Philadelphia Distilling ships about 200 cases a year of Bluecoat gin to its distributor in Shanghai. So it’s bad news that China’s latest volley in its trade war with the Trump administration includes a 25 percent tariff on the company’s flagship spirit.
If the Chinese distributor decides that levy makes the product too expensive and stops ordering, “that’s one less bottling day for my bottling crew, five or six people who, frankly, can’t miss a day of work if they want to make all their bills,” Andrew Auwerda, president and founder of the Fishtown company, said Monday. This isn’t the first time the distiller was wounded by the trade war. Last year, it had to contend with bigger tariffs on glass bottles from China.
Despite such individual stories, economists don’t expect the latest Chinese tariffs to have a big impact on the Philadelphia-area economy because the region is not heavily dependent on exports.
“There’s always going to be a few specific items,” said Tom Jackson, a regional forecaster in the Philadelphia office of economic consulting firm IHS Markit, but the broader hit is likely to be muted compared with other regions.
Exports accounted for less than 5 percent of the Philadelphia region’s economy in 2016, according to IHS, ranking the region 17 among the nation’s 20 largest metropolitan regions.
The region’s exports in 2017 totaled $21.7 billion, including $1.3 billion to China, according to federal data provided by the World Trade Center of Greater Philadelphia. China is the fourth-largest market for Philadelphia-area exports, behind Canada, Mexico, and the United Kingdom.
Whatever the direct financial impact of the new tariffs turns out to be, the trade war is not good for business or the economy, experts said.
“If consumers become more concerned about the U.S. outlook because of additional tariffs on U.S.-China trade and hold off on spending because of that, that will affect a lot of businesses in the area," said Bill Adams, a senior economist at PNC.
For businesses, the trade war makes it harder to plan.
“We find that companies above all don’t like the uncertainty. They want predictability,” said Linda Conlin, president of the local World Trade Center.
The latest round of Chinese tariffs — on $60 billion worth of U.S. goods, including frozen peas, granite, and dental drills, expected to take effect on June 1 — follow the Trump administration’s decision Friday to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports.
Previous retaliatory tariffs from China crippled Bassetts Ice Cream’s bid to build a business in China. “Our business with China has really slowed down,” said Alex Strange, vice president of distribution for the Philadelphia company, which was founded in 1861 by his great-great-great-grandfather.
Kingsbury Inc., a Northeast Philadelphia bearing manufacturer, by contrast, was able to pass on the cost of Chinese tariffs on its products, which are used in industrial turbines, compressors, and pumps used in petrochemical manufacturing, power generation, and the oil and gas industries.
In September, China boosted the tariff on its products to 24 percent from 4 percent, said Mick McCann, vice president of sales and marketing. Chinese customers asked Kingsbury whether it would discount the goods to make up for the tariff or move production to another country, perhaps to its factory in Germany, to avoid the tariff increase, but Kingsbury did neither.
“We’re not aware of any customers who have said we’re not going to buy this from you because of the additional tariff,” McCann said.