Editing The Pen Addict 663/transcript (section)

== Exploration of tariffs and their impact on businesses ==

* Why is that the introduction to this? Because there's no way we're getting out of this talk. So essentially, what we're not going to be able to do here in talking about tariffs is give any kind of like insight. Clarity. Clarity into the situation. You know, like it's changing daily. Like there's new headlines today. This doesn't make any sense. For the sake of this conversation, let us just assume tariffs will remain in some regard. I mean, they have to a degree in that, you know, I think it's gotten lost a little bit in the very large numbers that have been thrown around. That there is a baseline tariff of 10% that is levied on everything from every country currently. Currently.
* And going into the US. By the US. Let's be clear. Yeah. Let's be clear. I think it is implied, but yes. By the US. To the rest of the world. We are the baddies meme right now. Yes. I mean, this is, it's very complicated, right? Because lots of countries are tariffs. Sure, it is. It is not, in my opinion, it is not like objectively bad to have them. Right? Correct. With the right mindset, America can have them. I think at the 10% level is like, fine, you want like a token amount of money that you want to generate from somewhere else. I think the big problem is the massive tariffs that were suggested and are still kind of being dangled over many countries. And the way in which they were gotten to, which, you know, whatever the right way was, was not really based on what seemed to be any kind of like sound economic thinking. Right. And what has happened is kind of, is the fallout as we said today at the end of April is two things. The stock market is still struggling, if that's something you care about or not. You know, there are many ways in which that can affect you, even if you're not somebody who cares about the stock market. And the second thing is the impact that it is having on businesses who are either, A, hurt by the tariffs that exist,
* whether they're the baseline or more. But even the baseline can 10% can make a big problem for a lot of companies because margins can be small. Or B, the uncertainty of tariffs is resulting in a lot of companies, small companies, small businesses, especially in Asia, just not shipping anything to America for the time being or maybe further. Is that kind of like a good lay of the land for where we are today? Yep. Yep. You took a lot of thoughts I had and laid them out there just as the setup. Uncertainty is my big takeaway, right? There's nothing here that is certain, and that's the problem, right? Like, we'll talk a bit about the small business side of it here in a minute. But it's just the general uncertainty that this has caused. And, you know, stationery specific, like, it reaches deep into, like, the product chains of, you know, these manufacturers, including myself and including Myke, that we're having to deal with and thinking about things differently. Or honestly, you know, in the case of Spoke, which, again, I'll dig into this later, like, sometimes you just have to sit and wait and see what happens because it changes so fast. But that really ties, you know, small businesses' hands when they're, you know, that's their only thing that they do is tied up in the uncertainty. It's got to be just a nightmare type of situation for a lot of people. So we don't have any answers, right? It's literally going to change probably by the time we're done talking about this or by the time you listen to it. But there are some just kind of general things we can discuss today so you can get a broader picture of how it does affect our industry. I have a couple links in the show notes. One from the best article you can read is Tariffs in EDC by Anthony Scullambrini. He's a good friend and a lawyer. He's, I've talked to him many, many times over the decades. Did a really great post trying to explain things that he is more experienced with than you or I. And did a good job on that. So go read that because the EDC and gear market, you know, think like Anthony does, knives and flashlights and pens and things like that. So he does a, he has a really great article. And then just a more general like question article from Nifty over at Notebook Stories is called How Will Tariff Affect Notebook Prices? And that's kind of what we'll talk about a little bit today. Before I forget, did you see that Hobonichi, there's just like a bunch of the product line they're just not going to ship to America now? No, no. I saw that on Instagram a day or two ago. They're still selling the notebooks, but like a lot of the covers and stuff, they're just, they're like, no, we're not going to do this in the U.S. now. Yeah, because there's questions about how much you can send, what value, what dollar value you can send without getting, you know, your customers dinged by tariffs. And like I've had an anecdote from a couple of friends who have ordered pens from Japan who had ordered them almost like a pre-order type of situation, right? And spent, you know, like over an $800 amount and then getting hit with another, you know, $150, $200 worth of tariffs because by the time they shipped, like new tariffs were applied. So it's a really, really like sketchy situation on, again, certainty. There's no certainty in any of this right now. So one personal example, and I don't think they'll mind me saying because this is something anyone can figure out, but like I'm making a new Retro 51 this year. And, you know, we've been in the design and quoting and pricing process for a while earlier this year. And it just so happened when we got everything done, it was time to get the product quoted. They make their products in Taiwan.
* It was literally, I think, like the worst week for me to get a quote from them. And like they know, like they know, right? They're not like it's bad for them too, right? Because now I have to decide, well, the day I got the quote, Taiwan was under a 32% tariff. Like that's a crap load for me, right? In a big pin order and from a small business like myself. So I literally didn't respond to that email because like my eye, I was trying to do the math in my head, right? And just thinking about like what I would have to charge for this pin. And is that feasible? And should I order the quantities I already order? And things like that. Literally the next day that tariff got pulled. So I hadn't even replied to the email. And in the first quote, so the next day the tariff was on hold, not removed. It was paused for 90 days. They were in one of the countries that was paused for 90 days. I literally emailed back. All I said was, how about today? And got a new quote. And they're like, yeah, like this is an effing nightmare. Like all we can do is like laugh isn't the right term, but you get the concept. Like all we can do is laugh is like, how about today? Yeah. And they're like, here's what we're going to do. This thing's paused. We're just going to charge the regular price without any tariffs. And if something changes between now and delivery, like we'll just eat it. And like, you know, I respect that. Like that is not an easy, like it's not easy for them to manage this. It's not easy for me to manage this. Yeah. I mean, like I'm not making any decisions on Richard 51. But like I think about this is like a lot of companies I'm seeing say that kind of stuff. Like Kickstarters that are outstanding and things like that. I don't think that people should be saying that. Like I'll just eat it. Like. Well, they may not have said that like directly. Maybe it's like, it's like, we'll just deal with it as we come. Like, because what do we do? Are we going to, should we just stop? Like, you know, what is their other option? It's like, we're just going to have to do with what we can do today. Yeah. And then we'll figure out how it goes. But yeah, like the companies can't eat it. Right. Yeah. Like they're not saying it like that. So I don't want to misspeak there. I don't want to put that on them. But like, yeah, you're correct. Like companies can't afford a change three months down the line that they're not prepared for today. Especially at any size for a small business. Right. And I look retro 51 is a small business. They're not some huge conglomerate type business. You know, I'm a smaller business than they are. You're a smaller business than they are. But that's still a small business with probably, you know, I don't even know. Single digit employees, maybe 10. I don't know. That's a small business. So there's a thing that I keep thinking of. So what's making me think of that is Peak Design.
* Right. They have their Roller Pro suitcase going on right now. It's probably the biggest Kickstarter of all time all way up there. They've raised 9 points. They've raised, sorry, $13 million in this campaign right now. Right. And in their FAQ, they're like, what about tariffs? And they're like, oh, we'll cover it. Right. But, I mean, I don't know where they're having these things made.
* Right. But, I mean, if the tariff is 140% or whatever. Oh, I can talk about this. You can't just eat that. You can't. And, like, I don't know where they're having them made. But, like, I know, I'm seeing this kind of stuff from a lot of companies right now, especially in Kickstarter phases. And it's like, it's, I don't know. Like, there's something about it where I'm like, I don't, I just don't know right now if you can confidently state that. Like, it just seems really risky to me to just be like, I don't worry about it. You know? Like, I mean, Kickstarters in general are going to be really, really complicated for this time. Like, Kickstarter campaigns that have closed and could have closed a long time ago and the products are still being produced. Like, there's going to be, I think I saw a headline on The Verge about this today, which is essentially, like, get ready to pay more for your Kickstarter campaigns. Sure. Yeah.
* Yeah. So, can we, let's, let's talk about this from a spoke design perspective real quick because we, our pens are manufactured in China right now. So, just to lay out, like, the design process of spoke, we design and create original pens, right? Brian is an engineer. Brian Cad draws out all this, all these pens and all these designs. And so, all the designs are ours. And then we've gotten them quoted all over the world, you know, from places in the U.S., Vietnam, you know, China, and figured out, like, who could make the best. And Brian, given his past career in engineering and manufacturing, like, he's got a lot of experience with working with factories and understanding, like, the machining capabilities that we need, right? We're a very detailed, intensive machining process for the pens that we make. So, we have some good partners that we've worked with for years. And we're not all, like, different factories make different parts for our pens. And over the years, we've made some parts in the U.S. Like, I remember, like, at one point, we made our nose cones in the U.S. But, like, all our pens are kind of modular so we can move around and make pens from, you know, all over the place. Whoever makes them the best is where we're going to make them. And at a fair price, at a reasonable price that we think we could sell the pen for, right? So, you know, in the U.S., at the time we were doing this, it was very expensive to make our product. And, you know, it would still be if we moved to a factory in the U.S. or built our own factory. In some cases, Myke, we might just do that. It's easy. It's easy. We're just, like, probably next week we'll have our factory built.
* But, like, the idea that we could just up and move is pretty tough. So we've been planning for this since probably mid-year last year where we invested more in inventory, not knowing what was going to happen this year. So, like, we're fine now, like, as far as, like, products and inventory. And we can keep releasing new stuff. And, you know, we had some foresight in that aspect. But long term, I don't know, like, what's going to happen. Are we going to move? Are we going to find someone that can do it as well for, you know, a reasonable price? Like, I'm sure we'd be fine raising the price to some point. But, you know, if we stayed, like, manufacturing China, who knows? Like, that doesn't seem like a viable thing for us right now. So we're just waiting and seeing. Like, we're fine. The good thing kind of I alluded to with some of the other small business that feel more pain, like, this is neither of our only thing that we do. Right. It's a small percentage of what we do. So we can afford to wait and see. And we planned ahead to kind of manage this. But then I look at someone like Tactile Turn, who's done a great job of building in the U.S. And, like, I applaud them for that. And, but I wanted to, like, discuss, like, if Spoke was trying to move to a factory in the U.S., let's say Tactile Turn did a white label, right? And they were open to using us. Well, this doesn't mean everything's all hunky-dory with tariffs and the added cost because where does the metal come from? Yeah. Where are the magnets sourced? Where are the springs sourced? Where does the machinery come from? Where do the parts to repair the machinery come from, right? It's this whole supply chain that's affected, not just, hey, make your pin here and everything will be better. And, of course, you know, a 10% increase, say, on the material does not then equate to the same levels if you're importing a fully complete product. And putting 10% on top of it. Right. So, like, it's still an effect. It's less of an effect, but it's still an effect. And if every component is somehow touching somewhere with a tariff, it's going to increase the cost of things. So, even if you're doing what the U.S. government want you to do, which is make in America, it does not mean that you will be free of this. Right. Which is the problem, right? Like, in the spoke example, we don't order pins, right? We order parts. And different parts can dump from different places. We do all the design and all the assembly here. Like, we put everything together. We'll get, like, a box of barrels from one place and a box of caps and a box of clips. And all this stuff has to be assembled by us. So, yeah, like, to your point, it's like, oh, it's like, okay, well, we can move it. Well, guess what? We make a lot of titanium pins. How much is that going to cost now? And where are these magnets source from? You know, like, because we use a lot of magnets in our pins. Like, that's one of our things. Well, that's more expensive now. So, yeah, it's not simple to just, like, flip a switch and do that. So, it's something we're looking at. Something, you know, we're always thinking about. And, you know, luckily we had some planning and we thought of it. So, let's take this into, like, the stationery retail market. And that manufacturing supply chain affects everything we get here in the U.S. and around the world. Mostly, this is an import situation in the U.S. from other pin manufacturers. You know, the Japanese manufacturers, the European manufacturers are all going to be hit with different price increases. Oh, where do you think they get their boxes from, Myke, you know, for the packaging? And, you know, where do all these little pieces come from? So, I think probably for the next year or so, we're going to see, like, slight increases. Everything's going to start being more expensive, right? It's just going to happen. And I don't see any other way around it. Like, we're going to, I put a link in here and we can kind of lump this in here. Sailor went up on a bunch of prices that I missed, like, a couple months ago, like, pre-tariff. Like, they had a price change for, like, a gold increase, right? Every company is going through this right now. And it's going to affect some a lot. It's going to affect some a little. I don't know. It's going to affect the consumer the most, right? That's what this all boils down to. It's going to affect you and I and the listeners of this podcast the most. Because this is, like, this is not a, you know, a mandatory thing that we need to be buying, right? This is, like, incidental funds that we use to spend on our hobby and make our lives more enjoyable, right? So, like, these are the types of things that will get cut out of budgets as literally everything is getting more expensive right now. So, I think it's going to be a tough year in the stationery business as a whole. I'll try to check in with some retailers and some small businesses to see, like, what their feedback is later in the year. Like, right now, like me checking in right now, I'm literally going to get a sea of emails that says, I don't know, right? Yeah. But we can check, like, in the summer or the fall and see what has happened, what has changed, where the small hits turning into bigger things and affecting these businesses' bottom lines. And I don't want to say it's going to be interesting to watch. It's going to be painful to watch, and, like, I hate it, and this sucks, and there's not much we can do about it today. So, we'll think about what we can do for the future. So, yeah. What else should we talk about here? I was going to say, I think, you know, you mentioned, like, people said, I don't know, whatever. And I think the uncertainty is what is actually just going to be the problem here. My feeling on this is the 10% will probably remain unless companies, countries, strike some kind of deal with the U.S. government, which really, it seems like all of this is just to get some fun deals made, you know, because we'd love to make a deal.
* But I don't think that the super high tariff, any of those, will last. I don't think that it's going to be a thing that exists. I agree. And then this whole thing, all it did was just create a bunch of uncertainty for a few months. And, like, that will be the lasting impact of it. And it's like, what was the point of doing any of this? And it seems like one of the biggest reasons to do it was, for whatever reason, was to do something with the U.S.-China relationship. Yep. But I think it seems to me, as just a person who reads the news, that that was significantly... The hand was overplayed because China just said, we don't care. Yeah, we're good. And I think that wasn't the expectation of how this was going to go. And it has kind of rattled the government, it seems like. Like, that's my read on it. Like, they weren't expecting China to fight back as hard as they have. And it's now kind of hit this impasse. And it seems like China's not going to back down because why would they? And so now what? That kind of seems like where it is from my just layman's reading. And so where I think this ends up ultimately is this is a bad period of time where a bunch of bad stuff happened. And we come out of it actually not that massively different in the long term from where we were before it started, which just begs the question of what was the point? But I don't know. We'll see, right?
* We shall see. So, yeah. And, like, it's the thing, like, in COVID times, and this isn't really a stationery commentary, but more of a large corporation commentary. When those prices go up, man, they don't come back down. They just make more profit. And that's the stuff that kills, like, us, like, kills the consumer long term. So, you know, where should we, as stationery consumers, focus, you know, focus on, you know, like, small brands, you know, local made if you can, you know, be aware and observant of, you know, some of the challenges, like, the companies you shop for are going through. Understand, like, you know, things are going to be changed. Be patient.
* You know, I'm, I think I'm positive long term because it's so nonsensical, but it doesn't feel good. I tell you, like, none of this feels good.
* But, like, I'm trying to stay positive. And, you know, just from our industry perspective, like, I really like seeing, you know, things like Little Craft Fest this past weekend in Houston, like, went super well. It seems like, you know, a lot of stationery, a lot of small makers. You know, we have the Chicago Pen Show this weekend. I'll be interested to get some feedback from people there, you know, how it's affecting the broader stationery economy. Right now, it still seems okay. But, yeah, like, we just don't know. And that's a bad place to be. The uncertainty is not fun. Not ideal. I say this is one of those things where, not to be smug, but I'm very happy about the decisions past me made about where my products are made.
* Yeah, for sure. You know, we could have made our stuff much cheaper in China, a Cortex brand, but it's not what I wanted to do. Yeah. But the majority of our stuff is made in the UK, and the UK has the lowest tariff. And we had also been, like you, like, it was obvious that something was going to happen. I didn't know what it was, but it was clear, if you were paying attention, that there would be something going on.
* And so we've kind of just been, like, mentally preparing, really. Yeah. Yeah. Yeah. And we're getting ready to launch a new product next week, and we got hit by a tariff, which is a bit annoying. But it's just, it basically was, if the shipping would have taken, like, it would have been two days faster. It wouldn't have happened. But such is life. Yeah. It's so stupid right now. Such is life. Yeah. Yeah. And, like, you know, choosing where to make things, like, it's tough. Like, it's a balance of cost and quality, right? That's what, like, small makers like us look for. Like, can I make a really good product, and is the price fair? Right? Yeah. Like, if the price is cheap and the product is crap, like, when you're making bad decisions, or if the, you know, the product is so expensive, like, no one can afford it, even though it's, like, premium. Like, ah, that's tough. So, it's hard to find that balance of where to make things. I mean, like, for me, it was just a case of inexperience, right? Like, because I'm new to this still, I feel, even though we've been doing it for years now, but just, I don't, I feel, I still feel very new to it.
* I wanted to get these products made in a place where I could just go see them as they were being made. Yeah. And so, that was why we ended up making them in London. So, this is all we have for right now.
* Yeah. Like, you literally, y'all, like, literally learn nothing. Yeah. Like, this whole time. It's, like, crazy. But I just wanted to give some, like, personal anecdotes of, like, yeah, like, it's a hot mess express is my phrase of the year so far. And, yeah, turned out to be the case. But, you know, I'm still knee deep into this. Like, nothing's, like, changed in my day to day. Like, even from, like, working with retailers and advertisers and things like that. But, like, tomorrow's a new day. And that's the tough stuff. That's the tough stuff. So, I think we've, I've belabored that point enough. But, yeah.