Tariffs Risk ‘Sinking Us Before We Start,’ Says Tennessee Headphone Startup
Tech startups continue to join the many hundreds from various industries filing comments in docket USTR-2018-0026 opposing a third tranche of 25 percent Trade Act Section 301 tariffs on Chinese imports. One such startup, Culture Audio of Chattanooga, aims to be the first “scaled consumer product company in the headphone space based in the southeast” but worries tariffs will derail the company before it even leaves the station, commented CEO Joshua Simmons Thursday.
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Culture is introducing a “quality, unique set of wireless headphones” to compete against Apple and Bose “with a price point that is attractive & sound quality/features that are impressive,” said Simmons. “It is our position this unilateral imposition of a very expensive duty on a wide brush of consumer electronic products will put our budding business (and others) at a severe disadvantage before we sell the 1st unit (our launch date is in September/October with an aggressive advertising budget),” he said. Simmons fears tariffs on goods Culture sources from China under the Harmonized Tariff Schedule’s 8517.62.0050 subheading, which includes Bluetooth headphones, have “the possibility of sinking us before we start,” he said.
The headphones Culture seeks to debut “use open standard technology," said Simmons, and so aren't at risk of intellectual property theft from the Chinese -- one of the administration's Section 301 justifications for punishing the Chinese for allegedly unfair trade practices. “There are not viable & scaleable regions of the world we can move our manufacturing to, and it will take at least a decade before a viable manufacturing alternative could be created in the USA,” he said.
Simmons thinks the “broad stroke” of tariffs that the Trump administration wants to impose on consumer electronics goods is “short-sighted,” he said. Tariffs of 25 percent on IoT-critical connected devices imported to the U.S. from China under HTS 8517.62.00 would cost the U.S. economy $1.8 billion a year from the impact of higher prices reducing “consumption,” said a CTA study (see 1808170014). Culture agrees with the administration "on balancing tariff rates to have a fairer economic balance with China on industries that are likely to have a concrete net positive impact to our economy today, such as raw materials in steel, aluminum, etc.,” said Simmons.
If the administration puts the third tranche of tariffs into effect, “it will put a small business start-up like ourselves at a big disadvantage right when we are attempting to scale,” said Simmons. “This is not creating a pro-business climate.” American consumers and “small budding businesses like ourselves will feel it the worst,” he said.
Culture as a smart startup fears tariffs as make-or-break, but HP said Thursday it’s unfazed so far with the imposition or threat of higher duties on Chinese goods The tariffs imposed July 6 and Aug. 23 haven’t had a “material impact” on HP’s business “to date,” said CEO Dion Weisler on an earnings call.
HP, like all companies, is “monitoring the evolving market dynamics and the situation very closely,” said Weisler. “I can tell you we don’t speculate or comment on the situation until we know all the facts and things become more definitive.” HP will continue to work with the administration “to make sure they understand our point of view” on tariffs, he said. “We’ll monitor the situation and evolve it as necessary.”