Escalating US tariffs hurt recreational marine sector - PassageMaker
As tariffs and retaliatory tariffs build, U.S. marine manufacturers are facing a significant impact.

Until recently, the recreational boat industry has been feeling pretty confident with its economic outlook. Inventory is shallow, boat sales are up, and the summer is just beginning. The National Marine Manufacturers Association reported just a few weeks ago that boat sales had hit a ten year high. But there is some uncertainty in the air as of late.

U.S. international trade has been beset with confused seas over the last few weeks as the Trump Administration imposes, threatens, retracts and re-imposes tariffs against China, Mexico, Canada, and numerous European countries. And while these seas seem to be settling into some consistency over the past few days, they are far from calm as the storm of a trade war brews.

There was some hope that this past weekend's G7 meeting might bring relief to the threat of escalating tariffs. But as President Trump exited the G7 inroute to Signapore to meet with North Korean Leader Kim Jong-un, those hopes seem dashed.

Reagan Haynes, senior reporter at our sister publication, Soundings Trade Only has been tracking the threat this trade war poses to the recreational boating industry. Last week she reported on the proposed retaliatory tariffs saying, 

"Boats entering the EU will face a 25 percent tariff while Canada is applying a 10 percent tariff and Mexico a 15 percent tariff, according to the NMMA. Canada is the No. 1 importer of boats."

And while there are concerns throughout the U.S. of how these tariffs will impact the U.S. economy, the U.S. maritime industry is especially unnerved. A perfect storm is brewing with Section 232 tariffs on steel and aluminum, anti-dumping duties on Chinese aluminum sheet, and 301 tariffs on marine goods and products. In addition to retaliatory tariffs, many from friendly nations and trading partners the marine industry is seeing rising manufacturing costs and order cancellations.

Thom Dammrich, NMMA President.

Thom Dammrich, NMMA President.

Thom Dammrich the president of the National Marine Manufacturers Association released a statement in which he stated, “Simply put, these tariffs are a disaster for our industry. All types of recreational boats are on the retaliatory lists from both Canada and the EU. As a result, rather than protecting American manufacturing, these tariffs directly harm the entire recreational boating industry—one of our country’s enduring American-made industries. To make matters worse, Canada, Mexico, and the EU are the top three export markets for American-made marine products and in 2017 they accounted for nearly 70 percent of marine exports."

Aluminum boat sales have outpaced fiberglass boat sales in recent years. Yet most of these companies source their aluminum from American producers, which puts them at a greater disadvantage on an already competitive export market. The U.S. marine industry and the recreational market in general is a champion of U.S. manufacturing, creating some of the highest paying labor jobs in the U.S. market.

Volvo Group CEO Martin Lundstedt spoke with President Trump during a dinner with European business leaders during the World Economic Forum in Davos, Switzerland. His comments on the impact of tariffs on trade and U.S. business begin at the 5:55 mark.

The NMMA reports there are 650,000 jobs in the recreational marine market in boat manufacturing alone. There are even more jobs in all of the marine products and service sectors that support the recreational marine industry which would result in some far- reaching ripples if there was an industry slowdown from the ongoing trade war. Dammrich continued in his statement, saying, “In 2017, total recreational marine expenditures reached a ten year high of $39 billion. This growth was expected to continue into 2018 and beyond, but the Administration’s actions today jeopardize the stability of the industry and ultimately harm every American consumer, worker, and business.”

Bentley Collins, vice president of sales and marketing for Sabre and Back Cove yachts, shared his concerns with Soundings Trade Only, explaining that this Trade War would cost the recreational boat industry jobs if retaliatory tariffs are put in place. As he reported to Soundings Trade Only,

“My typical worker of an hourly-wage job works about 2,000 hours a year,” Collins told Trade Only Today. “When you equate that to the number of boats a small company like us will not sell in Canada, we’re going to lose between six and 10 boat builders. Our export business will basically go away. And that really is a matter of jobs.”

Employees discussing the construction of the Back Cove Downeast 37.

Employees discussing the construction of the Back Cove Downeast 37.

When it comes to Canadian trade, there is a real threat to U.S. companies as Canada is the number one export market for boat builders. When you look at boats like Back Cove or Sabre that take numerous labor hours to produce, a slowdown or halt in the export market could lead to a significant layoff ripple effect throughout the industry. 

Currently this trade war seems to be barreling forward with no end in sight. Each month the Marine Retailers Association of the Americas, along with Soundings Trade Only conduct the Pulse Report in conjunction with Robert W. Baird. The latest report saw respondents overwhelmingly expecting tariffs to raise the price of aluminum products.

Peter Schrappen, Vice President and Director of Government Affairs for the Northwest Marine Trade Association

Peter Schrappen, Vice President and Director of Government Affairs for the Northwest Marine Trade Association

When reached for comment on the effect that tariffs could have on the local Washington State economy, Peter Schrappen, Vice President and Director of Government Affairs for the Northwest Marine Trade Association, had this to say: 

“I wasn’t a history major but I sure remember learning in class that the start of the Great Depression was due to the tariffs President Hoover instituted in 1930. As a general rule, I’m for fewer barriers to trade than more. Washington State is the most trade-dependent state in the nation. We have a lot on the line here. When it comes to tariff wars, I’m not sure there are ever any winners.”

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