Happy Sunday,
We are talking tariffs once again. This is such an annoying topic, but we really want to try and drive home how expansive the effects of this are in the marketplace. Socks are our world, but this ripples through to almost every product we buy and sell as consumers in some way. This week, the US administration met with the Chinese authorities and “negotiated” a trade agreement. They exited this meeting, as they always do, and tried to sell us a story that they had somehow “won” and come to a groundbreaking agreement on trade with China. Now, we at Arvin Goods are not experts, and we are FARRRRRRR from any form of economist, but we are pretty experienced, reasonably intelligent, have an internet connection, and calculators on our iPhones. Dangerous minds!
We dug into these amazing negotiations that had gone down, and ran some simulations on how it would affect our space. If you feel like fact-checking us, we use the Flexport simulator and this thing called Google as our primary tools. As a caveat, we should acknowledge that basically everything could change in the next hours, let alone days, because that is what this crew of “negotiators” does. But, as it stands now, the screenshots below are how a shipment of socks from China would be tariffed going forward, vs one year ago. The advertised win in the meetings (we are paraphrasing) was around rare earth minerals, and in exchange for China easing its restrictions on these exports, we would reduce the “Fentanyl Tariff” from 20% to 10%. How rare earths and the fentanyl charge are related is unknown to us. This charge is highlighted below in red. In theory, the total charge could change from 75% down to 65%, compared to 21% a year ago. That’s a 44% increase. This is the “win”? A fabricated new tariff on importers, and an amazing negotiation to reduce a portion of the new charges created this year by this administration, and advertised (spun) as a victory for us.
A quick explanation of the charges. 13.5% is the standard tariff; this is what is paid for socks from (almost) any country. The 7.5% charge is the 2018/2019 China tariffs that were put in place during Trump v1.0. The 20%, now supposed to go to 10% is the fentanyl charge instituted this year, and the 34% charge is the new reciprocal tariff put in place this year on “liberation day” for who knows what🤷🏻♂️.
Compare this to Korea, Japan, and the EU, which have negotiated a flat 15%, and you can see how China, as the biggest products, materials, and equipment producing country on the planet, is handled very differently. Politics aside, just facts, a US importer, who is usually a wholesaler, retailer, or brand of some kind, pays these tariffs. Not the factory, not the foreign government. If you are not in this business, just apply this scenario to your own work. Your cost basis suddenly rises 44% or more. What do you do? Do you eat it, or raise your selling prices? And, this is just socks, we won’t even attempt to try and understand or explain the agricultural impacts. We’ll see how this shakes out. It is still evolving, and we think this will be negotiated down further as the administration feels more pressure, and the example of some of the other countries successfully decreasing the threatened tariffs on their exports as well.
Compared to one year ago:
Plus this dude wears gold-toe socks (made in China)…😉
Thank you for reading! Enjoy the news below, and we wish you a great week!
Hope you enjoy today’s Clean Up. We would love to hear from you. Comment here on Substack, hit us on social, or email us at info@arvingoods.com. Have a great week. Cheers,
Stories Of The Week…
Design
Why Lululemon’s NFL collaboration could be a ‘Hail Mary’ more than well-drawn play - Market Watch
This is more of an anti-design article. We couldn’t think of a worse match-up of brands than LuLu Lemon and the NFL. We don’t know what this means for LLL but it definitely is not innovative or motion forward.🏈🧘🏼♀️🤨
Photo
Legendary sports photographers reveal their best World Series memories - TIME
The World Series is where routine plays turn into anxiety-inducing, legend-making, career-defining feats. It’s where underdogs become heroes, where champions turn into dynasties, and where curses are born–or busted.📷🏟️⚾️
Industry
If you think Trump’s China deal is the end of the story, you haven’t been paying attention - CNN
Financial markets kicked off the week by gleefully cheering the weekend’s headlines that trade talks between the United States and China went smoothly. Just weeks earlier, Trump had threatened to impose a 100% tariff on Chinese exports and said he might call off a meeting with Chinese President Xi Jinping. Now, that meeting looks set to take place this week.
If all that seems like a rerun of a movie we’ve seen before but no one quite remembers how it ends, that’s because it never really did.
The rare-earth chokehold
The latest escalation between Trump and Xi arose after Beijing announced plans to restrict exports of rare-earth minerals, critical materials needed to power a wide range of electronics.🚢⛏️🇨🇳
Entertainment
The Neptunes Mixtape ft. Clipse, Jay-Z, Snoop Dogg, Justin Timberlake, Kelis & More - YouTube
Here’s a 1:30h mix about the legendary Virginia producer duo The Neptunes by Chad Hugo and Pharrell Williams. Their sound defined the 2000s! Hard drums, memorable chords and those melodies from the Korg Triton that changed how pop and hip-hop felt.🎧🔈
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