How Increased Tariffs are Impacting the Industry

WORDS BY ROSA SOPHIA

While it’s still too early to tell how increased tariffs will impact the coming year, manufacturers including JL Audio and Audiofrog share uncertainty and deep concerns about how tariff increases will impact American companies.

After a 10 percent tariff was applied to many products and items, another hike is anticipated—specifically 25 percent, expected to take effect in January. Currently, completed speakers can be imported from China without a tariff, but parts needed to build them in the United States are subject to tariff. This causes great difficulty for companies that manufacture here in the U.S., according to Manville Smith, vice president of marketing at JL Audio, based in Miramar, Fla. “As it stands right now, if you’re building them here, you’re being penalized,” Smith said. “It’s backwards. If the goal is to support U.S. manufacturing through tariffs, the tariff belongs on finished loudspeakers made in China, not on parts needed to build them here in the U.S.”

In the past 10 to 15 years, Smith said, JL Audio has focused on bringing more speaker production back to the U.S. by investing in equipment, real estate and personnel. The company has over 500 employees. “We’re committed to it,” Smith added.

More tariffs are anticipated in January, but the future remains uncertain. The situation has been confusing for many companies that are now reaching out for advice, according to Sage Chandler, vice president of international trade at the Consumer Technology Association.

However, Chandler noted, customers overall aren’t noticing price increases just yet. “The smaller companies haven’t felt it yet, but the bigger companies they’re buying from will see large distributors purchasing things in massive bulk. Some of those big companies knew what was coming and they stockpiled,” she said.

Manufacturers Prepare for Increased Tariff by Raising Prices

Many companies are increasing prices or planning to, according to Chandler, who stated that it may take a few months for people to fully understand the impact. “I’m getting a lot of emails from companies sending me notes from their suppliers saying that because of tariffs, they’re being forced to raise prices,” she said. More than the parts, it is also the equipment to create parts that is impacted, Chandler added. “For example, there’s a lot of semi-conductor manufacturing in the U.S. It’s one of our biggest exports.” Despite this, the equipment needed to make the semi-conductors is also being tariffed.

Along with JL Audio, AudioControl is being impacted by the changes. “Despite being a U.S. manufacturer for the majority of our products across our automotive and residential business, we are impacted by the 10 percent tariffs recently imposed on a number of product categories,” stated Alex Camara, CEO of AudioControl. According to the company’s official response, there is no price increase across the product line yet, but prices will be adjusted January first, or even as early as December. “The costs of our raw materials and finished goods have increased, as have transportation costs.”

Tariffs on imports from China are affecting the company’s products relating to the parts used for manufacturing in the U.S., stated AudioControl. “We continue to work on a number of ways to minimize the impacts of these tariffs but at this time, price changes will need to be implemented and our aim is to hopefully do this once.”

Omega has also increased prices, as of October first, according to a notice provided to their dealers. The notice also stated that the company’s impacted products were mainly in the security and remote start categories.

So far, retailers may not be feeling the impact just yet. Kimberly Trainer of Car- Tunes Inc. in Greenville, Miss. stated that the company has yet to increase prices in its store. “We carry lots of different brands of electronics,” she said. “After the first of the year and more and more of this is going on, we’ll probably have to take a look at the trend. So far it hasn’t had a huge impact on us. I’ll keep my eye on it, though.”

Strategy to Build Locally Has its Own Issues

Discussion on tariffs extended into a live-streaming discussion on Facebook relating to what it would take to invest in manufacturing in the United States. Andy Wehmeyer of Audiofrog noted his reasons for choosing a specific factory in China to manufacture his products. “The main reason anyone chooses a factory is usually because of capacity and expertise,” he explained. “Expertise is what creates quality. A bad batch of products does much more damage to your bottom line than higher acquisition prices.” Wehmeyer investigated a number of factories in different countries, including in the U.S., before choosing one in China. He added that there are many elements that go into creating a product that meets specifications.

JL Audio and other manufacturers underscored all the moving parts in the equation that need to be considered. “The false choice that some people see is one that assumes a simple decision between making things in China and making them here. Those are not the only choices,” Smith said, stating that any number of countries are available. “This action is going to shift a lot of production out of China to other low-cost countries, not the U.S.”

Wehmeyer stated that in order for someone to invest in a speaker factory in the United States, there would need to be a business model to support it.

W3v3 subwoofer driver assembly at the JL Audio facility in Miramar, Fla. The company continues to invest in real estate, equipment and personnel in the United States.

“Something would also have to be done about the fact that you can make speakers in Mexico, South Korea, Taiwan and in other countries,” he said.

Speaker manufacturers rely on a global supply chain, said both Wehmeyer and Smith. “Many years ago, we had a vibrant speaker building industry here in the U.S.,” Smith said. “There were parts suppliers that fed that industry. As speaker manufacturing went overseas, most of those businesses went out of business and the supply chain shifted to Asia. Whether you’re building speakers here or elsewhere, you’re reliant on that to some extent.”

In the live-streaming Facebook discussion with other industry professionals, Wehmeyer told viewers that the tariffs will continue to be a big problem unless the situation is resolved. “If you make speakers in the U.S. using parts that you source from China—and for many of those products, there’s no alternative source—then you’re already paying tariffs,” he explained. “This suggests to me that this is not about bringing the manufacturer of consumer electronics back to the U.S., because if that were the objective then completed goods would be subject to tariffs and components wouldn’t be.”

While Uncertain About the Future, Companies Consider Global Supply Chain

Currently, manufacturers are uncertain about what will happen once the next round of tariffs is enacted. “It’s a conundrum,” Chandler said, adding that she’s testified at three public hearings. “The number of companies and stakeholders testifying are increasing with every tariff round. In terms of bringing manufacturing back to the U.S., it’s really unlikely that most of this will come back just because of cost. This is supposed to be because of China’s bad intellectual property practices,” Chandler said, though many of the companies she works with state that they handle all their research, design, engineering and intellectual property work in the United States.

“They have all their engineers and developers based in the U.S. Those are higher-paying jobs. They contract manufacture or build facilities outside the U.S. so they can continue to keep that intellectual property model safe here, and pay the U.S. workers higher amounts,” Chandler explained. “To make it cost-effective, they go outside the country to where manufacturing is already a very sturdy part of the supply chain.”

Various parts are manufactured closely together at nearby factories, said both Chandler and Wehmeyer, which means moving any facility would still involve considering where other pieces of the supply chain originate.

“If you move manufacturing to the U.S., tariffs will still be on those products, and if the products are largely made in China, they will still have to pay 25 percent per piece that they’ve moved to the U.S. to use in manufacturing,” Chandler added. Instead, she stated, companies are considering moving production to countries such as Vietnam or the Philippines. “During the hearing, each panelist was given five minutes to speak. The committee would ask each panelist typically just one question. Ninety-five percent of the time, if not more, the one question was, ‘Can you move your manufacturing elsewhere?’ Anywhere other than China. I thought that was interesting.”

Manville Smith is the vice president of marketing at JL Audio, a company that manufactures in the U.S. and employs over 500 people.

“In our opinion, the whole tariff policy needs to be re-evaluated to better support those who are manufacturing here in the U.S., or at least to avoid tilting the playing field against us,”-Manville Smith of JL Audio.

JL Audio Expresses Concern to Local Legislators

By reaching out to local representatives and speaking with the press, JL Audio intends to raise awareness about the situation, Smith said. “We started by contacting all our legislators, our congress people, our representatives in every state we do business in,” he explained. “We have facilities in Florida, Arizona, and Oregon. We contacted all the legislators in all the states that represent us.”

The company has received no replies to their outreach, but they have retained lawyers and lobbyists in Washington to appeal to legislators as well as apply to the U.S. Trade Representatives for exemptions on products. The process is a tedious one, Smith stated, involving applying for an exemption for each individual part the company imports.

“We have invested in U.S. production and we are committed to it. We already deal with higher costs than manufacturers in other countries. The tariffs added on top of that make us less competitive in the world market,” Smith said.

In the meantime, JL Audio instituted a price increase that went into effect on

The showroom in CarTunes Inc. in Greenville, Miss. offers numerous options to customers. While owner Kimberly Trainer remains positive about the future, it is uncertain how tariffs will impact businesses in the new year.

A worker assembles a 10TW1 subwoofer driver at the JL Audio facility in Miramar, Fla. Despite the fact that JL Audio manufactures in the United States, the company is currently subject to the 10 percent tariff because they import some parts in order to manufacture products.

November first. “A large part of the price increase was not tariff-related, but some of it had to do with the 10 percent tariff that was thrown into the mix,” Smith explained. “The price increases average about six percent. If we are hit in January with another tariff increase, we will probably need to revisit pricing again. We can’t absorb it without hurting ourselves, and without limiting the things we’re trying to do here in terms of product development and factory expansion.”

Policy Should be Reevaluated to Support U.S. Manufacturers, said Smith

While still in the beginning phases of this change, Trainer stated that she will remain positive, though she added that a larger business might feel differently. “Obviously it’s a bigger dollar sign to someone else. In my experience it hasn’t thus far been a huge factor. I think there’s a lot more talk about the worry than there is to actually be worried about,” she said. “It’s just one of those things where our economy will probably come out stronger and benefit from it, but nobody has a crystal ball. If things work the way they’re supposed to work, hopefully all these things will be for the good.”

Wehmeyer shared his belief regarding where things might go. “For manufacturers who build stuff in China, it’s going to be a problem. For U.S. manufacturers, companies who import parts so they can assemble stuff in their own factories in the U.S., it’s going to be a problem. If January first comes around and there’s no fix, then the rest of the goods we import will be affected,” he said, adding that this would likely include finished speakers.

“We’ll figure out how to work through this,” Smith said of JL Audio. “We want to continue to invest in our future as a U.S. manufacturer. It will take some time, perseverance and effort from everyone in the industry to contact legislators and explain how these policies are hurting our businesses. Our customers will be asked to pay more for products and retailers will feel an impact from this,” he added.

Smith anticipates seeing an impact throughout the economy, not just in terms of audio. “American consumers will feel these price increases across a huge range of products that contain China-sourced content or are wholly made in China,” he said. “In the meantime, we adjust to the conditions and we work through it.”

He stated that he hopes JL Audio’s message is heard and that what the company is facing—as well as what other U.S. manufacturers are facing—is alleviated. “On a larger scale, outside our industry, I am sure there are many instances in which the new tariffs are hurting U.S. manufacturers,” he said. “In our opinion, the whole tariff policy needs to be re-evaluated to better support those who are manufacturing here in the U.S., or at least to avoid tilting the playing field against us.”

Methods to Learn More and Get Involved

Companies of all sizes should engage with government officials, said Sage Chandler of CTA. “Visit your DC representative’s office in your state, or invite them to see your operation. Send emails or call to talk about what you are working on or what concerns you on a regular basis,” she added. “It is important that they understand the reasons of successes or difficulties of business in their district.”

“Also, a little known and fabulous resource is the U.S. Department of Commerce. They have employees in every state whose sole job is to help companies export, and others who help promote small businesses,” Chandler said. “They can provide advice, information about foreign markets, research and are generally great to have familiar with your company. Keep in regular touch with these officials, too.”

Business owners can visit Small Business Administration Assistance (sba. gov) as well as the U.S. Department of Commerce Export Assistance website (export.gov) for more information.

Get informed, added Andy Wehmeyer of Audiofrog. “Read history. Read economics. Read the congressional record.” Learn as much as you can, he said, and “determine what you really believe is plausible and then buy a bunch of inventory.” Wehmeyer also suggested referencing the Office of the United States Trade Representative website (ustr.gov).