The 305 jobs at Cap America are good ones for rural Missouri, with an average wage of nearly $14 an hour plus benefits, but they wouldn’t exist without Chinese imports.
Workers at the Fredericktown company embroider company logos or other custom designs on imported baseball caps. It’s been a good business for 34 years, but Chief Executive Phil Page says it’s being hurt by President Donald Trump’s trade war.
“This whole tariff thing is like a slow burn for us,” Page said. “It will erode our margins.”
Cap America learned last month that the tariff on caps, along with $250 billion a year worth of other goods from China, will rise to 30% on Oct. 1. Trump imposed a 10% tariff a year ago and raised it to 25% in May.
Page was able to cushion the financial blow by placing large orders while the tariff was still 10%. He even rented a 40,000-square-foot warehouse to hold extra inventory.
Recently, though, Cap America used the last of the caps brought in under the 10% tariff. Since the company typically changes prices just once a year, in January, the higher-cost merchandise will pinch its profits.
Page has ordered some caps from other countries, but he said that’s not easy. He spent eight months vetting a manufacturer in Bangladesh to make sure the quality, style and colors were what his customers wanted.
So when Trump said, as he did on Twitter last month, that he could order U.S. companies out of China, he’s making an existential threat to companies like Cap America.
“You can’t just snap your fingers and change the supply chain overnight,” Page said. “If China controls 89% of the market, you don’t have to be a rocket scientist to know it will be difficult to move production anywhere else.”
Whether Trump likes it or not, China has become the workshop of the world. Even as companies scramble to find suppliers in places like Vietnam and Bangladesh, few major industries can do without China’s massive, efficient capacity and transportation infrastructure.
Caleres, the Clayton-based shoe company, has shifted sourcing away from China in recent years but still buys 60% of its products there. Trump hit the shoe industry, along with diapers, televisions and many other consumer products, with a 15% tariff Sept. 1.
Caleres CEO Diane Sullivan said in a statement that tariffs are “a volatile and ever-evolving topic that we continue to work in real time. We are confident we have positioned ourselves to mitigate the impact of increased tariffs on footwear produced in China for the balance of the year and into 2020.”
Page, for one, could do without the volatility. “It’s almost impossible to make future business decisions based on the climate he’s created with these tariffs,” he said.
As he thinks about pricing for next year, for instance, Page has to guess whether the tariff will stay at 30%, go higher or perhaps go away. He also knows customers may balk if he tries to pass on the full cost of the tariff.
This year’s price increase was higher than usual, Page said, and has led to a slight drop in unit sales.
Cap America can tolerate thinner margins for a while, he added, but he really doesn’t want to see the business shrink. Too many good jobs are at stake, in a part of the country that really needs them.