The reports of canceled orders came in immediately after the EU, Canada and Mexico announced their retaliatory tariffs on U.S. boat exports, and already it totals millions of dollars in lost sales. Particularly hard-hit are the builders of large boats, where only a few units are sold each year world-wide. The loss of just one or two sales can have a devastating impact on a company that may build as few as 5 or 10 large boats a year. One company is projecting a sales loss on the order of 20%.
Last week the European Union imposed a 25% tariff on most types of boats made in America, effective immediately. Canada announced a 10% tax on all U.S.-made boats effective July 1, and Mexico announced last week the immediate imposition of a 15% tariff on all U.S.-made boats.
The U.S. boatbuilders comprise what is little more than a cottage industry. Relatively small factories spotted around the U.S., most east of the Mississippi River, typically employ anywhere from 50 to 1,000 employees. Unit sales for every type of boat, except for PWCs and aluminum fishing boats, is small, virtually all under 3,000 units a year. Large boats, those of 40’, typically have sales of fewer than 100 units a year by brand, and many famous brands actually build fewer than 20 units a year. So, if the boating industry is so small, why has the EU chosen to drive a stake through their European sales?
Nicole Vasilaros, government and legal affairs vice president for the National marine Manufacturers Association (NMMA) says that the U.S. boating industry has “become a target for those that are wishing to make a point to this president. It’s a real U.S. manufacturing industry. In an era where not a lot is still made here in the U.S., boats are.”
Boats are seen in advertising for all sorts of products, there are many magazines devoted to them, they seem to be ubiquitous in the waterways and marinas – and of course, everyone would like to be able to afford to own one.
“A 25-percent import tax makes our products unmarketable in a location that accounts for 22 percent — $338.5 million — of annual U.S. boat exports,” Vasilaros said.
“To say our industry is concerned about the European Union’s 25-percent retaliatory tariff on U.S. boats would be an understatement,” Vasilaros told Trade Only Today.
The top boatbuilding states are Florida, Tennessee, North and South Carolina, Minnesota, Indiana, Arkansas, Missouri, Georgia, and Wisconsin. NPR has reported that in Orlando, Florida, Regal Marine Industries — which makes everything from 19-foot motorboats to 53-foot yachts priced above $1 million — said it’s already had $4 million worth of orders canceled or delayed by overseas dealers because of the tariff. CEO Duane Kuck estimates that the company, which employs 750 in Orlando and Valdosta, Georgia, will lose $13 million in revenue this year from European and Canadian tariffs.
“It’s hitting very hard and very quick,” Kuck said.
The EU and Canada accounted for up to 20 percent of Regal’s business. If the tariffs last past 60 days, Kuck estimates that his company would have to cut about 40 jobs, either through attrition or layoffs.
Bertram Yachts in Tampa, Florida, is scrambling to salvage sales. NPR reported this week that a customer in Monaco called to cancel the purchase of a $4 million, 61’ (18.6 m) yacht, citing the added cost of the tariffs. To save the deal, Bertram CEO Peter Truslow plans to offer to make the contract contingent on the tariffs being lifted. Yet it’s far from clear when — or whether — that might happen.
“It could be a day, it could be years,” Truslow said.
Before the tariffs, Bertram had been growing rapidly NPR reports, with Europe accounting for perhaps 15 percent of sales. The company had planned to expand its staff of 90; the tariffs have put any hiring on hold.
“The perception in the public,” Truslow said, “is there’s a bunch of rich guys hanging out at fancy marinas or something. But 90 percent of the people that work in the yacht business, they’re laying fiberglass and installing hardware. They’re hourly, hard-working guys, the same as you’d see in a car manufacturer. Those are the ones that get affected.
“Who’s the loser in this? The small yacht companies and the employees,” Truslow said.
A European dealer for Carver Yachts canceled two boat orders, Soundings Trade Only reported last week. As a result, the company is scrambling to reconfigure the boats for U.S. customers, says Rob Parmentier, president of Carver, Marquis and Larson Boat Group.
“Nobody wants to be stuck with a boat that’s priced 25 percent higher than it was two months ago,” Parmentier said. The dealer won’t order more Carver Yachts while they face a 25-percent levy, according to Parmentier.
Because shipping boats to Canada is not much more expensive than shipping them around the continental U.S., American-made boats of all sizes will be hit particularly hard there.
Even more concerning for Parmentier is the 10-percent tariff Canada will impose on boats from the United States in a little over a week — 20 percent of Larson Boat Group sales are in Canada, across the border from where the Larson, Striper, LarsonFX, Escape, and Triumph brands are built.
Aluminum fishing boats are particularly vulnerable in Canada because there are not many domestic manufacturers and most sales in this category are from companies such as Tracker, Lund, Lowe, Crestliner, Alumaweld, and others located in the U.S. Their products are getting hit by tariffs twice – first by the 10% tariff imposed by the U.S. on aluminum from Canada, then second by the 10% tariff places on U.S. boats sold in Canada.
Boats are largely made by hand, from the lamination of layers of fiberglass to the installation of equipment and final assembly, it is virtually all done by workers making and fitting each component into the hull. The equipment installed, such as bilge pumps, tanks, and electrical systems, to say nothing of the engines themselves, are all hand-assembled by sub-contractors. This means that literally hundreds of workers are involved with the construction of even relatively small boats.
Clearly, American jobs will be lost as a direct result of these tariffs, the only question is how many.