First, don't let this get into a political discussion otherwise the thread will get pulled.

We have been notified that as of September 1st, a 10% Tariff will be imposed on each shipment that we receive from China.

How will this affect us and our customers?  We think, not that much.

First, as Tariffs are imposed on all exports from China, the Chinese currency looses value against the US$.  We took the steps about 6 months ago to set our project costs with the Chinese builder in Chinese currency instead of US$s.  So that will absorb about 1/2 of the Tariff's cost when we import the models in lower payments in US$ to the builder as the exchange rate changes.

The Tariff is applied to cost price of only the parts that are made in China. For Diesels, 1/2 of our model cost comes from Chassis parts made in Korea and Electronics that we supply from the US. For Brass Steam engines, almost all of the cost is from China.  So actually the extra cost of the Tariff translates into about $20-$30 a Diesel and about $100 for a Steam Engine when factoring in the exchange rate.

If the Tariffs do turn on, which we expect them to do in September, we will pass on some of these costs to our customers, and absorb some ourselves. But it's not a 10% increase, more like 3% for Diesels, and 6% for Steam  and ERR prices will rise about 5%.

NO POLITICAL COMMENTARY PLEASE. This is just to inform you that the Tariffs don't mean the demise of your hobby or the other Manufacturers. It will have a muted affect on price increases for now. At least that will be our experience. If Tariffs are raised to 25%, then cost increases will be proportionately higher. That will start to hurt business everywhere, so I don't think it will be in place for very long.

If you have any further questions please feel free to email me directly. There's an email link on the bottom of our www.3rdrail.com page.

Original Post

Scott,

As others posted, thanks for the update, explanation as well as your good foresight to hedge your company's currency exposure and lessen the potential impact to your customers.

You can have a steam train ...If you'd just lay down your tracks.

Dear Scott,

Thank you for explaining the tariff situation in a realistic, not political, business way.

If you are able to speak about this, are you looking to venture into other countries to make your product ?

ACE trains in England, for example, has built there train line in Thailand and now thru ETS in central Europe.

Thank you for making us 5 year old( actually 63) boys happy with the product you produce !!!

 John P Dunn Sr. Scale2Rail Promotions

John and All,

I work with such a loyal and specialized crew of Koreans and Chinese in China. One observer at our facility said, "They can make your trains with their eye's closed..."  I've known them personally for 15 years now. We've gone through a lot of improvements and changes together to get our product just right. To move that to another country would be like starting over. Even with 25% tariffs, I think it would end up costing more to get the same detail and quality.

I've got lots of stories about my experience making models in the Philippines with Koreans. It started out good, then fell apart. There were no subcontractors there. Everything from decals, paint to screws and washers had to be imported. There was corruption, worker problems not to mention Typhoons, floods, Earthquakes and Dengue Fever.  The 2nd project had to be shipped back to China to be finished. The factory just fell apart in the Philippines. I was lucky to get what I got.

Well today the Yuan crossed 7.05 to the USD. Exactly what we thought it would do. If more Tariffs are levied it will move even more.

If you want any further discussion off the forum, feel free to email me.

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