Tariff Threat Dims Holiday Cheer for Christmas Tree Company

Date : 12/12/2019 @ 10:59AM
Source : Dow Jones News

Tariff Threat Dims Holiday Cheer for Christmas Tree Company

By Alex Leary | Photographs by Hannah Yoon for The Wall Street Journal 

President Trump's threatened new tariffs on Christmas decorations from China won't take effect until next year -- but that's no comfort to Mac Harman, who has to do his 2020 holiday shopping now.

Mr. Harman is chief executive of Balsam Brands of Redwood City, Calif., which sells artificial Christmas trees made in China. One of the factories that he buys from has given him a Dec. 20 deadline to place orders for next year.

That usually isn't a problem, but Mr. Harman says he can't estimate demand until he knows whether Mr. Trump is serious about imposing 15% tariffs on an array of consumer goods including Christmas decor, starting at 12:01 a.m. Sunday.

"You never know what the next day or the next hour will bring," Mr. Harman said of the U.S.-China trade war's head-spinning turns. "We've been growing and creating jobs, but two months ago we stopped hiring because we have to assume the tariffs are going into place and we will no longer be growing."

Other companies that import electronics, toys, apparel and other goods that would be subject to the new tariffs share the same predicament. Despite expectations that the tariffs will be delayed, no one is certain of what the president will do.

"Everyone is kind of living on the edge," said David French, the National Retail Federation's senior vice president for government relations. "I don't think anyone has a lot of clarity, even inside the administration, of what will happen."

Mr. Harman said the lighted Christmas trees sold under his Balsam Hill brand are made only in China. The privately held company expects $170 million in sales this year, up from $160 million in 2018, he said.

Since tariffs will force him to take either lower profit margins or fewer sales, Mr. Harman's company is holding off plans to add 50 people to its U.S. workforce of 130.

"We have been growing as a company significantly, so just being flat would be down," he said. "We're going to have to raise prices, it's going to cut demand."

The Wall Street Journal has reported that the Trump administration is likely to delay the scheduled new tariffs while trade negotiations continue with China. But Mr. Harman says a delay would simply extend the uncertainty for his purchases for the 2020 season.

Mr. Trump has defended tariffs as a necessary measure to force China to end business practices that he says have cost American jobs. Already, the U.S. has imposed tariffs on $361 billion of Chinese goods, and the threatened new levies would add 15% tariffs on $156 billion more in Chinese imports. That would leave about $20 billion of imported goods, in 2018 terms, not subjected to such duties.

"Americans elected Donald Trump because they were tired of excuses," White House spokesman Judd Deere said. "President Trump is the first president to stand up to China and send a clear message that the United States will no longer tolerate unfair trade practices."

Mr. Harman, 43 years old, says he understands that point of view. Raised in Cleveland, he said he saw his family's steel-wire manufacturing business suffer against Chinese imports. Living in Silicon Valley, the Stanford business graduate said he has seen China steal intellectual property.

"I get it," he said, sipping hot chocolate in a hotel cafe in Washington on a recent morning.

Still, Mr. Harman said he has no alternative to Chinese suppliers. He pleaded his case before the Office of the U.S. Trade Representative in June, only to learn in August that his trees were placed on a list of products to be tariffed this month.

The USTR has yet to announce a formal exclusion process for the December tariffs, but relief has been hard for many companies to win.

More than 1,700 companies are still waiting for the USTR to rule on requests to exclude products from the $200 billion tranche of tariffs placed last year on Chinese goods. Those tariffs started at 10% in September 2018 and rose to 25% this past May.

So far, the USTR has ruled on just 17% of the 31,000 exclusion requests under the $200 billion tranche. The vast majority of rulings -- 96% -- were denials, according to a Journal analysis of data posted on a public docket.

Mr. Harman in June was joined by executives at other Christmas-related businesses, who portrayed the tariffs as a hit to their employees and consumers.

"Who wants to place a tax on Christmas?" testified Doug Lauer, CEO of Old World Christmas, which sells blown-glass ornaments made in China. "Increasing the cost of celebrating Christmas will simply hurt American families."

In 2011, the Obama administration faced sharp rebukes over what critics called a "tax" on live Christmas trees. The 15-cent assessment was pushed by real tree farmers who were losing ground to artificial sellers and the money was for a marketing effort similar to the "Got Milk?" campaign.

The assessment was put on hold but eventually implemented, and the campaign continues today. "It's Christmas. Keep it real," goes the slogan.

--

Anthony DeBarros

contributed to this article.

Write to Alex Leary at alex.leary@wsj.com

 

(END) Dow Jones Newswires

December 12, 2019 05:44 ET (10:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.


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