Earlier this month the White House release a new list of almost 1,000 items coming from China that could be subject to additional 10% tariffs over and above what they may already be subject to. The list includes some ingredients used in the dietary supplement industry.
NPA president Dan Fabricant, PhD said that that the new tariffs could disrupt the industry because in many cases alternative sources of supply are not available. He said while there might have been an argument to be made for some of the items on Trump’s original lists—large commodity items such as aluminum and steel products—the issue seems to have gone far beyond that.
“We can’t have it where they are a 2% tariff on one side and we are paying a 25% tariff on the other. I get that,” Fabricant told NutraIngredients-USA.
One argument in favor of tariffs has always been to protect and stimulate domestic manufacturers. Fabricant said that presupposes that there are nascent supply capabilities waiting to be tapped that are held back only by differential prices. In the supply of dietary ingredients, that doesn’t match the facts on the ground, he said.
“I think the whole issue became oversimplified. On amino acids, for example, I don’t believe there is a US manufacturer who could in a reasonable amount of time meet the scale the market is demanding,” he said.
NPA to testify in August
In a letter sent late last week to US Trade Representative Robert Lighthizer, NPA laid out the case for the damaging effects of the tariffs. Fabricant will deliver the message via testimony at a hearing in Washington DC that will be schedule for later in August.
NPA’s main points can be summarized thus:
- Many dietary ingredients used in the domestic manufacture of dietary supplements are dependent upon sourcing in China because it is the only country which can handle ingredient sourcing supply on the scale the market demands.
- Imposing these tariffs on dietary ingredients would result in significant economic harm and financial impact to US companies. If small- and medium-sized companies were forced to obtain dietary ingredients from alternative sources domestically or abroad, most small- and some medium-sized companies would be out of business.
- Imposing these tariffs on dietary ingredients would result in a significant financial burden for consumers who may bear the increased costs.
- These proposed tariffs will predominantly affect small business, as defined by the Small Business Administration (SBA). Small businesses are the innovation engine in the natural products industry. Depressing innovation among US companies will only serve the interests of Asian and European manufacturers.
Tariffs could drive manufacturing overseas
Fabricant said the tariffs, if they take effect as they are proposed, could have the opposite effect of what’s intended. Since finished goods are not subject to the tariffs, companies might, instead of trying to develop new sources of supply, simply outsource their finished product manufacturing to China, putting their US employees out of work.
There are exemptions to be had, where cases can be made that alternative supply sources really aren’t available. But the process is neither quick nor easy, so Fabricant said companies need to get involved immediately.
“The exemption process is not a small one. There is a backlog of at least six months. Even if companies file for an exemption now, you probably won’t be granted one until after the tariffs go into effect in October,” he said.
“We need to put a marker down and we need to do it fast. When Trump came in, some companies seemed to be thinking that they didn’t need to be involved with a trade organization for the next four years because the administration is business friendly,” he said.