Even before the Covid-19 pandemic, many U.S.-based boatbuilders were dealing with supply-chain strains from Trump administration tariffs. As President-elect Joe Biden prepared to take office, the question remains open about whether those strains will remain, worsen or ease.
Biden, during his presidential campaign, touted a “Made in All of America” plan that included an increase in U.S. government purchasing of U.S.-based goods and services to the tune of $400 billion. He also called for a return to normal relations with longtime allies and partners.
What those promises will mean, specifically, for relations with three key marine markets — Canada, the European Union and China — is yet to be seen.
Canada: Choppy Waters
Canada was the largest export market for the United States in 2019, at $292.7 billion, according to the Office of the United States Trade Representative. That number is down 2.4 percent from 2018 after the Trump administration tariffs set off a series of tit-for-tat tariffs from both countries. For instance, after the United States reimposed a 10 percent tariff on Canadian aluminum, Canada responded with a retaliatory tax on $2.7 billion worth of U.S. goods.
While Canadian deputy prime minister Chrystia Freeland insisted that her nation would “impose dollar-for-dollar countermeasures,” the National Marine Manufacturers Association and NMMA Canada praised Canadian Prime Minister Justin Trudeau for exempting U.S.-built boats from the retaliatory action — with a reminder that after a similar situation in 2018, U.S. boat exports to Canada dropped by 26 percent.
This time around, the Covid-19 pandemic is exacerbating the tariff situation. Canada’s pandemic restrictions, along with the continually high infection rate in the United States, are keeping the border closed to consumers who might otherwise buy U.S.-built boats. “With the pandemic, we have seen a slowing of Canadian-based sales,” says Micah Bowers, CEO of Inventech Marine Solutions in Washington state. “The clients just can’t come down here, and we can’t go up there.”
Material acquisition from Canadian companies, he says, is more difficult but not impossible. “Timelines for our three biggest Canadian suppliers — AdvanTec, Shockwave and Shoxs — haven’t been affected yet,” he says. “So hopefully that continues.”
European Union: Making Nice
Relations between the United States and the European Union also include protectionist tariffs, but the Office of the United States Trade Representative reported a total estimated $1.1 trillion of goods and services traded in 2019. U.S. exports to the European Union increased 6.2 percent between 2018 and 2019, to $267.6 billion — good for 16.3 percent of overall U.S. exports.
In the macro sense, tit-for-tat tariffs do not appear to have crippled trade relations. And the efforts of marine industry leaders appear to have improved the situation.
In June 2018, the European Boating Industry, International Council of Marine Industry Associations and National Marine Manufacturers Association asked both parties to resolve disagreements over aluminum and steel, and explained that what’s on the line in the United States is $39 billion in annual sales, 650,000 jobs and 35,000 businesses. In a letter to U.S.T.R. and the European Commissioner for Trade they stated:
“We, the undersigned, urge both sides to quickly resolve trade disagreements regarding aluminum and steel tariffs. … The recreational boating industry would particularly benefit, as we face higher raw material costs, retaliation of marine products and technical barriers to trade. The U.S. and E.U. are natural trade partners and have a long tradition of exchanges in the boat industry.”
After August 2020, tensions eased with the announcement of a bilateral trade package of tariff reductions that emphasized increased coordination with health response, climate change, trade, technology and security. That’s the type of renewed cooperation that the Biden administration is indicating it wants to see going forward.
China: Bad to Worse
U.S.-China trade tanked in 2019, totaling $634.8 billion in goods and services, according to the Office of the United States Trade Representative. U.S. exports to China were $106.4 billion, down 11.5 percent from 2018, while China’s exports were $451.7 billion, down 16.2 percent.
The Trump administration took what was arguably the hardest line on tariffs against China, going so far as to accuse China of manipulating its currency in August 2019.
Continuing challenges in Taiwan — home to the shipyards of Kaohsiung that build boats for U.S. consumers — also are a factor. In 2019, Chinese President Xi Jinping called for Taiwan’s peaceful reunification and reiterated China’s right to use force if needed. In May 2020, Taiwanese President Tsai Ing-wen was inaugurated for another term. She is pro-independence.
As of November 2020, reports indicated a possible trade deal in the works between Taiwan and the United States. “Taiwan has emerged as an important potential strategic partner in terms of regional security and advanced silicon supply chain,” says Bing Chen, a Computer Vision engineer in Taipei. The U.S. allies in the Indo-Pacific understand that if Taiwan were to be taken by China, the [People’s Liberation Army], with records of unlawfully [weaponizing] islands in the South China Sea and [utilizing] militia fishing boats to plunder foreign waters, would have unchecked access to the Pacific.
If U.S.-backed boatbuilding facilities decide to leave mainland China, emerging markets such as Vietnam and Malaysia could be a landing spot.
This article was originally published in the February 2021 issue.