already been placed by retailers. According to Steinkamp, if the tariffs go into effect and the cost of these products rise 25%, shops will be left with only one choice: increasing consumer prices.

“[The tariffs are] literally a tax that’s going to be placed on every product that’s tariffed, that’s going to be passed from manufacturer to retailer to consumer,” he says. “Someone has to deal with that 25%, and ultimately, I think it’s going to be the consumer.”

This is especially problematic considering that many of SIA’s members are small, family-operated retailers that lack enough cushion to eat these additional costs, even for just one season. Several members have told the organization they doubt customers will be willing to shell out more for their products, no matter how essential they are. According to Steinkamp, it is just as likely that customers will instead opt to purchase from larger companies or direct-to-consumer retailers.

“A $200 jacket is going to be $250, and that’s a lot of money to somebody saving up for a nice jacket. That’s enough money to make people think twice, for sure,” says Steinkamp.

The Breaking Point

SIA is concerned that the tariffs could be the breaking point for many in the industry. When current SIA President Nick Sargent took over in 2015, he called this a “pivotal time in our industry,” even noting that in some places, it is “feast or famine.” 

Climate change has rendered a bleak outlook for the long-term health of snowsports. Steinkamp, who served as the director of environmental non-profit Protect Our Winters for a decade, pointed out that it has also made year-to-year outlooks harder to predict. According to sales figures from SIA, the 2018/2019 season was fruitful from beginning to end, but winter season prior was one of the bleakest in memory, both in terms of sales and—in many parts of the USA—snow. Next winter’s weather is uncertain, and the potential for a short season and increased prices due to these proposed tariffs does not bode well for SIA, its members, and the millions of winter sports enthusiasts across the country.

The President has often painted a picture of protecting domestic industry and manufacturing through the tariffs, but SIA says that viewpoint is unrealistic.

“Maybe in the long run, [companies] can evolve to start building factories and bring that business back,” Steinkamp says, “but you can’t just throw a tariff and say, ‘We’re going to protect American businesses,’ because there really is no [alternative for them].”

Many SIA members would find the price of manufacturing in the United States too high to do business, while many more are faced with an even larger issue: their products are impossible to make in the United States. Krimson Klover is a Boulder, Colo.-based outerwear brand that has been at the forefront of List 4 tariff opposition. Every product they make is on the list. 

In an interview with NPR, COO Gail Ross describes the roadblocks they are facing. “You can’t make [these] products in the United States. Literally, the machinery does not exist,” she says.

Steinkamp echoes this sentiment, saying that the high-tech machinery that goes into producing top of the line outerwear can take years to perfect, with relationships between companies and manufacturers spanning decades. It is unreasonable to expect an entire industry to change direction so sharply.

It appears that this message hit home to some degree, as the USTR listened diligently and asked meaningful questions, according to Steinkamp. His testimony centered around the idea that the tariffs are an unfair tax on mom-and-pop businesses who have nothing to do with China’s supposed-unfair trade policy, yet they will bear the brunt of increased costs.

“When you talk in those type of grassroot terms, I think it really hits home,” he says. “Because [the tariffs] are literally going to put people out of jobs and companies out of business.”

SIA’s strategy to win support for its cause has been to mobilize constituents who will chip away at members of congress. The organization believes that the most direct route to influencing the President’s decisions is through GOP congressmen.

“We’re not going to be taking sides…we [will not] make this a Trump thing,” says Steinkamp. “These are unfair. It’s a tax to our consumers. Everybody that is concerned has to weigh in, and we give them the tools to do it.”

SIA has members on all ends of the political spectrum, but most agree with Steinkamp. When a business’s viability depends on people going skiing, they tend to drop political alliances in favor of pragmatic solutions to keep the hotels full and the lift lines long.

As far as predictions go, Steinkamp is hopeful but realistic. Based on the history of the current trade war, it is unlikely that the President will back down and completely rescind the tariffs. If that is the case, SIA must wait to see what the USTR has to say. If the snowsports-specific products are removed from List 4, the problem would be solved for now. If not, the focus shifts to preparing for a worst-case scenario, in which talks break down again and the tariffs go into effect right as the winter sports season begins to ramp up.

“You’re talking about people’s lives, people’s businesses,” says Steinkamp, adding, “we’re focused on doing the right thing.”

Jon Jay contributed reporting on this article.