The Americans for Free Trade Coalition—a group of U.S. businesses and trade groups united against tariffs—on Thursday hosted a virtual discussion on the impact of the added Section 301 tariffs on China-made goods in place since 2018. Moderated by National Retail Federation (NRF) vice president of supply chain and customs policy Jonathan Gold, the conversation centered how tariffs, which have put $196 billion into Customs and Border Protection’s coffers, affect the U.S. economy.
“It’s been an interesting road with tariffs,” Downlite feather and down division chief financial officer and president Josh Werthaiser said. “There’s been so much uncertainty, and so much work that we’ve been having to deal with.”
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Downlite manufactures bed toppers and bulk insulation for home bedding, furniture, the hospitality industry and the outerwear sector in Ohio, North Carolina and Canada. With clients ranging from L.L. Bean to Macy’s, Bloomingdale’s, Costco, Marriott, W Hotels, Sheraton, Patagonia, Columbia Sportswear, Ralph Lauren and Lululemon, it sources its chief raw materials—feathers and down—primarily from China, as byproducts of the poultry industry.
“China is by far and away the largest consumer of duck meat and goose meat, so we are forced to go to China to get our raw material,” Werthaiser said, noting that the country is responsible for 85 percent of the global consumption of those two proteins. With “very limited options” for sourcing, Downlite has been engaged with the U.S. Trade Representative (USTR) since the China trade war started to advocate that feathers and down be excluded from the list taxed items.
The material first appeared on List 3, and Downlite argued that Chinese manufacturers of feather and down bedding products and insulation would receive an “unfair advantage” over American makers attempting to source the raw material for U.S. production. “We were successful in getting it off of List 3, but it appeared again on List 4,” Werthaiser said. “We found ourselves in Washington, D.C. sitting in front of the USTR having a lot of the same conversations again.”
Feathers and down remained on the list. “So that was the worst case scenario for us, because now we had a tariff on one of our key raw materials,” Werthaiser added. Notably, though, retail-ready manufactured products did not appear on the list, “So all of a sudden, there was a competitive swing over to China” for production, effectively handicapping U.S. manufacturers.
Since then, Downlite has pushed for exclusions on feathers and down, which have been granted, but the opacity surrounding the future of the tariffs and the exclusion process has come at a cost. “With the uncertainty of not knowing if the exclusion be extended…How do we price our product? What assumptions are we making, and what happens if those assumptions don’t actually come through?” he said. “That’s been the biggest challenge that we have had to face so far.”
Glen Weinstein, executive vice president and chief legal officer of iRobot, the maker of Roomba floor vacuums, said a lack of clarity about exclusions took its toll on the company. Prior to 2019, the company manufactured all of its products in China, but diversified sourcing to Malaysia one year after the Section 301 duties took effect. Relocating the supply chain during Covid travel restrictions was “enormously difficult.” While the company got an exclusion on its vacuums produced in China, the refunds were processed retroactively more than a year after the tariffs went into effect.
“That meant we fronted about $15 million of working capital before we could even start the process of seeking refunds,” Weinstein said. “It also meant that while we were in this long, long waiting period to see how the USTR would react to our exclusion application, we raised prices.” The decision led to lost sales, and a further recalibrating of prices. “Trying to make business decisions—decisions that are often a year retroactive to what the USTR is doing—is a complete enemy of thoughtful planning,” he added.
Mercury Marine trade operations manager Corbin Stenz said tariff exclusions are “just one piece of the puzzle,” and being granted an exclusion on a product or input does not guarantee the future stability of a business. A producer of outboard boat engines that manufactures its products with imported components in Wisconsin, Mercury has attempted to diversify its sourcing base based on geopolitical uncertainty and the possibility that U.S. relations with China could worsen.
“Now you hear rumors that maybe the tariffs are going to increase, maybe they’ll go away, maybe one list will go away and one with list will stay,” he added. “And so all that planning can’t be done, or it has to be done with so many different contingencies and variables that it makes it extremely challenging.”