NEW YORK (news agencies) — Gadgets sold without batteries. Toys sold in slimmed-down boxes or no packaging at all. More household goods that shoppers need to assemble themselves.
These are some of the ways consumer product companies are retooling their wares to reduce costs and avoid raising prices as President Donald Trump levies new import taxes on key trading partners as well as some materials used by American manufacturers.
The economic environment in which the president has imposed, threatened and occasionally postponed repeated rounds of tariffs is more precarious than during his first term. U.S. consumers are feeling tapped out after several years of inflation. Businesses say tariffs add to their expenses and eat into their profits, but they are wary of losing sales if they try to pass all of the increase on to customers.
Instead, some companies are exploring cost-cutting options, both ones that consumers likely would notice in time — remember “shrinkflation?” — and ones that exist too far down the supply chain for them to see. The changes may help minimize price increases yet won’t be enough in every case to offset them completely.
These are some of the strategies retailers and brands have in mind:
After putting an extra 20% tariff on all goods from China, as well as a 25% tariff on imported steel, aluminum and automobiles, Trump said he would announce on Wednesday the targets of “reciprocal tariffs” that mirror the taxes all other nations apply to certain U.S. exports.
He argues the tariffs will spur domestic manufacturing, among other goals.
Also on the horizon: twice-delayed tariffs on most goods from Canada and Mexico, and duties on copper, lumber and pharmaceutical drugs.
Kimberly Kirkendall, president of supply-chain consulting firm International Resource Development, has told clients — U.S. makers of shelving, home goods and food products — that given all the uncertainty, this is not the time for long-term moves like seeking factories outside of China.
She encouraged them to focus on the short term, particularly the need to scrutinize product lines from every angle for possible savings.
“You’ve got to collaborate and work together with your suppliers in this situation to be able to bring costs down,” Kirkendall said.
Sourcing concerns are not only a worry for big companies that rely on Chinese manufacturers. Sasha Iglehart, founder of a small online clothing company called Shirt Story, has a collection of upcycled men’s shirts that sell for around $235. She said she typically gets her vintage buttons from an Austrian supplier and knows Trump has talked about taxing goods from the European Union.
“I will continue to look for local vendors and collectors here in the States as back up,” said Iglehart, whose company is based in Connecticut.
For many companies, evaluating which components or details they can remove from their products or replace with less expensive ones is the go-to move for absorbing the potential financial hit from tariffs.
Los Angeles-based toy company Abacus Brands Inc., which designs science kits and other educational toys, has most of its products made in China. By using slightly thinner paper in an 80-page project book that comes with two of its kits, the company expects to avert a $10 retail price increase, President Steve Rad said.
“Three or 4 cents here,” Rad said. “Seven or 6 cents there. Two more pennies over there. All of a sudden, you’ve made up the difference.”
Aurora World Inc., known for its plush pets and toy vehicles, is looking at using fewer paint colors as a way to counteract tariff costs, according to Gabe Higa, managing director of the California company’s toy division. All of Aurora World’s toys come from factories in China.
“This is something that makes it a little bit simpler so that there’s less manual labor involved or less material cost,” Higa said. “(It) doesn’t have a lot of incremental value so it’s easy to take away.”
The company still may have to raise prices as long as the new tariffs are in effect, he said.
Tweaking or reducing product packaging is another area where importers may cut back and carries the advantage of possibly appealing to eco-conscious customers.
United Arab Emirates Dirham Exchange Rate
