How Manufacturers and Distributors Are Responding to Current Tariffs

While other world events may have pushed the thought of tariffs to the back burner, this doesn’t negate their impact on industry manufacturers and suppliers as they strive to navigate the ever-changing rules.

“The impact of tariffs is top of mind and the situation continues to evolve daily,” says Eric Bjorling, vice president of marketing for STIHL. “While our approach to local production is helping us avoid some of the worst effects of the import taxes, we do still rely on other components that are shipped to the U.S.”

Overall Impact

Denise Mullikin, president of Hunter Irrigation’s landscape division, says that while they had some initial concerns about material availability and supply chain obstacles, tariffs have not really impacted their ability to produce products.

Mullikin says they were prepared for these extended tariffs after adapting to the tariffs imposed on Chinese imports during President Trump’s first administration.

“As an organization, it pushed us to understand and make thoughtful decisions around where we manufacture products and the implications of those choices on product costs and logistics,” Mullikin says.

COVID also prompted Hunter to expand their supply chain and continuously review how to mitigate increased production costs.

“Prior to the recent tariffs being implemented, we were already well underway to investing in increased manufacturing and distribution capacity within the United States,” Mullikin says.

Dan Wurgler, executive vice president of procurement and operations for Ewing Outdoor Supply, says that COVID also caused them to diversify their supplier base.

“There are a few companies out there that have a domestically produced option,” Wurgler says. “The delta was pretty significant between the imported and the domestically produced product. That gap is starting to close. We will still look at the domestically produced option as a viable option. We have to seriously look at it because this isn’t going to go away anytime soon, and if we wait, we could find ourselves way behind the eight ball on that.”

Pricing Changes

One of the biggest concerns with the tariffs is the impact on product pricing.

“I think manufacturers have been very responsible with saying it’s a 25% tariff, but not all of that thing is made overseas,” Wurgler says. “There are certain components. The lift that manufacturers have had is saying, ‘Okay, we have to clearly identify what component or components are being imported. What is the tariff? What is the impact of the tariff on that item, and then what percentage of the finished goods is that item or items that are imported?’ So, a 25% tariff doesn’t necessarily translate to a 25% increase. It might come down to a two or three percent increase.”

Mullikin says, in their case, they did not extend price increases to the market immediately. They chose to analyze the situation and determined that the best strategy for them was to spread the increased production costs across most products, allowing Hunter to moderate the overall increase and have the smallest impact on the market possible. They expect to see pricing increase by low single digits.

“While we absolutely take the pricing position of our competitors into consideration, we also believe that we need to do what is best for our business and our customers, first and foremost,” Mullikin says. “In general, we have worked to maintain our margins through modest price increases – that is what lets us continue to be a viable and growth-oriented organization.”

Wurgler says what price increases they’ve seen are being passed on to their customers. Ewing is choosing to only raise the prices for impacted items, rather than spreading the cost across all their goods. He says that for some products, they may take some strategic margin compression.

“John Deere continues to monitor the structural impacts of tariffs on our customers, dealers, and the business while awaiting clarity for the longer term,” says a company spokesperson with John Deere. “Due to our significant U.S. manufacturing presence and high percentage of domestic component sourcing, we intend to offer our customers as much pricing stability as possible through this time.”

As for what will happen to pricing if the tariffs are lifted, Wurgler expects it to come down, as manufacturers will seek ways to gain market share when their costs decrease.

Mullikin says their ability to adjust pricing will depend on how it is handled further up the supply chain.

“If we see real cost reductions moving forward there’s always the opportunity to pass those savings along to the market,” Mullikin says.

Product Availability and Delays

Past tariffs and the pandemic have also insulated brands from product delays as they have learned the value of supply chain resilience. Mullikin says they haven’t experienced any delays in material or component availability so far.

Wurgler says they’ve only encountered spot shortages as some manufacturers have paused shipping around fluidity of certain tariffs. Mullikin says this was the case for Hunter early in the year when they purposefully held shipments for a few days to see if certain elevated tariffs would hold.

“We were happy we did – when those tariffs were quickly downgraded days later, we immediately resumed shipping and were ultimately able to limit our (and the market’s) exposure to increased costs,” Mullikin says. “We have learned over time that taking a thoughtful and measured approach to decision-making serves us, and our customers, better than reacting from a place of panic or fear.”

How Landscape Companies Can Respond to Tariffs

Wurgler recommends owners pay close attention to the evolving tariffs and how they will impact their own businesses.

“They need to have open communication with their customers and try to prepare their customers as much as possible for what’s going to happen,” Wurgler says.

Mullikin says that while the impact of tariffs has been relatively minimal on product pricing so far, landscape companies should pass along price increases in a way that keeps them competitive while also preserving their financial strength.

“Consumers are generally aware of what is going on regarding trade tariffs and would not be surprised to see a reasonable uptick in what they expect to pay for landscape installation and services,” Mullikin says.

Wurgler encourages businesses to develop an effective plan B for the products they regularly buy.

“From a longer-term preparation standpoint, I believe all businesses are well served to run scenario planning – outlining what they would do if the market booms, normalizes, or experiences a downturn,” Mullikin says. “It helps to highlight potential deficiencies and areas of investment, it removes some of the emotion around real-time decision making, and it pushes an organization to clearly identify the levers that can be pulled to ensure viability in any market environment.”