To Our Client Partners,
I am writing to provide an update regarding the China tariff situation and QRG’s approach to pricing for the balance of 2019. With June 1 having arrived, the 25% tariffs are now official. While we had collectively hoped for a last-minute resolution, all indications and reports suggest the increased tariffs are likely to remain in place for an extended period of time. Little progress has been made between the U.S. and China on the key issues since the early May fallout. Moreover, there is no clear timeline around future negotiations – and the recent Mexico tariff announcement complicates the global trade landscape even further.
As a reminder, the 25% tariffs impact the original product categories included in the 10% tariff regulations enacted last September (effectively an additional 15% increase to supplier product costs on top of the initial 10%). The major categories relevant to our industry are Bags and Stationery products, and portions of Drinkware, Technology and other Accessory categories. Beyond the currently enacted tariffs, the process of imposing 25% tariffs on all remaining product categories coming from China has begun. A final determination will be made on this issue when the public hearing and comment period ends on June 24. We have been working closely with our industry and other trade associations to make sure our voice is heard in opposition to a further expansion of the tariffs.
As a result of the new 25% tariffs, you may be seeing a price adjustment for items that haven’t historically fluctuated. Consistent with our strategy to date, we will continue to take a measured and moderate approach to passing along price increases. Please reach out directly to your account contact if you have additional questions.
Despite the immediate challenges ahead, I have been inspired by the level of partnership and resiliency our industry has demonstrated in the face of some very difficult circumstances. We will continue to keep you updated on progress with the trade negotiations as well as the potential expansion of the tariffs as additional news and information warrants. Until then, I would like to thank you for your continued support and loyalty to QRG during these times of uncertainty.
Sincerely,
Todd Pottebaum
QRG President
