|The tariff situation on Chinese imports remains in flux.
Some Tariffs Delayed Until December
Trump Administration says holiday shopping season is a factor.
THE NEWS ON TARIFFS to be placed on Chinese imports keeps evolving, as some planned tariffs have been delayed to avoid disrupting the holiday shopping season. The Trump Administration had announced this August that a 10% tariff would be levied on $300 billion worth of goods enumerated on “List 4”—including virtually all music and audio products—starting September 1. Now, however, tariffs on certain goods including a variety of toys and electronics have been delayed until December 15. “What we’ve done is we’ve delayed it so they won’t be relevant in the Christmas shopping season,” President Trump recently told reporters. “Just in case they might have an impact on people.”
Where does that leave music and audio products? It seemingly depends on the category. Media outlets including Bloomberg and Axios report that for product categories where at least 75% of U.S. imports come from China, tariffs will be delayed until December 15. For categories where less than 75% of U.S. imports come from China, 10% tariffs will go into effect September 1 as scheduled. It's also been reported that some items will be removed from the list entirely, and not subject to new tariffs, “based on health, safety, national security and other factors.”
Across music and audio segments, the market share of Chinese imports varies significantly. 99% of portable keyboards under $150 originate from China, as do 90% of violins. By contrast, Chinese-made cymbals account for just 8.6% of total imports. In guitars, Chinese-made electric guitars represent 32.5% of imports. In acoustic guitars valued at under $300, Chinese imports account for 70% of total imports.
U.S. music and audio imports from China had a landed value of $979 million in 2018 and accounted for 49% of total imports, making China the industry's single largest source for imported gear. Chinese-made products generated approximately 40% of the revenue of U.S. music products retailers. In June of this year, the Trump administration had threatened and then abruptly rescinded a 25% tariff on List 4 products after Chinese officials agreed to unspecified conditions. Subsequent talks in Shanghai between U.S. and Chinese trade officials broke down in late July, prompting the planned 10% tariff.
Industry opinion on the impact of the tariffs varies. Some contend that any resulting price increases will be insignificant, especially given the depreciation of the yuan. Others are concerned that any price increases will crimp demand. The price impact of the 10% tariffs will be largely offset by a steep decline in the value of the Chinese currency. The yuan has depreciated 6% since January 1 to 7.1 to the U.S. dollar.
Ever since the Trump administration began hinting at higher import duties, manufacturers in and out of the music industry have begun seeking new sources of supply. Indonesian guitar factories, to cite one example, have been flooded with increased orders over the past eight months. Furthermore, Mexico has displaced China as the U.S.’s largest trading partner.