New US Tariffs Will Harm Escape Room Creators

The White House’s $250 billion in tariffs on Chinese imports will increase the cost of electronic components by 25%. 

Before we dive into the issue in question, I need to make a something clear. I will moderate away any broad-brush political comments. Read the post, think about the issue, and feel free to thoughtfully discuss it. Anything short of thoughtful discussion isn’t helpful to anyone. (For what it’s worth, that extends beyond this site.)

Artistically rendered image of complex breadboarding.

What’s Going On

Electronics and manufacturing expert Andrew “bunnie” Huang published a lengthy analysis this weekend about how the $250 billion in tariffs on Chinese imports will harm educators, DIY creators, and American businesses that do assembly within the United States by slapping a 25% tax on a broad spectrum of electronics components.

“The new 25% tariffs announced by the USTR, set to go into effect on July 6th, are decidedly anti-Maker and ironically pro-offshoring. I’ve examined the tariff lists (List 1 and List 2), and it taxes the import of basic components, tools and sub-assemblies, while giving fully assembled goods a free pass. The USTR’s press release is careful to mention that the tariffs “do not include goods commonly purchased by American consumers such as cellular telephones or televisions.”

Think about it – big companies with the resources to organize thousands of overseas workers making TVs and cell phones will have their outsourced supply chains protected, but small companies that still assemble valuable goods from basic parts inside the US are about to see significant cost increases. Worse yet educators, already forced to work with a shoe-string budget, are going to return from their summer recess to find that basic parts, tools and components for use in the classroom are now significantly more expensive.”

Bunnie thoughtfully breaks down why these tariffs are ill-conceived because they fly in the face of their stated goal. Assembled electronics such as smartphones, televisions, and computers are all exempt from the tariff. The unassembled components that make up those devices are subject to the 25% price hike.

The incentive to pay Chinese manufacturing to build the entire product before shipping will get magnified, not reduced.

I strongly encourage you to read his entire analysis.

Tariffs & Escape Room Creators

Escape room creators who design and build their own games or hire American labor to create custom games will take a massive financial blow from these tariffs.

The tariffs hit the absolute necessities for custom technology creation. The list is lengthy, covering essentially all of the basics short of wood, paint, and construction hardware (update: screws & nails will be impacted by the steel tariff). If it’s related to the creation of electronics, it’s probably on the tariff list.

These items from List 1 are set to increase in price by 25% as of July 6th, 2018:

A broad range of items within the following categories are affected.I have simplified the lengthy list for easier reading. Read the List 1 on the USTR website for more thorough descriptions.

  • batteries
  • soldering irons
  • oscilloscopes
  • resistance measuring instruments
  • circuit assemblies (like Arduino)
  • LEDs
  • LCDs
  • capacitors
  • resistors
  • transistors
  • photosensitive semiconductors
  • mounted piezoelectric crystals
  • switches
  • connectors
  • insulated electric conductors
  • touch screens without display capabilities
  • power supply parts
  • and many other items

These items from List 2 are under review for a 25% tariff:

  • multimeters
  • additional types of diodes
  • additional electronic integrated circuits: processors and controllers, memories, amplifiers, other
  • parts of electronic integrated circuits and microassemblies
  • electric motors
  • DC motors
  • additional insulated electric conductors
  • acrylic polymers
  • monofilament plastics (for 3D printing)
  • and many other items

The Net Effect

A 25% hike in electronic component prices will measurably increase build budgets. It will also raise the price associated with learning and experimentation.

If the finished goods you buy are made in the US, they too will have been subjected to these tariffs and will increase in price.

Build prices will go up.

Either budgets will inflate too or quality will drop accordingly. In general, Americans will be paying a lot more for a broad range of goods, so raising prices won’t necessarily be a great strategy to mitigate the losses on the business side.

What Now?

Stock Up

If you can stock up on the parts that you need, you should try to do so before July 6th.

That being said, bigger companies than yours have been gobbling up everything that they can to improve their margins, so prices have gone up, especially in markets that have already been struggling to meet demand, such as capacitors.

It’s also possible that the things you need have already sold out.

Adjust Your Budgets

If you’re planning new games, you’ll need to revisit your budget. There’s no way around it.

Speak Up

List 2, which includes all manner of 3D printing and acrylic laser cutting materials, has not yet been ratified. The USTR reports that they will open this list up for public comment. When that opens up, I ask everyone to speak up.

Final Thoughts

The bigger the company, the more insulated they are from these tariffs. Massive manufacturing operations that already handle all assembly in China will be untouched by this policy. It’s the medium and small scale businesses, as well as individuals, who will bear the brunt of these new taxes.

Setting aside for a moment my personal belief that no one wins a trade war… when I stop and contrast the stated goal of these new tariffs — to harm Chinese businesses and boost American companies — with the harsh reality that it will make more sense to buy finished goods from China, I am at a loss for words.

Increasing the price of base-level components increases the cost of education, making it more expensive to learn the skills necessary to thrive in a technology-driven world.

Increasing the price of base-level components drives up the price of goods built in the United States.

Increasing the price of base-level components decreases the likelihood that a product will be built in the United States.

If we’re going to fire a gun, it shouldn’t be at our own foot.

If you comment on this post, please include the hashtag #ReadTheWholePost so that commenters can see who has informed themselves appropriately. 

5 thoughts on “New US Tariffs Will Harm Escape Room Creators

  1. Ohhh Caaaanadaaahhhh…
    But seriously, it will be interesting to see how quickly the effects of the tariffs will be felt in various industries, especially ours, across North America. Here in Canada we’re not exempt from the pressures either, though different from in the US, and with such a small community/industry it is fascinating to consider the next few months/year.
    The upcoming Transworld conference in Nashville is my immediate consideration personally, especially with the travel ban being upheld. One wonders if price increases will be broadly shown on products/services available there. And/or will non-American vendors begin pursuing non-American clients more steadily?
    So many variables to consider.
    Thanks for laying some things out so clearly. Those props are made up of tiny pieces but 25% price increases in tiny pieces becomes expensive real fast.
    #ReadtheWholePost

  2. Yes it’s going to suck for a while but in the long run things will get better. Just because we’ve been getting cheap parts for so long doesn’t make it efficient. I can’t begin to tell you how many times I’ve had to replace a battery or RFID chip in my props because they are so cheaply made. If the tariffs result in companies making the products here to avoid them thus creating more jobs AND a better product then the pain we feel for the next year will be worth it.

  3. David, thank you for this informative post. I did not understand until today how this new tariff would impact me and my business, but thanks to your concise and salient post (#ReadTheWholePost), I now see that it will be a big deal for us. We build our own games and mechanisms, so the “little guys” like us with the big Amazon credit card bill at the end of each month will pay through the nose. Where’s the 25% tariff money going, anyway? I wish it was possible to stock up, but when you don’t know exactly what you plan to do next month, that’s a challenge. Plus storage is tight already! Thanks again for your insight. I suppose it’s better to see a crash coming and brace yourself then to be blindsided.

  4. International trade is a very complicated beast to understand, manage and predict outcomes across a broad array of goods and services. Since electronics are probably the most broad category it is especially complex. However, retrospectively, we can analyze with greater certainty what factors contribute to the outcomes we have already experienced. My understanding is the decisions regarding tariffs are an effort to better manage a long standing and growing issue affecting our country as a whole. That being said, there is a chess game being played and many of our industries are and will be pawns in that game. Hopefully, the “game” will not last too long and the carnage will not be too great.

    This article is important to alert those whom may not be aware that there are going to be waves, rough water, and some rude surprises on the road ahead. Perhaps it will be a case of putting medicine on a wound (remember the sting of Bactine on your knee scrape) that makes the pain worse at the moment but helped you in the long run.

    Each of us in or about to be in the escape room business have a lot of significant variables to address. Recently, a new labor related law in my state increased the cost of having part time employees significantly. Trade wars and the maturation of the escape room industry are two more significant variables that cannot be ignored.

    Regarding tariffs, the stakes are high with lots of winners and losers. Opinions from reasonable and knowledgeable people will be divergent. Time will tell with the larger outcomes but the interim volatility is most assuredly a reality. Be aware, be prepared and stay tuned.

    #ReadtheWholePost

    1. I absolutely agree that there are a lot of reasonable differences in opinion here.

      Your comment, while thoughtful ignores the simple fact that the biggest companies are harmed the least by these tariffs, and that the structure of them incentivizes ramping up the dependance on the Chinese side of the supply chain, not reducing it.

      As it is, the largest nail manufacturer is under massive financial pressure from steel tariffs. Which also means that my statement about construction hardware being unaffected is wrong. http://www.newsweek.com/trump-steel-tariff-nail-industry-992834

      Additionally, I can’t get behind chess as the metaphor. Chess is a game where a strong player can legitimately identify and control for all of the variables. Complex chaotic systems that change because they have been modeled do not “play” like chess.

      There are certainly risky moves being made here. The game is absolutely high stakes.

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