U.S. Tariffs On China May Force California Company To Move Production Overseas
AUDIE CORNISH, HOST:
The latest U.S. tariffs on Chinese goods took effect today, making it more expensive for Americans to buy yet more products from China. We're going to hear now from the CEO of an American company who's trying to figure out what to do now. Daniel Emerson runs Light & Motion. It's a company in Marina, Calif. They sell lights for bikes and scuba divers, among other specialty uses. In fact, his lights were recently used in the dramatic rescue of the Thai soccer team trapped in a cave. Here in the U.S...
DANIEL EMERSON: Local law enforcement and FBI use our lights to inspect the hulls of ships coming into our ports. We're the exclusive light of the Weather Channel. Hurricane Florence, when you see an - a broadcaster standing in driving rain being lit, it's our lights that are lighting them.
CORNISH: The problem he has is that most of the parts that he uses to make his lights come from China.
EMERSON: Our electronics, which are the most expensive part of the light, are sourced primarily in China. We used to make them in the United States, but China's just too attractive. Batteries - all of our lights have batteries, and batteries come out of Asia, mostly Korea and Japan. And then all the customized parts, the specialty parts that make our lights unique, are built with specialized tooling that all resides in China.
CORNISH: Right now, are you having to pay higher prices for them?
EMERSON: Yeah. The way the tariff works is you have a shipment come in. It lands at the Port of Oakland. The U.S. government says, oh, this is $100,000 of parts. Please write us a check for $10,000 if you want to get your parts. We end up writing very large checks to the U.S. government, and we cannot continue to run our business if that continues.
CORNISH: Can you imagine in the long run these tariffs helping you at all?
EMERSON: These tariffs are going to destroy our business and force us to move offshore. I think of tariffs as a wall built around the United States. And if your business is inside that wall, it becomes very difficult to bring parts in. And it also becomes very difficult to move parts out. The smartest thing for us to do, which is what the law is telling us, is to move all of our production outside that wall. That allows us to sell internationally without any barriers or added costs. The most galling thing about the tariffs is the administration has created a tunnel under this wall that allows my Chinese competitors to bring all their products into the United States tariff-free.
CORNISH: What do you mean by that?
EMERSON: If you look at the list of what is being tariffed, it's all parts, mostly, at least in my bike light, scuba diving light and cinema and photography light space. I have a - many, many, many competitors out of Asia and China in particular that are not being tariffed at all. A finished flashlight will come into the United States tariff-free under the new tariffs. Meanwhile, my business that builds in the United States, all of the parts we buy are being tariffed.
CORNISH: It sounds like you're in a real flex moment. You sound quite calm, given the enormity of what you're saying about your business.
EMERSON: Well, you know, there's an emotional side to this, and there's the business side. I don't make the rules. The rules have changed. I need to adapt.
CORNISH: Where do you plan to move production?
EMERSON: Well, as I talked about, this tunnel underneath the tariff wall - there are countries like Taiwan or the Philippines who enjoy what's called most favored nation status. And products from those countries coming into the United States are tariff-free. What that means is I'll still get all of my parts out of China. I'll just ship them to another country, like the Philippines, assemble them there and bring them into the United States without tariffs.
CORNISH: Daniel Emerson is CEO of Light & Motion, a lighting manufacturer in Marina, Calif. Thank you for speaking with us.
EMERSON: Thank you, Audie. It's a pleasure to be on your program.
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