Companies Ramp Up Production to Hit 90-Day Tariff Window

It may only be a 90-day reprieve from the steepest of President Donald Trump’s China tariffs, but it’s enough time to entice companies to restart factory operations and start shipping.

Therabody, a Los Angeles-based maker of wellness products such as Theragun massagers, is ramping up production again in China, CEO Monty Sharma said.

He added that “in my 40 years of work,” he’s never been happier “about a 30% increase in our costs.”

The reprieve is the latest twist in a series of on-again, off-again tariff actions that are making it hard for businesses to plan their operations. For some, the trade policy whiplash has already forced them to reconfigure their businesses. Others have altered their growth, hiring and investment plans.

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While the temporary trade deal with China reduced the odds of a full-blown recession, economists say it won’t be enough to avert a U.S. slowdown. The trade confusion has also already disrupted a critical period when retailers and suppliers place orders for back-to-school and holiday goods.

Getting up and running again won’t be straightforward. A sudden surge of shipping demand is expected to raise costs and create delays. The relatively short 90-day window in which tariffs are being lowered leaves companies with little wiggle room when it comes to trans-oceanic supply chains.

Although lower tariffs may bring some relief on costs, the temporary reprieve may lead to a “catch-up period” when retailers rush to restock inventories and items on U.S. shelves are scarce, which could lead to higher prices, according to Bloomberg Economics.

READ MORE: Freight Rates Set to Rise on Pacific Shipping Frenzy

After the 90-day reprieve was announced, Bogg Bag, a company known for its perforated tote bags, has reversed an earlier decision to raise prices — at least for now. The company also restarted production it halted earlier this year.

Bogg is still planning to cut its fall and holiday product lineup by 45 items — or almost half of its collection — so that it doesn’t have to rush production to make up for lost time.

For its current lineup, Bogg wants to move quickly. “Let’s get them finished, let’s get them loaded and on the water” because ports will begin to get crowded, said Bogg CEO and founder Kim Vaccarella.

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A worker sorts packages at a neighborhood sorting center in Beijing. (Na Bian/Bloomberg)

Tariffs had eroded demand to the point that shipping company Evergreen Marine Corp. last week told the Massachusetts Port Authority that its vessels departing from China would be stopping at the Port of Boston twice a month going forward, down from once a week, according to Richard Davey, CEO of the infrastructure operator.

But come May 12, the port operator was hearing from customers seeking to ramp up imports during the 90-day period, Davey said. The Port of Boston receives furniture, wine, spirits, toys, apparel and plastics.

The temporary tariff relief means that U.S. companies will try to quickly ship out products that were being held in factory warehouses in China, according to David Chitayat, CEO of Genimex, which does contract manufacturing for global brands.

Many businesses are stocking up on products in the U.S. to have a cushion of inventory in case trade talks break down or levies spike back up after the 90-day period. Some of those goods will still need to be produced, since some manufacturing was paused during the surge in tariffs.

Chitayat predicted companies will be able to absorb the tariffs at their current level — but consumers will still face higher prices.

“The tariffs are still meaningful, but should be manageable for most brands,” he said, assuming companies hike prices. A 30% increase in manufacturing costs translates to roughly a 5% to 10% increase in the price consumers pay for the product, he added.

Companies still face hurdles to quickly ship their products to the U.S. during the 90-day window. In the short term, shipping is “going to be a mess with everyone scrambling to get space,” Chitayat said. He expects container prices to go up but notes they are starting from a low point.

Tarptent is looking to reverse course after the California-based seller of outdoor gear asked a supplier to pause purchase orders from its factory in China.

The company is also gauging whether there’s enough time to order and ship the U.S.-made fabric it uses for its tents to the manufacturer in time for a production run to happen within the 90-day window.

“My guess is that it is pretty unlikely,” said Tarptent president Henry Shires. “The 90-day window is very narrow — and the window givers are too unreliable — to risk a big investment” in fabric.

The rollback of tariffs brought some relief for Chinese exporters, who had been left in limbo since the Trump administration hiked tariffs to 145%.

One medical equipment maker in Shanghai said the easing trade tensions will allow it to shelve planned job cuts and production line closures. But it won’t change plans to shift some manufacturing out of China to avoid the still-high tariffs, said Pang Ling, a sales manager of the company which employs hundreds of workers and relies on the U.S. for about half of its $70 million in annual sales.

The lower-tariff window will help Wisconsin-based Net Health Shops in the short term, CEO Chuck Gregorich said. The home goods company is looking into shipping dozens of containers from China that it paused in March. Gregorich expects this to boost its overall inventory and alleviate supply shortages.

Whether he decides to ship those containers will also depend on ocean freight rates. He anticipates that rates could rise due to pent-up demand as other businesses look to get more items delivered in the coming weeks and months.

Longer term, Gregorich expects items from China to remain more expensive, so he’s prioritizing sourcing products from other countries like Vietnam and India.

“My mind is already in those other countries,” he said.