Home Electronics Vendors Express Confusion, Concern on 25% Tariffs That Loom on Jan. 1

DALLAS -- Audio companies are bracing for the impact of the 10 percent Section 301 tariffs on Chinese imports that took effect a month ago, and are holding out hope that the Jan. 1 increase to 25 percent won't come to pass, vendors said at the fall meeting of the Home Technology Specialists of America. JL Audio, which sells subwoofers for the home market and speakers, subs and amplifiers for the marine and automotive spaces, is raising prices 6 percent on Nov. 15 on its home product line, said Doug Henderson, senior vice president-home audio.

JL Audio tried to mitigate price increases as much as possible, Henderson said, but tariffs “have had an impact” and higher duties on raw materials, magnets and steel have pushed up the company’s bill of materials costs. The 6 percent price bump doesn’t cover the full impact of the 10 percent tariffs imposed Sept. 24, Henderson said, and will be passed on to consumers in higher factory list prices, he said.

JL Audio is eyeing the looming Jan. 1 tariff increase warily, fearing it may mean another round of price hikes, Henderson said. JL Audio is being taxed on components being brought in for assembly, compared with . powered speakers such as Amazon’s Echo and the Apple HomePod, which are exempt from tariffs because they’re imported from China as finished products, Henderson said. On whether that is affecting product development plans for the company, he said there are no changes to the product road map.

So far, JL Audio customers haven’t shown concern, Henderson said, but that kind of impact is typically felt after a price increase goes into effect. To ease pricing pain, JL gave dealers 60 days’ notice so they could spec in gear at the old prices to avoid derailing projects in the works, he said. Some 50 JL Audio products are affected by the 10 percent tariffs, he said.

Dana Innovations is feeling the effects of tariffs related to tariff codes that apply to its iPort charging station and amplifiers, Jason Sloan, chief sales officer, said. The company has a “decent amount of inventory” to be able to hold prices for now, Sloan said. How long that lasts depends on what happens in January, Sloan said. “If it goes to 25 percent in January, clearly we’ll have to make some adjustments.”

Sloan said most of the company's speakers “are not affected as of today,” but “it feels like it’s as arbitrary as anything,” he said of the classifications. Determining what fits into tariff structures isn’t clear and competitors are in the same tough spot, he said. “It could go to 25 percent in January, it could stay at 10 percent for a while, it could be 0 … who knows?” The unpredictability is the hardest for the company and dealers, he said. Dana is recommending that dealers begin incorporating a line into bids to allow for price increases that “may or may not go into effect,” Sloan said. “You just can’t do a price increase because of tariffs; it makes it really hard to do temporary price adjustments,” and that makes it difficult for custom integrators trying to specify projects six to 26 weeks out, he said.

Electronics manufacturers are uncertain, too, about who will be affected by tariffs along with a possible domino effect. Tariffs on products with wireless connectivity, such as stereo or surround-sound receivers that don’t fall into the smart speaker exemption status, could have a negative impact on speaker sales, Sandy Gross, GoldenEar Technology president, said.

GoldenEar had planned to bring a wireless speaker to market next year, which might be exempt from current tariffs, but Gross is concerned about the Jan. 1 move that would put “a tariff on every Chinese product.” If that happens, “it’s just a holy mess,” he said. “It’s going to destroy a lot of businesses, and it will be extremely poor for our industry.” GoldenEar hasn’t been hit yet on tariffs because it brings in fully assembled speakers, she said. If President Donald Trump "decides to put a tariff on every product coming from China, which is what he’s threatening, then we’ll have it on everything we make,” she said.

Some electronics companies brought in large volumes of units before the tariff went into effect to delay the impact, noted Roy Feldstein, chief technology officer and owner of distributor Vana. Vana had to raise prices last week on a vacuum-based record cleaning product it distributes that's made by Okki Nokki, a Netherlands-based company manufacturing in China. Feldstein raised prices on the record cleaner from $499 to $599 due to tariffs and higher shipping costs, he said. “I couldn’t eat it anymore,” Feldstein said: “I was going to lose money on the product.”

The Okki Nokki record cleaner isn’t even classified as a hi-fi product; instead because water goes on a record and is vacuumed off, “the U.S. government regards it as a vacuum, and no amount of arguing would get us around it. My harmonized code is a vacuum,” Feldstein said. If the tariff goes up to 25 percent in January, “that will effectively put us out of business,” he said of the Okki Nokki product in the U.S. “No one is going to pay that 25 percent because I have competitors that are not made-in-China.” The company had planned a $199 product, but with a 25 percent price hike, “it really destroys my price point.” He called the tariffs a “ridiculous thing for the consumer electronics industry because it’s a tax on every American.”

The confusion over product classification was evident at Trinnov Audio, where International Sales Manager, Americas Chuck Back said the company’s preamp/surround processors don’t fall under tariff codes because they are classified as PCs by CBP. The primary functions of the product are on a PC, "so it comes in duty-free” from China, he said. The company’s power amplifiers are U.S.-built, “so we got lucky,” he said. “We slipped through the cracks.”