With the trade turmoil over the past few months, it has been a busy, perhaps even chaotic time for the leadership of just about any supplier in the promotional products industry.
For Samantha Kates, president of Montreal-based Spector & Co., PPAI 100’s No. 25 supplier, a significant portion of her time is spent speaking with distributor partners who might have made some incorrect assumptions concerning President Donald Trump’s implementation of tariffs on Canadian imports.
- Trump has vowed that on April 2 there will be a 25% tariff on all Canadian and Mexican imports, regardless of their previous protection under the U.S.-Canada-Mexico Agreement.
- As a Canadian-based company, many of Spector’s clients have taken that to mean that this Canadian tariff would apply to bringing the supplier’s products into the U.S.
- In Spector’s (and certain other Canadian or Mexican-based companies) case, this is almost entirely untrue.
“Most of my conversations with our customers have been exactly that,” Kates says. “And in many cases, they think that our prices will increase by 25%.”
These conversations are happening with partners who understandably associate Spector with Canada, but an important distinction is that a significant majority of the supplier’s products are not manufactured in Canada. Just because something crosses the Canadian-U.S. border does not make it a Canadian import subject to those specific tariffs.
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“He says ‘sweeping tariffs’ so people think that the minute something leaves Canada – it doesn’t matter where it comes from – there’s a 25% Canadian tariff on it,” says Marla Ruttenberg, Spector’s chief financial officer. “But it’s based on country of origin.”
- To some industry professionals, this might be obvious, but given the barrage of tariff threats, pauses and implementations, it would be easy for the basic workings of tariffs to be lost in the weeds.
“You still have a lot of confusion, certainly in the U.S., even just in what tariffs are and who pays tariffs and how they work,” says Kates, who is based in Florida. “The misconception that we get from our U.S.-based customers is that they hear this 25% tariff, and they think, ‘Oh my gosh, we can’t do business with Spector.'”
Tariffs Are Determined By Country Of Origin
As Ruttenberg stated, a tariff applies to an import based on the country that the goods were made in or originated from. The reason for the tariff is typically to have some sort of negative impact on that country of origin in trade wars or negotiations.
- At a time when the U.S. is applying tariffs to a potentially unprecedented number of countries, it is important that distributors have conversations with their supplier partners to achieve clarity and avoid assumptions.
- In the case of Spector, a significant amount of the products is sourced from China, which is a different tariff conversation.
- There is “a very small subsection” of Spector products manufactured in Canada, and there is also a small duty placed on Canadian labor that the company is able to absorb.
Marla Ruttenberg
CFO, Spector & Co.
“There’s no difference between dealing with us versus dealing with anyone in the U.S.,” Ruttenberg says as a message to distributors needing to bring product to the U.S.
To clarify further, Spector is still paying tariffs on their Chinese imports before bringing them into the U.S. With so much of promo (and most industries) reliant on China, this is an issue faced by many U.S. suppliers as well. There is no second set of tariffs applied to Spector for getting the products over the U.S. border.
“It’s going into the U.S. as duty paid,” says Ruttenberg. “We’re paying the duty when they come in, not when they go out.”
- This is also the case with imports for companies based in Mexico or any other country. It is a crucial point of understanding that a company being based in a certain country does not guarantee that its products are also manufactured in that country, as most U.S. suppliers will tell you.
This has been a point of emphasis also made by PPAI Board Chair Denise Taschereau, CEO and co-founder of Vancouver-based distributor Fairware, who warns against knee-jerk reactions, particularly, members abandoning companies that operate in Mexico and Canada.
“It’s critical to understand the impacts,” Taschereau says. “Traditionally, tariffs are anchored in country of origin, so your partners in Mexico or Canada who are decorating goods from overseas shouldn’t be impacted. We want to continue to support those brands and uplift them at a time like this.”
Denise Taschereau
PPAI Board Chair
‘What We’re More Concerned About is The Market’
As you likely understand, this does not allow Spector to avoid tariffs altogether, as it’s bringing in goods from China, a common source for promotional products.
- Tariffs on Chinese imports have been in place since Trump’s first term in office. In February, he increased those tariffs by 10% and then in March raised them to 20%.
“From that perspective, Spector is on level playing ground with any other U.S. company,” Ruttenberg says.
While the Canadian tariffs absolutely do affect plenty of suppliers manufacturing domestically and hinder certain promo partnerships, it is the Chinese tariffs that are most broadly putting an increased strain on promo and other industries. When asked if we are approaching a landscape in which it is becoming less feasible to source from China, Ruttenberg’s response was emphatic.
“Oh 100%,” Ruttenberg confirms. “There are products you’re paying 65% tariffs on. The problem is that some of these products aren’t available elsewhere. Even with these tariffs, finding a source outside of China for a better price is just not a thing.”
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She added that other countries will likely develop the ability to produce such goods and, assuming tariffs are not levied to those countries as well, that will provide some relief. For her part, Kates says the industry is largely “in the same boat” when it comes to Chinese tariffs and will weather it together. However, both the North American tariffs and Chinese tariffs, taken together, represent a different fear.
“What we’re concerned more about is the market, the industry as a whole,” says Kates. “If the purchase of this type of merchandising is going to go down, it’s going to affect us all. If demand drops and prices increase, that’s never a good situation for an industry to be in.”
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This is Kates’ 29th year in the promo industry, and she has seen it bounce back from the 2008 recession and the COVID-19 restrictions, showing a resilience that gives her confidence going forward.
“The real struggle is the uncertainty,” says Kates, who encourages communication but advises that not every supplier will have concrete answers until trade scenarios show signs of remaining relatively static. “The industry does really well sort of knowing where we’re at and what we need to plan for, and we will plan for that. We have a lot of smart people here at Spector that are working really hard.”
As tensions continue to rise between the U.S. and Canadian governments, Kates does not see a situation that reflects the relationships she’s built and witnessed as the leader of a Canadian company.
Samantha Kates
President, Spector & Co.
“We would like to remind everyone that Canada and the U.S. are friends regardless of what our administration would like us to think,” Kates says. “You could not find two better allies, two better supporters of each other.”
‘Thoughtful Approach’
PPAI has long supported free trade.
Serving members of all political stripes, the Association recognizes the need for policies that strengthen the U.S. economy and support domestic manufacturing. However, any measures – including tariffs – must be implemented strategically to minimize short-term economic disruption while setting the stage for long-term growth. Abrupt cost increases impact businesses of all sizes, from small distributors to global suppliers, ultimately affecting jobs, investment and product pricing throughout our industry.
Drew Holmgreen
President/CEO, PPAI
“We advocate for a thoughtful approach – one that balances economic goals with the realities of supply chain dynamics,” says Drew Holmgreen, president and CEO of PPAI. “With support from our lobbying partners in Washington, we are in ongoing conversations with industry volunteers, trade groups and policymakers with the goal to ensure that any trade policies consider the full scope of their impact and allow businesses time to adapt.”
- Every year, PPAI members and staff travel to Capitol Hill to advocate for the promotional products industry as part of PPAI’s Legislative Education and Action Day.
- Tariff concerns will be one of the key issues we’ll be discussing with members of Congress on April 7-8. (Learn more about LEAD here.)
For questions or suggestions on regulatory or government affairs issues, please contact Rachel Zoch at RachelZ@ppai.org.
