Hundreds of orders for U.S. boats have been cancelled by Canadian boat dealers as tariffs introduced by that country are scheduled go into effect on July 1. The tariffs were announced by the Canadian government following the Trump administration’s decision earlier this year to levy tariffs on imported steel and aluminum from Canada.
Dealers in Ontario have already cancelled 500 orders from the U.S. builders they represent. “This is absolutely not a situation that has anything to do with economics,” Rick Layzell, CEO of Boating Ontario Association, told Trade Only Today. “Boat sales have been brisk this year and inventory pipelines are very low. The tariffs are adding a 10 percent increase, and with the rising prices from aluminum boat builders and sales taxes, consumers could see a 25 percent price increase overnight. Most are willing to let the deal die rather than pay that.”
About 100,000 new and used boats were sold in Ontario last year, according to NMMA Canada and about 65 percent of those boats came from the United States. “Our hope is that this whole situation will go away,” says Layzell. “None of us want this. There is no gain to the industry. Earlier this year, 82 percent of our members said they were investing in growth for the future for the year. But this is cutting us off at the knees.”
U.S. builders started to feel the impact of the tariffs months ahead of the July 1 date.
“This is the first summer the Canadians have started selling boats again,” said Rob Parmentier, CEO of the Marquis-Larson Group, adding the market has been hampered since 2016 by currency fluctuations. Parmentier, whose company sells many boats into Canada, said he is scrambling to come up with a plan to mitigate the impact of the tariffs so his Canadian dealers don’t “cancel millions of dollars of sales.”
Duane Kuck, CEO of Regal Marine Industries, said he has seen $4 million worth of orders canceled or delayed, thanks to retaliatory tariffs from both Canada and the E.U. “It’s hitting very hard and very quick,” Kuck told ABC News.
The two export markets account for about 20 percent Regal’s annual sales. Kuck estimates that Regal might have to cut about 40 jobs through attrition or layoffs, if the tariffs continue to disrupt sales.
“We’re cautiously optimistic but expecting the worst about these tariffs,” says Durrell Wiley, general manager of Dockside Marine in Kelowna, British Columbia. “We’ve already reduced our orders for new Sea Rays from 18 to six boats.”
Wiley said the weak Canadian dollar has driven up prices for US-sourced new and used boats and the tariffs will make the situation much worse for Canadian dealers. “The industry was already in dire straits, but now we’re really on our knees,” he told Trade Only Today. “We not only reduced our orders but told Sea Ray we won’t be taking any of those boats in the third or fourth quarters. That is when you want to be stocking up.”
While domestic manufacturers like Campion Marine could benefit from the tariffs, CEO Brock Elliott says “nobody has pulled the trigger” for new-boat orders. Campion, which sources many components through US-based IBBI, says his company is feeling the pinch of the aluminum tariffs in the U.S. “IBBI is negotiating with suppliers to get the best prices possible, but we’ve put our pricing for 2018 models on hold until we find out more information,” said Elliott. “We source items like aluminum fuel tanks, cleats and wiring harnesses through the U.S. We’re being affected the same as U.S. boat builders.”
Elliott said the builder has seen interest from Canadian dealers looking for alternatives to U.S. boats, but has not received orders yet. The company is also contacting dealers in the European Union since Canadian-built boats won’t attract the 25 percent tariffs that their U.S. counterparts will receive.
Whatever happens with Canada’s retaliatory tariffs, most observers expect the aluminum price hikes to stay. The timing, adds Parmentier, also creates a double-whammy effect. Not only are the tariffs raising export prices, but U.S. builders of aluminum boats are facing as much as a 200 percent increase on aluminum sheet.
That could also impact U.S. boat sales. Around 85 percent of pontoons sold in the United States are 18 feet, says Parmentier. “They’re entry-level boats,” he adds. “You’re going to lose that customer.”