Tariffs, Trade Wars and Their Industry Impact

The ongoing trade war between the U.S. and China could be nearing an end, potentially bringing some relief to manufacturers and consumers of chemicals, printers and assorted ancillary businesses throughout the imaging channel ecosystem.

Just how much these tariffs on both sides have impacted print industry companies and their consumers is hard to gauge, but there could be wide-ranging ramifications of imposing tariffs on more than $250 billion worth of Chinese imports. Whether it’s computers and printer manufacturers dependent on imported printed circuit boards or suppliers importing the raw materials and chemicals needed to make liquid ink or toner powder, this industry is one of many awaiting some clarity and resolution from on high.

Anyone who has been following the plight of soybean and livestock farmers who have endured the wrath of retaliatory tariffs from China should appreciate that this prolonged standoff isn’t a one-way street and real human beings and companies are suffering. Eventually and inevitably, the tariffs extended their tentacles to the global printing and imaging sector.

In the last few weeks, numerous reports suggest the two countries are closing in on a trade deal that would roll back tariffs on both sides. In the interim – and for the past year-plus of this saga – companies of all sizes and specialties have had to lay off employees, put off expansion plans and pass along the higher cost of importing critical goods and components to customers.

Near the end of 2018, HP was the first of the major OEMs to acknowledge that a number of challenges, including the availability of processors and the impact of the latest round of tariffs, were factored into its outlook for fiscal 2019.

Many industry executives are understandably worried about how this prolonged staredown has provided purveyors of knock-off products a golden opportunity to insert their way into the market, eroding sales and margins at a time when these affected companies are already suffering from the impact of the tariffs.

Andy Binder, vice president and general manager of HP’s office supplies solution group, last year made the industry’s case to the United States Trade Representative office when he argued that the tariffs would surely force U.S.-based OEMs to raise consumable prices, compelling customers to buy lower-priced aftermarket alternatives, which, of course, are mostly manufactured by Chinese companies.

Throughout this tumult, printer OEMs have filed for numerous exemptions with the USTR (along with just about every other industry) for a wide array of printer components and consumables, hoping to minimize the damage from these sweeping levies.

Canon U.S.A. is seeking exemptions for printer gears, fuser assemblies for laser printers, all-in-one toner cartridges and other components. Epson wants exemptions for carriage assemblies used to hold the print head and ink cartridges on printers, print head units and pump cap assemblies among others.

HP sought relief for 17 different components related to all-in-one toner cartridges and imaging units found in its legacy laser devices. Konica Minolta Business Solutions U.S.A. asked for a trio of exemptions for printer toner cartridges, assorted printer parts and saddle stitch booklet makers. Kyocera Document Solutions America Inc. and Xerox both put in for five exemptions each, all related to various components and printing parts and supplies. Actionable Intelligence has done some excellent in-depth reporting on many of these exemptions and is keeping close track of the results.

Thus far, though still under review, none of these exemption requests have been approved. Everyone is still waiting and waiting while life and business move on.

In December, the USTR granted the first product exclusion requests from these Section 301 tariffs. The exclusions, covering 918 separate product exclusion requests, spanned a variety of products – hydraulic power engines, drinking-water coolers, ball bearings and CB radio transceivers, etc. – but nothing yet that touches the printing and imaging sector. That could change. The USTR said it would “continue to issue decisions on pending requests on a periodic basis.”

A little hint of a possible ray of sunshine crept through March 1 when reports surfaced that the USTR will soon publish a notice that it is “no longer appropriate” to raise the tariff rate from the current 10 percent to 25 percent as it originally planned to do Jan. 1.

Citing productive conversations between negotiators on both sides, President Trump agreed to again delay the looming tariff increase after issuing a 90-day extension in January. Clearly, at least among the people who actually are involved in the back-and-forth negotiations, there’s a growing sense that a resolution is near.

While it’s not a done deal – the administration is debating whether or not to immediately lift all or most of the tariffs as a sign of good faith or to hold the line and phase out the tariffs incrementally for greater leverage – it appears the printing and imaging industry will soon be able to get back to focusing on just plain old business issues. And that would be good news indeed.

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Patricia Ames

Patricia Ames

Patricia Ames is senior analyst for BPO Media, which publishes The Imaging Channel and Workflow magazines. As a market analyst and industry consultant, Ames has worked for prominent consulting firms including KPMG and has more than 10 years experience in the imaging industry covering technology and business sectors. Ames has lived and worked in the United States, Southeast Asia and Europe and enjoys being a part of a global industry and community.