Similarly HYTE, mostly known for their PC cases, gives a remarkably detailed insight, both into their cost structure and how they are impacted by tariffs, in this video:
I of course feel for them as a small business. They took risk and did the numbers and are trying to bring something great to their customers.
One angle I didn’t see covered in response… dropping the quality on the product. If America just isn’t there yet on manufacturing, and people still only want to pay $139 for a computer case… surely someone in America can sell the customer a box of some sort for $139. It might be pretty crap, but there’s already local industry selling trailers and park benches and other things made out of metal. A barebones steel case seems within reach for $139, and they can improve from there.
This is a fantastically detailed video. Thank you for sharing this! Everybody on HN should watch this video to get an inside view of what businesses are going through in America right now.
I'm guessing a ton of new companies will pop up overnight in India, Taiwan, Vietnam, S Korea that simply purchase components from China and resell them to the US. Not exactly helping anyone.
> guessing a ton of new companies will pop up overnight in India, Taiwan, Vietnam, S Korea that simply purchase components from China and resell them to the US
The reality in high-tariff economies is simpler: more people just forge customs paperwork.
This will happen in Cambodia. They are building a massive amount of factories near Sihanoukville where the Chinese goods will be stamped with « made in Cambodia » and shipped right away to the USA.
This is a known issue with tariffs, so "governments" are on the lookout for it. It's risky, and there are consequences if you get caught.
There were however reports of Chinese companies actually setting up production in e.g. Thailand. The products are more expensive then, so it doesn't actually change anything - at least it was like this before the introduction of the one billion gagillion tariffs.
Apple is shifting its production to India, but in reality, the phones are just assembled in India. All the components are made in China, shipped to India, where they are put together. China still captures 90% of the value
The interesting thing is that India already has high tariffs for goods coming from China, however this might be different for finished vs non-finished goods and for consumption vs re-export goods. The tariffs aren't cheap though. Iphones not manufactured in India and sold there are significantly more expensive due to all the tariffs.
Straightforward circumvention like that isn’t allowed (I’m not saying it won’t work). The new companies you mention would only be entitled to thelower tariffs on the value they add to the product they buy from China.
This already happened under Trump I administration. Now they are setting high tariffs on India, Vietnam, as well. Not sure whether it is to close this loophole or not.
Ryan Pertersen (Import Genius and now Flexport) said that if these tariffs continue on China, 80% of small and medium-sized businesses that buy from China will go bankrupt. Over 2 million jobs will be lost. He is not the only one calling for a small business Armageddon. The big corporations love it, companies like Apple got exemptions, it's why you don't here them freaking out.
Hope Wyze makes it through this, long-time customer, and their cameras are great.
Big corps love it because they're at the top of the food chain. But an extinction event is an extinction event. It just takes longer for the effects to work their way up.
Small businesses are 44% of US GDP. Losing even 10% of GDP would be very uncomfortable.
In 2021, approx 500 years ago, Ryan tweeted out a series of measures intended to resolve a Long Beach port shipping jam. His measures did almost nothing and amounted to bluster and broscience. https://www.latimes.com/business/technology/story/2021-10-28...
If you start building a factory in the US now, it will take years and you’ll be paying high tariffs on the equipment, high tariffs on the raw materials, high wages for unexperienced workers… And all of this in a political environment so unstable that your investment might be pointless six months from now if/when the president flip-flops again.
I doubt they own any part of their manufacturing at the moment.
Unless manufacturing already exists in the US (which I doubt here), I don't believe company this size has any chance to move manufacturing to the US
Adafruit (an electronics manufacturer and retailer here in the United States) has been sharing insights in a video series called 'Tariff talk' as well: https://youtu.be/y36XchXA8BU
If they had bought American floodlights they had saved 255k in tarrifs. So if they had paid 200k for the floodlights they would have still been better of.
One could argue, that there might be no American Floodlight Company - well here is the incentive to build one.
Secondly the money isn't lost, it goes to the state. Like a tax, but it is called differently. With this 255k more the state can now subsidise the local floodlight industry.
If anything of the above comes to fruition... That's a different matter...
Lutnick: "It's time to train people not to do the jobs of the past, but to do the great jobs of the future. This is the new model where you work in these kinds of plants for the rest of your life and your kids work here and your grandkids work here. We let the auto plants go overseas."
United States Secretary of Commerce ladies and gentlemen!
It harms 100% of Americans which means it harms the 50% of Americans who advocate for science, education, and health. Anything that causes any harm to this group in any way at any cost is what that other 50% wants and derives the benefit from.
American products are too expensive, so nobody buys them. Import taxes make imported products more expensive so that they are even more expensive than the American products. The hope is that this makes it cheaper for American consumers to buy American products than to buy imported products.
But the elephant in the room is that the American-made products are now so expensive that you cannot profitably export them to any other country. So you have effectively limited the market size to purely the internal American market. And that means Chinese companies might have much better economies of scale. Because they can capture customers worldwide and not just inside America.
But most likely, the house of cards will fall over before you ever ship the first American-made product: Headlights need injection-molded parts. Since this was historically almost fully outsourced, the U.S. has almost no production capacity in this area. Building these factories takes 2 to 5 years. That means, unless everyone is fully convinced that these taxes will stay in effect for at least 5 years, nobody is going to build the necessary manufacturing capacity. And good luck finding US investors who are happy to invest millions into a factory with a predicted 5% profit margin.
It offsets the cost of cheaper Chinese labor and material costs. With the goal of making "made in the USA" products price competitive where they were not before.
In the abstract this possibly makes more jobs in the USA for manufacturing these items. It also keeps the entire process conducted in US Dollars that stay entirely within our borders which is theoretically better for currency stability and value.
Negatively polarize the Democratic Party out of their anti-trade posturing (sweatshops! outsourcing pollution! look at the rust belt!) for a generation?
From a "humorous absurdity" point of view, I kind of love this comment. It has just the right amount of pettiness and vindictive sentiment -- with just a hint of "tone-deaf". Bravo!
For the non Americans, it appears Wyze is a smart home company currently specialising in cameras, founded by ex Amazon (retailer) employees. I assume these floodlights are "smart" in some way.
How much in retail value? I've seen a few small companies that have all their manufacturing operations in China pass on tariffs at cost transparently, and for those that have already adjusted to the current rates, the surcharge is much smaller than I expected (~30%), but I don't know how margins differ by sector.
It does depend on industry, but I don’t think you should be too surprised by a 30% surcharge, and I have some math to illustrate!
Let’s assume that this 30% surcharge exactly matches the increased cost due to tariffs (I think 145%?). This would mean that 1.45*manufacturing_cost = 0.3*MSRP -> manufacturing_cost = 0.2*MSRP. The manufacturing cost is 20% of the end price. A higher surcharge would indicate that the manufacturing cost is a _higher_ percentage of the end price. Consider that they’ll also have costs due to shipping, returns, staffing, marketing, R&D, and they need profit on top. In that context, 20% seems quite reasonable to me.
Edit: you should expect to feel the highest percentage price increase in products that have become extremely commoditized, because they naturally have the tightest margins. Off the top of my head, I’m thinking toasters, microwaves, lamps, TVs, electronics cables, batteries, things like that
The top voted comments I see are all supportive so far.
There are a lot of comments asking why they don’t move manufacturing to Seattle. This theme is common among people who don’t understand how manufacturing works right now: They don’t realize that a product like this has many different parts from different places, down to the dozens of little SMT capacitors. You can’t just move the factory and avoid tariffs because the parts still come from other places.
Who needs enemies - when a country is made unhealthy (due to all the new regressive HHS directives), manufacturing anything is costly, importing is unfeasible due to tariffs, misinformation, deporting anyone without due process and on and on?
Tarrifs have started to hit the boardgame industry pretty hard already, and as an enthusiast, I have started to really worry. Within a very short span, several companies have already announced drastic slowdowns in product production/shipments and staff, to some outright closing.
So I manufacture cycling products from Taiwan + China, importing to US... he's paying 152% tariffs, on the cost price of the product. Previously would have been like 7% base, with maybe a 20% trade war tarriff added on.
So for back of napkin: $10 widget, selling for eg $40.
This has been written about in so many articles and discussed so extensively on HN and many other forums over the last month that it's hard to believe your stated lack of knowledge.
Higher, most goods don't have import taxes, or rates were less than 10 percent. Looks like the rates for wall mounted lights were previously 5 percent.
prof-dr-ir|10 months ago
https://www.youtube.com/watch?v=1W_mSOS1Qts&t=1394s
They also address the question of moving their production to the US.
ENGNR|10 months ago
I of course feel for them as a small business. They took risk and did the numbers and are trying to bring something great to their customers.
One angle I didn’t see covered in response… dropping the quality on the product. If America just isn’t there yet on manufacturing, and people still only want to pay $139 for a computer case… surely someone in America can sell the customer a box of some sort for $139. It might be pretty crap, but there’s already local industry selling trailers and park benches and other things made out of metal. A barebones steel case seems within reach for $139, and they can improve from there.
danesparza|10 months ago
hn1986|10 months ago
This article they link to is excellent
almosthere|10 months ago
JumpCrisscross|10 months ago
The reality in high-tariff economies is simpler: more people just forge customs paperwork.
whatevermom|10 months ago
locallost|10 months ago
There were however reports of Chinese companies actually setting up production in e.g. Thailand. The products are more expensive then, so it doesn't actually change anything - at least it was like this before the introduction of the one billion gagillion tariffs.
spaceman_2020|10 months ago
oatmeal_croc|10 months ago
aiiizzz|10 months ago
mystified5016|10 months ago
JSR_FDED|10 months ago
miohtama|10 months ago
sleepyguy|10 months ago
Hope Wyze makes it through this, long-time customer, and their cameras are great.
TheOtherHobbes|10 months ago
Small businesses are 44% of US GDP. Losing even 10% of GDP would be very uncomfortable.
carabiner|10 months ago
He also doesn't understand the concept of commercial airliners avoiding military airspace: https://www.reddit.com/r/ATC/s/1bTyTpBsqb
pavlov|10 months ago
If you start building a factory in the US now, it will take years and you’ll be paying high tariffs on the equipment, high tariffs on the raw materials, high wages for unexperienced workers… And all of this in a political environment so unstable that your investment might be pointless six months from now if/when the president flip-flops again.
World-class industrial strategy.
vfclists|10 months ago
tpetry|10 months ago
Timshel|10 months ago
I doubt they own any part of their manufacturing at the moment. Unless manufacturing already exists in the US (which I doubt here), I don't believe company this size has any chance to move manufacturing to the US
The GamerNexus video already mentioned elsewhere explore those issues: https://www.youtube.com/watch?v=1W_mSOS1Qts.
danesparza|10 months ago
voidUpdate|10 months ago
number6|10 months ago
One could argue, that there might be no American Floodlight Company - well here is the incentive to build one.
Secondly the money isn't lost, it goes to the state. Like a tax, but it is called differently. With this 255k more the state can now subsidise the local floodlight industry.
If anything of the above comes to fruition... That's a different matter...
rasz|10 months ago
Lutnick: "It's time to train people not to do the jobs of the past, but to do the great jobs of the future. This is the new model where you work in these kinds of plants for the rest of your life and your kids work here and your grandkids work here. We let the auto plants go overseas."
United States Secretary of Commerce ladies and gentlemen!
bgro|10 months ago
fxtentacle|10 months ago
But the elephant in the room is that the American-made products are now so expensive that you cannot profitably export them to any other country. So you have effectively limited the market size to purely the internal American market. And that means Chinese companies might have much better economies of scale. Because they can capture customers worldwide and not just inside America.
But most likely, the house of cards will fall over before you ever ship the first American-made product: Headlights need injection-molded parts. Since this was historically almost fully outsourced, the U.S. has almost no production capacity in this area. Building these factories takes 2 to 5 years. That means, unless everyone is fully convinced that these taxes will stay in effect for at least 5 years, nobody is going to build the necessary manufacturing capacity. And good luck finding US investors who are happy to invest millions into a factory with a predicted 5% profit margin.
thih9|10 months ago
timewizard|10 months ago
In the abstract this possibly makes more jobs in the USA for manufacturing these items. It also keeps the entire process conducted in US Dollars that stay entirely within our borders which is theoretically better for currency stability and value.
Ferret7446|10 months ago
What the actual motivation is, you'd have to ask Trump in a setting where he'd tell you the truth rather than putting on a show for the public.
twoodfin|10 months ago
m463|10 months ago
There are unfair trade practices other countries have imposed against the united states, and raising tariffs starts negotiations.
That said, don't know how unfair other countries were per-country, and how negotiating has benefited from the tariffs.
therealfiona|10 months ago
danesparza|10 months ago
averageRoyalty|10 months ago
bananalychee|10 months ago
pinkmuffinere|10 months ago
Let’s assume that this 30% surcharge exactly matches the increased cost due to tariffs (I think 145%?). This would mean that 1.45*manufacturing_cost = 0.3*MSRP -> manufacturing_cost = 0.2*MSRP. The manufacturing cost is 20% of the end price. A higher surcharge would indicate that the manufacturing cost is a _higher_ percentage of the end price. Consider that they’ll also have costs due to shipping, returns, staffing, marketing, R&D, and they need profit on top. In that context, 20% seems quite reasonable to me.
Edit: you should expect to feel the highest percentage price increase in products that have become extremely commoditized, because they naturally have the tightest margins. Off the top of my head, I’m thinking toasters, microwaves, lamps, TVs, electronics cables, batteries, things like that
inverted_flag|10 months ago
They’re getting attacked in the replies.
Aurornis|10 months ago
There are a lot of comments asking why they don’t move manufacturing to Seattle. This theme is common among people who don’t understand how manufacturing works right now: They don’t realize that a product like this has many different parts from different places, down to the dozens of little SMT capacitors. You can’t just move the factory and avoid tariffs because the parts still come from other places.
ncruces|10 months ago
Who are these people?
Havoc|10 months ago
sherdil2022|10 months ago
Who needs enemies - when a country is made unhealthy (due to all the new regressive HHS directives), manufacturing anything is costly, importing is unfeasible due to tariffs, misinformation, deporting anyone without due process and on and on?
Scottn1|10 months ago
https://stonemaiergames.com/we-are-suing-the-president/ https://www.cmon.com/press/an-update-on-our-internal-teams-a... https://www.greaterthangames.com/blogs/news/greater-than-gam...
bufferoverflow|10 months ago
blitzar|10 months ago
danesparza|10 months ago
carabiner|10 months ago
[deleted]
Antipodes456|10 months ago
So for back of napkin: $10 widget, selling for eg $40.
NORMALLY Product: $10, Shipping, storage etc: $10, Duties: $0.70, Marketing $10, Sale price: $40, Profit: $10
TRADE WAR Product: $10, Shipping, storage etc: $10, Duties: $15, Marketing $10, Sale price: $40, Profit: -$5
So to make even 15% profit, the price needs to increase from $40 to ~$52
So companies are either winding up and ditching their inventory in China (lose less), or if they can prices are going up 20+%. Inflation here we come
At that price they be losing a significant amount on this.
UPS has already laid off 20,000 people. There is about to be a tsunami of businesses winding up unfortunately (us included).
anigbrowl|10 months ago
Cerium|10 months ago
tomcam|10 months ago
techpineapple|10 months ago
waxpancake|10 months ago
Timshel|10 months ago
> Obviously we’d love to move our factories back home to Seattle. We just need to figure out to make the rain in Seattle power an assembly line.
rchaud|10 months ago