Boatbuilder's Million-Dollar Problem: No One Wants to Eat the Tariff
DECATUR, Ind.—For workers at the Formula boat factory, it’s pretty easy to know when one of the vessels they’re assembling is destined for a European buyer... Unfortunately, tweaking a boat for sale in Europe is increasingly uncommon in northeast Indiana. Scott Porter, Formula’s president, told me this week the company has shipped one unit across the Atlantic since the European Union’s retaliatory tariff raised the price of an American boat there by 25%. That was a year ago, when EU officials assembled a long list of U.S. targets in response to President Trump’s steel and aluminum tariffs.
The duty, which adds between $25,000 and $400,000 to the price of a Formula boat, is in addition to a value-added tax of roughly 20%. And that’s on top of delivery charges that can tack on thousands of dollars more. Before the tariffs, Mr. Porter typically sent as much as 10% of his production, or 35 boats, to Europe each year. That’s important income for a decades-old family firm that employs 350 people in labor-intensive and pressure-packed jobs. Providing good benefits, a steady stream of tasks and job security is critical in an era when workers can easily find another place to earn a paycheck.
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“Our international business is gone,” Mr. Parmentier, the CEO of Wisconsin-based Marquis Yachts, said. He’s optimistic some of Marquis’ international sales will return after Canada recently removed a tariff on U.S. boats. Messrs. Porter and Parmentier blame a trade war that is showing little sign of abating. Both suggest it may be time for the Trump administration to slap similar tariffs on big-ticket items from Europe. It’s unclear whether that will happen. Mr. Parmentier, whose most expensive yachts exceed $4 million, has seven European orders ready to be filled when the tariff disappears. While he waits, hard-fought market share is drifting away.
The Trump administration has argued that its tariffs on aluminum, steel and other foreign goods may raise raw material costs or consumer prices today, but that short-term pain is worth the long-term pursuit of fairer trade. But the retaliatory penalties that Europe, China and others have countered with show that the short-term pain can be considerable—and maybe not so short term. The nightmare scenario looks like this: Big dealers in foreign markets might forget you; big regional boat shows go on without you; buyers eventually ditch you, opting for German, British, Italian or French alternatives that aren’t subject to similar border taxes.
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Some boat builders are among the companies willing to dip into profits to keep a foot in the European market. Bill Yeargin, CEO of Florida-based Correct Craft Inc., says in some cases the company will help dealers cover the cost of the tariffs. But this is costing Mr. Yeargin millions and isn’t sufficient to maintain his sales levels. The company’s European business, which had been about $20 million annually, has fallen by a third.
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https://www.wsj.com/articles/boatbuilders-million-dollar-problem-no-one-wants-to-eat-the-tariff-11561734002 (paid subscription)
Where is Pence?
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