Potential Tariffs & Golden, CO.

[Hopsbreath]

Well someone report how tariff's have effected you personally.

Higher material costs due to steel/aluminum tariffs certainly took a chunk out of my 2018/2019 bonuses last time around. Probably years beyond that too but it gets difficult to parse with covid.

The future is uncertain and that’s why markets tanked. Bottom line, no one knows what’s the end goal.

But let me ask a simple question:
Did Ram1500 or Chevy Silverado become less expensive after they moved manufacturing to Mexico?

Could you make your point more clearly? Because Ram's product lineup is weird with the "classic" 4th gen and new 5th gen 1500 sold simultaneously, and despite moving some production to Mexico Ram and GM still have truck assembly plants in the US, notably Sterling Heights Assembly in MI for Ram and Fort Wayne Assembly in IN for GM (and Flint, if you're counting Silverado HD).

What is unclear?

Why is Mexico made Ram as expensive as US made Ram?

A little different but the same: Fender makes the exact same guitars in Mexico, as they do in the US, as they do in Indonesia. The Indonesian Stratocaster is a third the price of the US and the Mexican is 2/3rd the cost.

Cover up that manufacture and you’ll have a tough time telling the difference. I own all three and prefer an Indonesian J-bass to an American equivalent. The price point really is the only difference.

Now the really funny thing is the US and Mexican factories are only 180 miles from each other. So close that some of the same workers have built guitars at both factories. The joke is “Mexican Fenders are built by Mexicans in Mexico and American Fenders are built by Mexicans in California.”

So why does the Ram cost the same regardless of origin? Fender has managed to cut a discount as has Spyderco with the Chinese value lineup. Dodge being Dodge; I suppose there’s a reason I’ve never owned a Chrysler product.

[northmanscall]

Spyderco knives are already quite expensive here in europe.
Usually 40% more compared to US Shops.
Tariffs will make it worse.
I have no Problem spending money for quality, but i have thresholds which i am comfortable spending on the hobby.
For example a vanilla Shaman in Germany is 360€.
I think for many this is too much.
It will show how many us made knives i can afford in the future.

[sal]

Seems like there is certainly a lot of speculation, which means guessing and opinions? It also seems like there is little overall agreement, which again supports the fact that we don't know what the future will hold. I also think that this is a fluid change, which means nothing is the way it will be, so we still don't know.

sal

Sure… but I’m curious how Spyderco with relatively static pricing model and MAP program will cope with the complex and probably very dynamic tariff environment.

Hi Zhyla,

We will do what we always do. We will look at the cos of manufacture, add in overhead, put in our required profit in order to stay in business and set the price. If the model is too expensive to survive in the marketplace, then it will be discontinued. There are models that we keep in the line for reasons other than profit, so often profit is reduced to keep the model in the line. This is a challenging balancing act and must be carefully watched so we don't make the mistake of an imbalance that will increase debt beyond what we can pay.

If you spend more than you earn, you will go into debt. If your debt gets too high, and you cannot pay it, you will begin to lose assets and the ability to increase your debt.....until you lose it all.

On a Global level, the US has been increasing debt at a greater rate than is sustainable. The difference is a long term view vs a short term view.

sal

[RustyIron]

On a Global level, the US has been increasing debt at a greater rate than is sustainable. The difference is a long term view vs a short term view.

That's what I wanted to say, but was afraid it might be perceived as too political and Kristi would yell at me. I hope she goes easy on you.

The funny thing is, as far back as I remember, citizens from all walks have been complaining about spending too much on this, too much on that, sending too much money here and there, not paying attention to the plight of the taxpaying public, and all the while we're going deeper and deeper into debt. Everyone has been complaining since I was a kid in the 60's--probably longer. No one has done anything about it, and the problem has mushroomed. Now someone is actually taking action, and all the "experts" are gnashing their teeth. Are the economic steps being taken the right ones? I don't know. I'm no macroeconomist. You tell me.

In my profession, I adopted the philosophy that I don't have to fix everything overnight. It took a long time to get this way, and it will take some time to get everything the way it needs to be. But if I can improve something every day, no matter how small, eventually things can be near-perfect.

[Synov]

Yes, so this results in trade deficit. Shouldn’t this be discouraged through policy?

No, because there is nothing negative about it. Certain politicians use the negative connotations of the word "deficit" as a scare tactic. But most of the strongest economies in the world have trade deficits, simply because their wealthy populations can afford to consume more and import more. So yes you can easily reduce the trade deficit by raising prices and essentially making people poorer, but that's obviously not good policy.

[Mat_ski]

Yes, so this results in trade deficit. Shouldn’t this be discouraged through policy?

No, because there is nothing negative about it. Certain politicians use the negative connotations of the word "deficit" as a scare tactic. But most of the strongest economies in the world have trade deficits, simply because their wealthy populations can afford to consume more and import more. So yes you can easily reduce the trade deficit by raising prices and essentially making people poorer, but that's obviously not good policy.

Is it always good?
Is there a point at which it becomes bad?

[Synov]

Yes, so this results in trade deficit. Shouldn’t this be discouraged through policy?

No, because there is nothing negative about it. Certain politicians use the negative connotations of the word "deficit" as a scare tactic. But most of the strongest economies in the world have trade deficits, simply because their wealthy populations can afford to consume more and import more. So yes you can easily reduce the trade deficit by raising prices and essentially making people poorer, but that's obviously not good policy.

Is it always good?
Is there a point at which it becomes bad?

If you buy food from the grocery store, you have a trade deficit with the store. If you sell some of your old stuff to your neighbor, you have a trade surplus with them. It's neither good nor bad, it just is.

https://econofact.org/is-the-trade-defi ... -on-growth

[SpyderEdgeForever]

Is my math off or is this right?
The Taiwan Tariff will be 32 percent and the Japan tariff will be 24 percent.

That means a 100 dollar knife will now be 132 from Taiwan and 124 from Japan?

[Mat_ski]

Yes, so this results in trade deficit. Shouldn’t this be discouraged through policy?

No, because there is nothing negative about it. Certain politicians use the negative connotations of the word "deficit" as a scare tactic. But most of the strongest economies in the world have trade deficits, simply because their wealthy populations can afford to consume more and import more. So yes you can easily reduce the trade deficit by raising prices and essentially making people poorer, but that's obviously not good policy.

Is it always good?
Is there a point at which it becomes bad?

If you buy food from the grocery store, you have a trade deficit with the store. If you sell some of your old stuff to your neighbor, you have a trade surplus with them. It's neither good nor bad, it just is.

https://econofact.org/is-the-trade-defi ... -on-growth

That still does not answer the question at what point is trade deficit bad?

If I buy more than sell then i become indebted. This is only sustainable if someone is willing to buy my debt. Do you think it is sustainable forever?

[CDEP]

No, because there is nothing negative about it. Certain politicians use the negative connotations of the word "deficit" as a scare tactic. But most of the strongest economies in the world have trade deficits, simply because their wealthy populations can afford to consume more and import more. So yes you can easily reduce the trade deficit by raising prices and essentially making people poorer, but that's obviously not good policy.

Is it always good?
Is there a point at which it becomes bad?

If you buy food from the grocery store, you have a trade deficit with the store. If you sell some of your old stuff to your neighbor, you have a trade surplus with them. It's neither good nor bad, it just is.

https://econofact.org/is-the-trade-defi ... -on-growth

That still does not answer the question at what point is trade deficit bad?

If I buy more than sell then i become indebted. This is only sustainable if someone is willing to buy my debt. Do you think it is sustainable forever?

Budget deficits and Trade deficits are not the same. The link he provided explains it really well.

If you spend more money buying Spyderco knives than you earn, you have both a Trade Deficit with Spyderco *and* a Budget Deficit for you. It's the Budget deficit that is the problem for you.

If you buy a T-shirt made in China for 10 dollars, and one made in the US for 25 dollars, the one from China adds to your trade deficit with China, but the one from the US hits your budget deficit harder.

So yes, depending on other factors, trade deficits are not necessarily bad and are sustainable in the long term.

Spyderco has a HUGE trade deficit with China, but the knives they have produced there can be sold at a lower price point and help to sustain the company so they can make the sexy stuff for us in Golden. I's bet that we owe a lot of our favorite Spydie stuff to the success of the Tenacious.

[Synov]

No, because there is nothing negative about it. Certain politicians use the negative connotations of the word "deficit" as a scare tactic. But most of the strongest economies in the world have trade deficits, simply because their wealthy populations can afford to consume more and import more. So yes you can easily reduce the trade deficit by raising prices and essentially making people poorer, but that's obviously not good policy.

Is it always good?
Is there a point at which it becomes bad?

If you buy food from the grocery store, you have a trade deficit with the store. If you sell some of your old stuff to your neighbor, you have a trade surplus with them. It's neither good nor bad, it just is.

https://econofact.org/is-the-trade-defi ... -on-growth

That still does not answer the question at what point is trade deficit bad?

If I buy more than sell then i become indebted. This is only sustainable if someone is willing to buy my debt. Do you think it is sustainable forever?

It's neither good nor bad. How does that not answer the question (answer: never), or at least point out that the question is based on a faulty premise (premise: a trade deficit can be bad)?

There is no "trade debt" when you purchase goods, so I don't see how your analogy works. You get the goods, they get the money, it's a balanced exchange, just not balanced in terms of only goods. There are more ways to make money than just exporting goods so goods going in does not have to balance with goods going out.

[Naperville]

Trade deficits are OK until you no longer have any kind of manufacturing base in your home country. Then you have a problem.

The USA is a hegemonic power operating globally, 24x7x365, electronically in the air and in every wire, on the seas, in the seas, in space, in air, and on the ground, in all weather.

You could say that every US Citizen is part of the machine that is the DoD. There are not just 5 to 7 branches, there are dozens of functioning pieces, and they all interoperate. The budget for basic DoD functions is around $1 trillion, but the real cost is far more. If you are a citizen, you pay into or work for the DoD, and peace in The West.

The DoD has people analyzing wars and weapons of every force globally non stop. Weapons are designed, tested, reviewed and moved into use. If 5% of the weapons make the cut into use, then think about the cost of failure in the development of new weapons and technologies.

The DoD cannot lose a major war once.

If there is no manufacturing base will our enemies sell us uniforms?

[Mat_ski]

So if our combined deficit is greater than our surplus it is still ok?

More money leaving than coming is fine?

Can we keep doing that indefinitely?

To Naperville point, do you think we could keep doing that without our military? Or if dollar was not the world’s reserve currency?

[Naperville]

So if our combined deficit is greater than our surplus it is still ok?

More money leaving than coming is fine?

Can we keep doing that indefinitely?

To Naperville point, do you think we could keep doing that without our military? Or if dollar was not the world’s reserve currency?

What came first, the chicken or the egg. How did the US dollar get to be the trade or exchange vehicle for the globe? They had to have the largest most powerful economy, but they also had to guarantee all shipping lanes globally for all of their ships performing trade.

Now the USA protects shipping lanes, but probably owns less than 5% of the ships. China and South Korea are the large ship makers and owners I think.

Think about the term hegemony and hegemonic power. The US is trying to reverse 50+ years of globalism, that moves all of their manufacturing back home. There is going to be some unpleasantness, some pain.

Will China become THE global hegemonic power or will the USA and The West reverse the trend and remain in power? This is a lot more than paying $25 more for a Spyderco knife, this is a war that may be fought without firing a shot, that determines if Eric has a company to pass on to his children. The USA is not alone in this, but the USA is making the first of many moves to redevelop it's manufacturing base.

https://en.wikipedia.org/wiki/List_of_U ... e_agencies

https://www.google.com/search?q=what+ma ... onic+power

[Synov]

So if our combined deficit is greater than our surplus it is still ok?

More money leaving than coming is fine?

Can we keep doing that indefinitely?

To Naperville point, do you think we could keep doing that without our military? Or if dollar was not the world’s reserve currency?

You're confusing balance of trade with balance of payments. Balance of trade is only about goods exported vs imported, not money. There is money coming into the country unrelated to exported goods.

What came first, the chicken or the egg. How did the US dollar get to be the trade or exchange vehicle for the globe? They had to have the largest most powerful economy, but they also had to guarantee all shipping lanes globally for all of their ships performing trade.

Now the USA protects shipping lanes, but probably owns less than 5% of the ships. China and South Korea are the large ship makers and owners I think.

Think about the term hegemony and hegemonic power. The US is trying to reverse 50+ years of globalism, that moves all of their manufacturing back home. There is going to be some unpleasantness, some pain.

Will China become THE global hegemonic power or will the USA and The West reverse the trend and remain in power? This is a lot more than paying $25 more for a Spyderco knife, this is a war that may be fought without firing a shot, that determines if Eric has a company to pass on to his children. The USA is not alone in this, but the USA is making the first of many moves to redevelop it's manufacturing base.

There's just a few issues with that.

1. No one is going to heavily invest in manufacturing just because of tariffs that will probably be removed 3 years from now, if not sooner once Congress realizes they need to take charge.

2. The negative effects of this trade war reverbating throughout the global economy are going to discourage investment in manufacturing and negate its effects.

3. Tariffs don't actually "solve" trade deficits. https://www.nber.org/papers/w25402

[Bolster]

This is a lot more than paying $25 more for a Spyderco knife, this is a war that may be fought without firing a shot, that determines if Eric has a company to pass on to his children.

Wait a second, let's not gloss over the important things in our haste to discuss tariffs, trade, war, hegemony, and the future of planet earth.

Eric has a family ??

[Naperville]

This is a lot more than paying $25 more for a Spyderco knife, this is a war that may be fought without firing a shot, that determines if Eric has a company to pass on to his children.

Wait a second, let's not gloss over the important things in our haste to discuss tariffs, trade, war, hegemony, and the future of planet earth.

Eric has a family ??

God has a plan.

[aicolainen]

I think there's a place for strategic, well planned, predictable and smoothly phased in tariffs to help set the home team up for success, and secure domestic manufacturing of critical supplies. I would endorse such tariffs for the US, Norway and any other country.
What I have yet to see is the strategic, well planned, predictable and smoothly phased in part.

On the knife side of things,
when the smoke settles and we have some understanding of how this will play out long term, and if the tariffs stay in place, my hope for the hobby is that Spyderco would consider some means to prevent tariffs from stacking up too much. E.g. a QC facility outside the US so knives from production facilities outside the US can be sold in Europe and elsewhere without accumulating US import tax and EU retaliatory tax on top of production cost, overhead and profit margin.

[Brock O Lee]

...a QC facility outside the US so knives from production facilities outside the US can be sold in Europe and elsewhere without accumulating US import tax and EU retaliatory tax on top of production cost, overhead and profit margin.

This is a very good point. I've often wondered why knives made in Japan or Taiwan were only available to purchase from the USA.

I imagine a short hop directly to Aus would reduce a significant amount of overhead and taxes...

[CDEP]

I think there's a place for strategic, well planned, predictable and smoothly phased in tariffs to help set the home team up for success, and secure domestic manufacturing of critical supplies. I would endorse such tariffs for the US, Norway and any other country.
What I have yet to see is the strategic, well planned, predictable and smoothly phased in part.

On the knife side of things,
when the smoke settles and we have some understanding of how this will play out long term, and if the tariffs stay in place, my hope for the hobby is that Spyderco would consider some means to prevent tariffs from stacking up too much. E.g. a QC facility outside the US so knives from production facilities outside the US can be sold in Europe and elsewhere without accumulating US import tax and EU retaliatory tax on top of production cost, overhead and profit margin.

Simply doing a QC outside of the US would not qualify as a "substantial transformation" under Section 301, and CBP has seen this trick tried before. Sadly, it wouldn't work.