They help companies determine prices. Rates make it more difficult.

We import a few raw materials for our manufactured products such as Yttrium oxide, which is derived from a rare earth metal. We also import technical ceramic parts that are mainly produced by two exceptional suppliers from China. An immediate effect of the rate is that we had a shipment of raw materials along the way when the rate of 145 percent was imposed – so our costs have only risen dramatically.

We also have 15 to 20 transactions pending Chinese suppliers of technical ceramic parts, and our margins will be trimmed considerably – by no less than 35 to 45 percent.

We now invoice rates in new price canons. For example, a part that we ordered in January, which cost $ 1.57 per unit, costs $ 2.97 in April due to the new rates. Although we expected that we will pay the January rate, we have to pay the higher April rate, because it depends on when the part arrives. Even with that price increase we are cropping our own margins. Our customers will certainly have to pay higher prices in the future, but it is too early to say whether they accept higher prices or postpone or cancel projects.

We recently received a letter from a large customer stating that they would not accept price increases that can be attributed to rates.

We also have to deal with incoming shipping problems. This has to do with the end of the the minimis exemption. Many of the parts that we import are eligible for this exemption, but no longer. Now companies such as FedEx are required to collect a rate on any shipping with a value of more than $ 1, so we think the end of the minimum is to be delayed. The bottom line is that we have problems getting shipments now.

On the export side of our company we have a large Chinese customer who bought our goods for about $ 60,000 in March, and the shipment was willing to leave, just as China said it would apply mutual rates after President Trump had announced his rates of 145 percent on “Liberation Day”. As a result, our customer has asked us to save the product, in the hope that the problem will be resolved soon. I wrote to them and said, “We are happy to hold it, but I very much doubt that it will be resolved soon.”

Our Chinese activities had grown considerably for this. About 40 percent of our turnover comes from exports. It would not surprise me if our Chinese sale now drops by 50 to 75 percent. And the hit may not be reversible because our customers in China will probably look for domestic suppliers.

The rates have already been baked in a recession. I expect that our total turnover will fall by 15 to 20 percent if a recession strikes. We experienced a decrease of 18 percent in 2008, so we have some basis for our prediction. And this is all caused by a loose error, namely the 145 percent rates for China and all over the world. We see that our China suppliers are extremely competent and very responsive, and we like to work with them. We have no plans to change our supply chain.

It is a bit like an earthquake in the Indian Ocean. It didn’t feel thousands of kilometers away, but the tsunami will eventually touch us, and that’s how it feels. The tsunami is inflation and unemployment.