The past few months have certainly seen its twists and turns when it comes to the looming “trade war” between the United States and China; in fact, on May 29, President Trump pivoted from a sort of temporary “cease-fire” to announce that the United States will impose a 25-percent tariff on $50 billion of “goods imported from China containing industrially significant technology.”
The White House says the final list of covered imports will be announced by June 15; however, thanks to a previously published list of products and technologies already targeted for proposed tariffs (outlined in great detail at http://ustr.gov/sites/default/files/files/Press/Releases/301FRN.pdf), the security industry should have a pretty good indication of what products will appear on the final list.
If the tariffs are eventually adopted, it will have a ripple effect across the security industry – with major effects on dealers, integrators, vendors and distributors. SD&Ihas delved deeply into this proposed tariff list and come up with the following list of affected products/product categories:
- Video cameras (circuit boards/internal parts and lenses);
- Batteries and UPS devices;
- Fiber optic cable;
- Coaxial connectors;
- Media conversion and solid state media storage;
- LED lighting;
- Video monitors and displays;
- Touchscreens; and
- Helicopter parts (for aerial drones).
“The inclusion of many of these products will directly hurt U.S. companies by increasing the cost of key components needed to manufacture or integrate security systems,” Don Erickson, CEO of the Security Industry Association (SIA), wrote in a formal letter of opposition that was sent to the federal government. “In many cases, there are few if any realistic alternative sources that can be pursued without significant supply chain disruption.”
What would happen to our industry if all of these products coming from China cost 25 percent more than they do today?
“I can tell you for a fact that security integrators are not going to eat the 25 percent,” says Bill Bozeman, President and CEO of the PSA Security Network of integrators. “They will have to pass it through to the end-user in 95 percent of the cases. Even for the 5 percent who might eat those costs, it will only be a strategic move to gain market share – a loss leader type of mentality that some integrators and manufacturers utilize.
“The big question is, if that’s the case, will it impact sales growth,” Bozeman asks. “Products are only a certain percentage of the whole package, but if things go up, for example, 9-10 percent, will it have an impact on sales as things get more expensive?”
SIA maintains that any such threat to the costs of security products and components could have dire repercussions. “Imposition of tariffs on these products would have a significant negative impact on our industry’s ability to export and continue to grow in the United States, puts jobs at risk for U.S. workers, and will make it more difficult for our members to respond to U.S. customer demand – an issue which, for an industry striving to provide the most effective security and life safety solutions, has consequences that go well beyond the bottom-line,” Erickson wrote.