Six months into tariffs, businesses have no idea how to price anything
How much should a copper bathtub cost? Clifford Thompson is trying to figure that out.
How much should a copper bathtub cost? Clifford Thompson is trying to figure that out.
Until now, the hand-hammered tubs his family-owned business imports from India have carried a suggested retail price of about $3,300. President Trump’s 50 per cent tariff on copper imports and steep levies on goods from India are forcing Thompson Traders to rethink that price, but settling on a new one isn’t easy.
Just this week, the levies on Indian goods doubled to 50 per cent — days before an appeals court late Friday struck down the legal basis for at least part of those tariffs, a ruling likely heading for Supreme Court review. The North Carolina company’s negotiations with big-box retailers over even small price increases are maddeningly slow. And Thompson, the company’s president, isn’t certain what inflation-weary consumers will accept — or how much competitors plan to charge.
“Everyone is struggling to figure out what to do, what’s the right decision, where do we set prices,” Thompson said from the warehouse offices of the 30-person company founded by his mother, Alejandra Ochoa de Thompson.
The impact of tariffs has been a question hanging over the economy. So far, the global trade war hasn’t caused a surge in prices. That is in large part because companies have absorbed price increases, though that might not last. Pre-tariff inventories are running low, forcing companies to confront difficult pricing decisions they can no longer delay.
Federal Reserve Chair Jerome Powell said last week that tariffs’ effects on consumer prices “are now clearly visible” in some categories of goods, and are expected to accumulate in the months ahead. In a recent Richmond Fed survey, about 38 per cent of businesses reported being only slightly certain or not at all certain about the prices they will charge for the rest of the year. Nearly 60 per cent were either slightly certain or not at all certain about the costs of materials for the remainder of the year.
Thompson Traders says its pricing limbo can’t last forever because it can’t absorb a double-digit import tax on so many goods. If it can’t raise enough prices by year-end, it might need to take drastic steps to reduce costs, including slashing marketing and executive pay, Clifford Thompson said.
Repricing, though, isn’t as easy as changing a tag — in part because suppliers and big-box stores are engaged in an epic tussle over who will pay what.
Retailers, including Lowe’s and Home Depot, buy Thompson Traders’ wares and set the retail price themselves. And they have been reluctant to pay Thompson Traders more.
Back in May, the company submitted a request asking Lowe’s to pay 4 per cent to 5 per cent more for a range of kitchen sinks manufactured in Turkey, which had just been hit with an extra 10 per cent import tariff. The fireclay ceramic sinks have generally retailed for $249 to $499, depending on size.
Chris DeVillers, who handles Thompson’s negotiations with big retailers, filled out a worksheet documenting the product cost, duties and freight costs, to justify his requested new price.
By July, he was still awaiting a decision, so he nudged the retailer. Then, in late July, Trump hiked the tariff on Turkish goods to 15 per cent.
Lowe’s, which declined to comment, last week finally agreed to a 4 per cent to 5 per cent increase on some sinks, but not all, DeVillers said. He hasn’t gone back to ask for more in the wake of the increased tariff, in part because he is not sure that 15 per cent is the final levy. Thompson Traders may “have to eat it,” he said. “I’m not sure.” Thompson Traders says Home Depot has agreed to price increases on some items but not all. The company hasn’t approached the retailer again about the increased tariff on Turkey.
Home Depot said it couldn’t comment on specific suppliers, but pointed to comments that its executive vice president of merchandising, Billy Bastek, made on an earnings call this month. Bastek said higher tariffs mean there will be “modest price movement in some categories,” but that the company is “laser-focused” on protecting its customers’ costs.
Clifford Thompson said he understands retailers are “in a very tight spot as well,” concerned that price-hike requests from thousands of suppliers could fuel further inflation and sap consumer demand. So his company is trying to limit how many times it returns to the big-box stores with new requests, even as tariffs change week to week, he added. “We cannot go back two weeks later and say, ‘Oh, sorry, now it has to be this price.’ They just don’t work that way.” The company is worried the steep tariffs on copper may force it to stop selling some items, including a copper sink that retails for $450 at big-box stores. DeVillers hasn’t settled on a new price but thinks it might have to be as much as $800 if tariffs stay the same, likely making the sink too expensive for the retailers.
Pricing uncertainty prompted the company this month to ask its Indian factory to halt shipment of 50 copper tubs that had already been boxed up for delivery.
Decisions on pricing are also complicated by a lack of clarity on how the tariffs are being applied.
Alejandra Thompson de Jordan, Clifford’s sister and head of marketing for the company’s higher-end products — many of which are made in Mexico — spent days analysing the market and compiling a new price list for the copper and brass sinks, range hoods and other items she oversees. She was ready to send it to her retail and interior-design customers a few weeks ago when her other brother, J.J. Thompson, called to say the company’s assumptions about the copper tariff might be wrong.
DeVillers had spent half the night reading US Customs and Border Protection documents and now believed that CBP was levying the 50 per cent copper and brass tariff on the value of the raw materials used in a product — not on the value of the finished item. That meant their tariff costs might be lower than they originally expected and her new prices therefore too high, Thompson de Jordan said.
But when Devillers and J.J. Thompson called three different customs brokers to check whether their new conclusion was correct, they got three different answers.
“I still haven’t sent it,” Thompson de Jordan said of her price list. “I have anxiety about it right now.” For some items, including copper tubs, Thompson Traders is researching the market before it asks retailers for an increase to ensure it is not out of sync with competitors. It is scouring rivals’ online pricing and canvassing sales representatives and kitchen-and-bath showrooms for feedback on possible price changes.
Thompson Traders has considered producing items domestically but says the hurdles are too high. The company sources many of its hand-hammered copper and brass items from a town in Mexico where artisans have been coppersmithing since the Middle Ages, Clifford Thompson said.
Attempting to re-create that in the US would require an investment that the small business can’t afford, he said.
Tariff-related questions still hang over several of the countries that supply Thompson Traders. Trump’s negotiations with Mexico on a potential trade deal continue, which could change levies on imports from that country. Trump also hasn’t reached a deal with China, from which Thompson Traders imports sink drains. And the company doesn’t rule out changes to tariffs on India, Turkey and other nations.
“If people think that tariffs are what’s the best thing for the country, [then] we’re OK with the tariffs,” said Clifford Thompson.
“What we would really love is just some clarity around it … so we can say, ‘OK, here’s what the price is,’ and we can move on.”
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