As reported in RePlay, “Word from Washington, D.C. is that nothing significant was accomplished in this morning’s [last week’s] talks between American and Chinese trade leaders, just in case anyone was hoping for an eleventh-hour reprieve from the Trump Administration’s newly-increased tariffs on a selection of Chinese business and consumer goods that went into effect today.
As everyone in the coin-op world knows all too well, an enormous portion of the prizes we give out to players via merchandisers, cranes and ticket games comes from China, along with a significant number of the amusement games themselves (let’s not forget spare parts, too).
Whether we’re in the mix of goods to bear the new 25 percent import duty, which is what a tariff means, we don’t know yet, but we’re investigating. Of course, the administration has been known to back down rather quickly on these things in the past. But pundits think this time the president is deadly serious about forcing China to take a harder look at their disregard of our intellectual property laws and other irritants in our trade relationship with them. More to come.”
What this could mean? Much of what we hear and read in the news about tariffs is a lot bluster on both sides and what is expected during a tough negotiation. Let’s start with the facts: The 10% duty on US$200 billion worth of goods went into effect on September 24, 2018. This was the third stage of tariff implementation on the US side. On Friday, May 10, 2019 President Trump raised the percentage from 10% to 25% after negotiations broke down (for now). These tariffs are on 1,300 Chinese goods that include televisions, batteries, and yes, on some redemption and merchandiser prizes and amusement games/parts.
We have also heard that China is playing for ‘time’ in hopes that Trump won’t get re-elected. We have heard that China will retaliate and we will be in a long-term trade war. We have heard that China has been ripping of the US economy to the tune of $500 billion a year. We have heard that President Trump threatened on Sunday to put tariffs on another US$350 billion in Chinese imports ‘shortly’, but did not mention this threat in his latest round of tweets on Wednesday. We have heard that China holds $1.2 trillion of US debt and watch out!
There is actually bi-partisan support on all of this. After the announcement in June 2018 of the first round of tariffs on Chinese imports, for example, Senate Minority Leader Chuck Schumer said Trump’s actions were “on the money”.
“China is our real trade enemy, and their theft of intellectual property and their refusal to let our companies compete fairly threatens millions of future American jobs,” Schumer said.
The Amusement Industry is doing well and has so far survived the consequences of the 10% tariff increase for six months. Some game manufacturers raised prices as on January 1, 2019 and we are still buying the top games. We can agree that no matter what, prices on amusement games may increase and redemption and merchandiser prices will likely increase. The good news is that our industry can and will adapt to higher prices. For example, a game manufacturer that has games made in China may find that now it is less expensive to have the circuit boards continue to be made in China but then have the cabinets and mounting brackets and graphics produced in the US and the games assembled in the US (Midwest, East Coast, West Coast). Even though it is more expensive to manufacturer the cabinets in the US, there is a great savings in not having to ship the games from China to the US by the container and the shipping delays and customs delays disappear.
As far as prizes go, our entire FEC operations place the points necessary for a prize on the line item cost of that prize. If the cost is increased, the points to win that prize increase in the same ratio. Therefore it, will take more points for a customer to win that prize. The perceived value of that prize will also be increased at retail stores and online. The playfield will be leveled. We can also look for prizes that are made in the US and be assured that entrepreneurs will see the ‘demand’ and find ways to fill the ‘void’.
And then there is the topic of US inventions and patents. Perhaps higher tariffs will decrease the number of knock-off games, parts, prize items, and the playfield will be balanced as the used games will retain their values without knock-offs as competition. Just saying.