Lately, there has been a lot of news about international trade policy, new tariff laws and a “trade war” with manufacturing power-house, China. For many, this has little impact on a day to day level. When people think tariffs, they usually think of major industrial exports and imports like steel. But recent laws put in place are affecting many small businesses across the United States. Especially those who work frequently with Asia.
The changes in trade policy began with an intention to bring back jobs and keep manufacturing in the United States after an increase in international outsourcing. But, unfortunately this has an adverse effect on many companies that are based in the US who work with overseas partners. And that is not just big corporations, it is small businesses that depend on fixed manufacturing costs to succeed.
The Vertical Collective is a small, but mighty manufacturing firm based in Southern California that specializes in on-demand product production, primarily in categories like apparel, footwear, housewares and accessories. These new tariff policies will have a large influence on this local business, and the established roster of clients. What this means for small companies, like The Vertical Collective, is that costs go up. Simple.
These new policies place a significantly higher tax on goods and materials being imported from China. With 41% of US’s apparel consumption, 72% of America’s footwear, and 84% of travel goods sold in the US being made in China, these associated costs are inescapable. China is responsible for almost 50% of the apparel that enters the United States.
These price hikes have a consequential impact -- just because manufacturing expenses go up, doesn’t mean all clients are happy to pay more for something they have been getting at a fixed cost. To counteract this, small businesses are forced to adapt quickly. With obstacles, comes opportunity for innovation.
At The Vertical Collective, consistent innovation and adaptation is a way of business. This comes in the form of being hyper vigilant about costs and the diligent management of products from design to production. When you look at the complete process from a mile high view, manufacturers must lower costs elsewhere in the process to keep services steady.
For example, small manufacturers like TVC ensure quality and price efficiency by hiring native staff in China to mitigate mistakes and oversee onsite work, therefore minimizing corrections and errors.
“Our elite roster of clients have come to expect on-demand trends at the highest quality, at affordable prices,” says The Vertical Collective co-founder Katherine Zabloudil. “In this current climate, we leverage our experienced staff and existing relationships to further fine tune the efficiency of our systems, keeping costs down.”
Early on, TVC recognized the need for manufacturing diversification, expanding partnerships with factories outside of China, in regions like Cambodia, Pakistan and Prague. By doing so, they are not strictly beholden to one market. Additionally, The Vertical Collective was able to secure strong relationships with factories closer to home in Los Angeles and throughout the US. They are consistently touring facilities to determine the best locations for their client’s needs, and are dedicated to offering the best price at the quality they expect.
Overseas freighting and duty costs are hefty, which is why they’ve developed long standing relationships with freight companies. This to allows for negotiating the right pricing, while also guaranteeing enough leeway in the timeline so that if items get held up it does not impact the client’s delivery date and therefore, cost. In this on-demand market, small manufacturers have to ensure that goods can be delivered quickly and seamlessly. Another cost saver is bulk freighting, meaning that The Vertical Collective maximizes container space, managing all overseas logistics to ensure clients can benefit from their relationships.
“Despite these new trade policies and tariff laws, we built a business model that ensures flexibility, innovation and resourcefulness to weather storms like these,” says The Vertical Collective co-founder Morgaine McGee.
In an ever changing globalized economy, small manufacturing businesses are always required to innovate -- but a trade war with China certainly isn’t helping.