Tariff Tracker: Power Lawn & Garden Suppliers Brace for Tariffs, Plead for Reversal

In the first three rounds of the Trump administration’s trade war with China, tariffs have been imposed on a variety of power lawn and garden equipment, as well as engines and other OEM components, replacement parts, and attachment accessories. Some of the first- and second-round proposals – such as tariffs on snow blowers and log splitters – were ultimately excluded before taking effect, but many others were not, including tariffs on leaf blowers and lawn mower blades, which were enacted in a third round of actions on September 24th.

In addition to the growing list of tariffs on end-use power lawn and garden products and related equipment, the industry has already had to adjust to the March 2018 steel and aluminum tariffs – a significant constraint given that high volumes of these materials are used to manufacture power lawn and garden equipment – as well as Canada’s retaliatory duty on US lawn mowers.

Smaller Companies in Emerging Markets Face the Greatest Pressure

Two relatively small companies that focus on electric equipment – Snow Joe and the American Lawn Mower Company (ALM) – have repeatedly requested that the equipment they produce be removed from these lists of tariffs, citing a number of justifications:

• There simply are no feasible alternatives to China when it comes to sourcing some of these products. Both Joseph Cohen of Snow Joe and Michael Kersey of ALM note that their priority is to use US sources but that for many types of equipment they have found none. In fact, it’s difficult to source these products affordably anywhere but China.
• Producing this equipment domestically may not be possible for many companies that don’t have the capital to dramatically expand their operations, but even with adequate funds available, establishing new production lines at the necessary scale takes time to plan and execute – time many companies don’t have in sufficient abundance to avoid tariff-related losses.
• A lot of the equipment at issue isn’t particularly high-tech, and is primarily used by consumers, so in this case tariffs meant to stave off Chinese competition in high-tech and industrial markets won’t really hit their target.
• Furthermore, neither Cohen nor Kersey have observed pervasive IP theft in the power lawn and garden equipment industry – a key reason behind the Trump administration’s actions against China – so targeting these products doesn’t seem justified.
• Rather, Kersey fears that raising costs (and therefore product pricing) for US suppliers will only encourage Chinese competitors to move into higher-tech areas as US firms’ profit margins and R&D spending are undermined.

With a focus on environmentally friendly electric equipment, Snow Joe and ALM are also concerned that these pressures will hurt their customers – US households seeking electric equipment as a green alternative to engine-driven types. Sales of electric equipment (corded and battery-powered) grew nearly 5% per year between 2012 and 2017 and will continue to grow at a similar pace through 2022. These products continue to make significant market share gains in the residential market due to several advantages over gas-powered models:

• affordability
• light weight
• low noise level
• low operating cost
• few maintenance requirements
• no fuel emissions

However, as many of the companies operating in the electric power lawn and garden equipment space are smaller in scale and scope – and therefore more susceptible to the effect of tariffs – than their engine-oriented counterparts, consumers may face reduced availability and higher prices for electric types as a result of the trade war.

Pressure Mounts Industry-Wide as Production Costs Rise

Even for larger companies that rely primarily on domestic manufacturing, many of these tariffs can be a drag on business. MTD Products – which had $1.7 billion in power lawn and garden equipment sales in 2017 – also asked the Trump administration to reconsider some of products targeted in its trade policy. For MTD, the tariff on small engines used in handheld or walk behind equipment will raise production costs, because – as in the case of Snow Joe and ALM – these components cannot be affordably sourced anywhere but China.

Other than these engines and some other components, MTD’s equipment is made in the US, and yet the added duties on Chinese engines and any foreign steel and aluminum components the company uses in production will raise the manufacturing costs of the finished machine – costs which are often passed on to the consumer. MTD’s Gary Lobaza also notes that where end-use equipment isn’t affected (yet) – e.g., handheld trimmers and chainsaws – imports of low-cost Chinese equipment could even benefit from the higher production costs placed on equipment that is largely made in the US but uses Chinese components or materials.

As for the threat of IP theft, Lobaza acknowledges that MTD Products has suffered as Chinese producers reverse-engineer their equipment. Nevertheless, he doesn’t think that the Trump administration’s approach to the problem will help power lawn and garden equipment suppliers, their employees, or their customers.

US, China Show No Signs of Letting Up

Suppliers of power lawn and garden equipment face several tariffs that threaten to restrain growth until either the tariffs are revoked or the industry makes enormous adjustments. These currently include:

• three successive tariff packages affecting a wide variety of end-use products, OEM components, replacement parts, and attachment accessories
• the tariffs on most foreign steel and aluminum, which effectively raised prices for essentially all steel, even domestic supplies (while the aluminum market has adjusted so far)
• Canada’s tariff on US lawn mowers in response to the steel and aluminum tariffs (which remains in place after the US, Canada, and Mexico agreed to the USMCA trade deal, also known as “new NAFTA”, in September 2018)

As if that isn’t enough, the Trump has threatened to place tariffs on the goods making up the remaining $267 billion of the US’ imports from China.

To Learn More

Want to learn more about tariffs and the industries they'll impact the most? Download the Freedonia Group's new white paper for the latest insights from experts.

For more insight into the power lawn and garden equipment market, see Power Lawn & Garden Equipment, by The Freedonia Group. This comprehensive report provides the following:

• Historical demand data and forecasts
• Consumer survey data
• Industry structure and composition
• Company market share

About the Author:

Matt Breuer is an industry analyst at the Freedonia Group, where he writes industry studies focused on the US consumer goods markets.