Are Tariffs Going to Kill 400 Scale?

The news from the USA over the past few months has in general been unpleasant, but yesterday's 'liberation day' nonsense is definitely going to have a massive impact on die-cast. If you're not paying attention Trump just added a 34% extra tariff on top of the 20% added a few weeks back. That's 54% extra on anything coming from China. That's going to hurt. Here are my thoughts on the impact.

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Current Situation

This is the news coming overnight UK time. As reported in the Guardian here:

Could we see less US releases in the future?

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Impact of Initial 20%

So far the impact of the original 20% tariff has been relatively small. I know that Gemini Jets passed on 5% tariff related costs to retailers last month and I am aware of another manufacturer who has suggested splitting the 20% four ways (5% each manufacturer, distributer, retailer, customer). I have been increasingly involved working with US partners and speaking with them I know the dire impact the 20% tariff was having on some of their business models.

Brands like Gemini that make a lot of US models will surely be hit hard by this

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Impact of 54%

The people I've spoken with are now in shock that the tariff will go up to 54% and it is hard to see how that can be swallowed by the different sides in the way the 20% could be. The result may well lead to some retailers and others going out of business. Surely, at the least, the price of models in the US is going to rise again substantially.

NG are another brand I'd expect to be hurt by this

Outside the US we can only look on in bewilderment at the lunacy going on within, but it will no doubt impact us as well (ignoring the knock on effects to the wider global economy). Several major 400 scale brand's sales (most noticeably Gemini Jets and NG Models, and to a lesser degree Aeroclassics) are heavily focused on the US market. Ultimately, it could well lead to the bankruptcy of some brands. The alternative is that those brands reorient their releases away from US focused products (presumably US short-haul at least). However, even a good chunk of non-US models are sold in the USA so I'd argue that changing subject matter alone will not necessarily have the desired impact. The only models that I'd expect to avoid being impacted are those made primarily for the Chinese domestic market.

So far the price hikes have largely been focused on products shipped by container or via distributers like ADI. They haven't impacted the smaller shipments coming via air-freight direct to retailers (a pathway used I believe by Panda, Aviation400, NG Models and several others). However, if the 'de minimus' loophole is closed, as it states above it wil be, does that now mean all 400 scale shipments will be caught up in the tariffs?

Tariffs Not Business As Usual

I have seen at least one of the 400 scale brands (who'll be releasing in the next week) suggest that these tariffs are no different to other countries' practices. The line was:

"Many countries have import duties, VAT, GST, etc. collected on imported goods; the USA will now join those ranks"

I should point out to my American friends that this is not really true. VAT and GST are taxes applied to almost all goods and services in countries like the UK, Australia and New Zealand. They do not attack imports specifically, but where they impact imports they are merely applying the same tax to imported goods that is already applied to domestic ones. No advantage is gained. They are NOT tariffs. For more on the difference between the two from a US perspective see ​The Tariff and Sales Tax Mishmash – Untying the Mess

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Predictions

Assuming that these tariffs are here to stay and not some flip-flopping bargaining attempt I'd suspect:

• The price of new models in the US is going to rise again substantially
• Unlike with the 20% tariff all brands will probably now be impacted
• Some major brands will be heavily hit by this
• Some retailers will go under (especially smaller ones that don't work in the seconds market)
• You may see less US focused releases in the scale
• It wouldn't surprise me to see the cost of secondhand models also rise as a result