US-China trade war could affect your holiday fireworks

As President Donald Trump and Chinese leader Xi Jinping prepare to meet at the Group of 20 summit next week in Japan to discuss the trade war between the two countries, one item looms in the balance: fireworks.

Trump has already imposed a 25% tariff on $200 billion worth of Chinese products in May, and could apply a new 25% tariff on $300 billion more, including smaller fireworks that sparkle on street corners and bigger ones that illuminate the night across cities and towns.

So far, the president has not set a deadline for when he could impose the new tariffs.

Your 2019 Fourth of July is safe for now since all of the products are already in the United States. But future events such as Labor Day, New Year’s Eve and the 2020 Fourth of July may be dimmer if these tariffs are implemented, according to the American Pyrotechnics Association (APA).

Retailers expect to increase the price of their products anywhere from 5% to 25% if the tariffs go through. That means customers and towns around the country would pay more for fireworks, leading to scaled-back shows, and fewer purchases and jobs.

China produces 99% of backyard fireworks such as sparklers and small pyrotechnics, as well as 75% of professional grade fireworks.

“These potential tariffs are very problematic because we rely so heavily on China, and there really is no alternative source,” says Julie Heckman, executive director of the APA. The higher levies could affect small American fireworks businesses, she says.

In the United States, the industry has grown every year for the last 20. In 1998, consumer and display fireworks generated $141 million and $284 million in revenue respectively for the industry. In 2018, they accounted for $360 million and $945 million as the fireworks industry brought in a revenue of $1.3 billion.

The APA is worried small towns with small budgets will have to cancel future firework displays for holidays and festivals if Trump puts the tariffs into effect. That will have other ripple effects because firework displays generate millions of dollars for local economies.

Gary Hufbauer, an economist with the Peterson Institute for International Economics, expects that a 25% tariff would lower fireworks sales by 10% to 20%. Small fireworks businesses are worried the tariffs would hurt them, leading to layoffs of hundreds of seasonal workers and higher costs for customers.

Mick Marietta, CEO of Jake’s Fireworks based in Pittsburg, Kansas, said if the tariffs happen, shoppers will take the hit.

“When you’re talking about 25%, nobody has that margin in the fold, so it would have to be directly passed on to the consumers,” Marietta explained. ”A lot of the consumer fireworks are done through nonprofit organizations — church groups, band groups, cheerleaders ... What happens is they make their money off of the sales too, so they will make less money? It’s almost a trickle-down effect.”

The average customer at Powder Monkey Fireworks in Weldon Spring, Missouri, spends $80 to $100 on fireworks, says President Chris Sander. They would still spend that amount of money if the tariffs were imposed, but walk away with fewer products, affecting his profit in a seasonal business.

“There’s a lot of people who sell fireworks all year,” he said, even if they only make a whole year’s profit over a couple of weeks. “We live paycheck to paycheck, but our paycheck is once a year. We definitely will have to figure out something,” Sander said

Heckman is testifying in front of the U.S. Trade Commission on Thursday in hopes of exempting fireworks from the tariffs to avoid economic impact on the industry. She is optimistic they will be removed from the list. However, Hufbauer is skeptical fireworks will be exempt because they are “fun”, “play” products.

”I just don’t think it’s in the same category as some kind of machine part or electronic component that a firm depends on for its livelihood,” says Hufbauer.

Hufbauer estimates there is a 30% chance of Trump putting the new tariffs in place. He predicts the meeting between the president and Jinping will focus on resuming “working level meetings” between the two countries.

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