Tuesday, June 25, 2019

Trade Wars - a tariff-ically bad idea

Recently I have had a few folks ask me about tariffs, since tariffs have been in the news a lot lately and they know that I have dealt with and complained about them in the past (as has almost anyone whose career has direct involvement with consumer goods in the US).  Since I’ve been asked a few times and know just enough to be dangerous I thought I’d do a blawg post on it, esp since it’s a good challenge to make something as bone dry as tariffs as entertaining as a tale of a fun adventure!  And, unlike a lot of things that happen at the federal level, this ridiculous trade war that the Trump administration is inexplicably waging will actually affect literally – not virtually – everyone. 

A “tariff” is a tax that companies pay to their own government to import (or export) goods into their home country.  Since I’ve been in the shoe biz and know that well, I’ll use that as an example. 

Say Allbirds (a pretty cool new shoe company that came out of nowhere over the last coupla years and is killing it, and was just featured in a fun podcast on How I Built This) has a new shoe.  As I mentioned in the earlier post about river footwear, there is a “Harmonized Tariff Code” and literally each product brought into the United States must have an associated tariff code assigned to it.  If Allbirds is a smart company – and they likely are, though I bet it was a bit of a learning curve – they likely use their industry experts that they hopefully hired to figure out what the code will be, because that will determine the percentage price of the cost of the product that you pay.  It’s significant because the tariff percentages vary from zero to fifty percent and beyond, and if you guess wrong and the humorless US Customs agent who inspects your shipment declares a code for your product that is different than what you expected, all your profit margin could evaporate before it even hits your warehouse.  In Allbirds’ case, they are using wool as their upper material, and since that’s unprecedented for an “athletic” shoe (important in the Codes) that undoubtedly made a difference. 

So hopefully the shipment of Allbirds has come into the Long Beach port from their factory partner in China, the humorless customs officer inspects them and declares a code, and Allbirds gets a bill from the US gubment for thousands of dollars. 

For easy math, lets say that the shoes are $100 (they are $95), typical dealer markups is 45-50% (easy math=50%) so the dealer buys them for $50, and Allbirds wants to get an industry-standard margin so they are buying” the shoes made from their specs from the Chinese factory for $25.    A 10% duty (the terms tariff and duty are more or less interchangeable) means that Allbirds is paying $2.50 for each pair, and for a 10,000 pair order (that’s pretty small) they’ll owe Uncle Sam $25,000.  A fair chunko’ change for a company that is still just getting going. 

So Allbirds sets its suggested retail prices based on what the factory will charge to make the shoe, the cost of the box, the shipping from China to the port to their warehouse to the dealer (or consumer), and….the duty they have to pay on the shoes.  When any of those costs go up, then something has to give:  Allbirds’ margin, the price that they sell to their dealers, and/or the price to the consumers.  And historically the duty codes have been generally carved in stone (the US customs has been too lazy to change them since the beginning of time) so that historically is something that even a new shoe company can count on. 

But in order to save the economy from….the 10 year expansion that it’s had, with low inflation and tons of job growth?  President Trump declares that “Trade Wars are good and easy to win”  and announces he’s going to jack the duty rates for all sorts of products coming from our two biggest trade partners (consumer goods from China and fruits and plenty of other products from Mexico) In doing so he proves former Fed chair Janet Yellen right in her assertion that Trump does not have a basic grasp of macroeconomics.   In Allbirds’ case, what that means is that their $25 shoe that they paid $2.50 for to the US government  now has that much more cost associated with it.  So does Allbirds feel like they should be shouldering this philosophical tete ‘a tete between countries “at war?”  No, they understandably say “We gotta raise our prices to account for the increase in our costs.”  And in the above easy math, any tariff increase is multiplied fourfold by the time it reaches the consumer.  And here’s the kicker:  China doesn’t care!  The factory still just makes the shoes and sells them to Allbirds for $25. 

In Trumpworld, the idea is that the athletic shoe industry – and clothes, and sleeping bags, and tents, and Ikea shelving unit industries – will leap up and say “Yes Sir Mr. President!  We will forsake the 40 years of relationship building with our factory partners to help them build the infrastructure needed to produce shoes that our fellow ‘Mericans can buy for $100 and start anew!  We’ll build shoe factories in the US from scratch using super-expensive machines and molds that are only available in China and pay people $30/hour to make the shoes, and then magically still sell the shoes for $100!”  Suffice to say, that ain’t happenin’. 

There are some domestic shoe (boot) manufacturers:  the Berry Amendment passed by Congress in 1941 mandated that the US military has to use US-manufactured products, and there are companies that are nearly-exclusive DoD contractors for boots.  Danner is one such company, and in addition to making $150 light hikers made in China they also “construct” $200 boots using Asian-made fabrics that they import.  And they also have their premium line of hiking boots that are 100% domestically produced…for >$380.  So yes, it can be done (though none of those boots use EVA, which is the light, typically-white midsole material that gives shoes their cushioning, because there are no EVA manufacturers/molders in the US) but if you are supportive of Trump’s Trade War you should also be supportive of $300 shoes. 

The Mexico tariff thing is even more baffling to me, tho to be fair that seems to be de-escalating.  I get it that the immigration thing is arguably the most complex and challenging problem we face, but Mexico just happens to be the country between the likes of Guatemala and El Salvador where the folks are fleeing from, and I am amazed (or maybe I shouldn’t be) that there has been zero talk along the lines of “how can we help/influence Guatemala and El Salvador to make them less-awful so people won’t feel compelled to flee to the US?” 

A lot of the stuff that the Trump administration is doing/has done really doesn’t affect most of us:  the escalation in tension with Iran, the Russia investigation, even the immigration stuff.  But this trade war? It literally has the potential to crush the zillions of American companies who rely on international manufacturing partners (including our beloved car companies, who rely hugely on Chinese-made machines to help make their cars) and – most importantly – the domestic companies that we rely on for reasonably-priced goods will be forced to jack their prices to their dealers and to consumers, and we will all suffer from Trump’s misguided “war.” 

Ps – Paul Krugman is far smarter than most everybody (Nobel Prizes typically denote this) and he has his own summary of How goes the wars…. https://www.nytimes.com/2019/03/03/opinion/how-goes-the-trade-war.html

Thursday, June 13, 2019

Trains, boats, and one great rental car

I've been doing a lot of training lately.  No, not running/riding (and my lack of fitness shows that), but actually taking the train!  It's a little known fact, but in addition to our beloved cars and the expensive/frustrating air travel Amtrak still exists in the US, and I've realized that it works.......mostly.....

Three times over the last few weeks I have had the need/opportunity to meet friends in Green River for trips: paddling the Black Box section of the San Rafael with the intrepid Alaskan adventurer Brad Meiklejohn, paddling the mighty Muddy Creek and canyoneering with intrepid Washington adventurer and photographer Benj Wadsworth, and returning to the Black Boxes again with endurance cycling legend-turned-intrepid-packrafter Mike Curiak, and each time there was a fair bit of incentive not to drive.   Ashley and I share a car and since she rides to work every day and leaves me the car on a day to day basis all the time, but taking it out of SLC for days wouldn't be an appropriate use of that privilege.  Yes, I could easily rent a car for a coupla days, but actually the train is pretty sweet!

The California Zephyr is a romantic name for the choo choo that chugs once a day from Sacramento to Chicago and back, and after whiling its way across Nevada arrives in Salt Lake City at the unlikely hour of 3am.

Now before you roll your eyes and think "there's no way in hell I am getting up to catch a train in the middle of the night" hear me out.  It actually works out pretty well.  I wake up at 2:30, get a Lyft to the train station, wait a few mins for the train to arrive, clamber on, and am asleep again by the time the train leaves the SLC city limits, lulled by the quiet and gently rocking motion of the train.  Compared to a plane - and for that matter, a car - train seats are mega:  they are wide, lean way back without crimping the folks behind, have thigh supports, and foot supports.  And there are so few people who appreciate the train that you'll almost certainly have a 2 seat combo to yourself.  So moderately-comfortable sleeping while "sitting" in the seats is a real thing.

All three times I have woken up a ways after dawn to watch us progress our way along the Price river, and I have just about enough time to get a cup of tea in the cafe, read the paper on my phone, and the conductor calls out "Green River!"
a little blurry, but I think he's checking his fob watch! 
The "station" in Green River is little more than an abandoned building and a landing:

But indeed, once you're off the train....

It's indeed the Green River  Epicenter, it's now 8am, you are a few blocks from a great taco truck:

that has killer breakfast burrito, and presto!  You are in Southern Utah with plenty of time to stage for adventuring!  To be sure, Green River is not quite Moab, Fruita, Escalante, or Springdale in terms of being a gateway (though they just did a ribbon cutting on a new mtb trail:
It's only 5.5 miles, but it's a start....
And of course you are poised to get to great places.     Two of these trips were for paddling the Black Box section of the San Rafael; once with Brad Meikeljohn and another with Mike Curiak.  Flat water leads to great class 3-4:

And once in the Box there's a challenging portage:

thanks for Mike for again shooting great pics.
 Before some nice camping after you leave the first Box:
I love overhangs!
and then running a coupla must-run class 4's in the 2nd box before a long paddle out. 

Another train-trip was to meet our friend Benj Wadsworth for some canyoneering and more Utah desert creeking:

The train back to Salt Lake leaves Green River at 6pm, arriving at 11pm.  For my first two trips down I didn’t need to take the train home, but for the last one – with Mike, last week, who was coming from paddling the Zion Narrows and then heading back to Grand Junction – I did need the return trip.   After we took off the river in mid-afternoon (thanks again to Jeny for running our shuttle for us) we were back in Green River and all was good:  we had enough time to have a burger at Ray’s Tavern, the train station was just down the street, it was going to come chugging through soon, and I had a good book to get me home on the train.  Until I got the text message:  “Amtrak train #5 is delayed….until 2:30 am”  Gaack.  Really?  I like Ray’s and all, but spending the next 8 hours there sounded suboptimal.  I did have my camping gear and could just sleep on the train landing.  Then a few minutes later another text:  “Amtrak train #5 is delayed….until 3:30 am.”  How could a train get an hour later in only 10 more minutes?  But it was an indication that clearly something was awry, and the trend wasn’t good. 

Mike and Jeny wanted to help but there wasn’t much for them to do beyond getting me to the even-more-bleak western end of town where there are two gas stations near the I-70 on ramp.  I bid them adieu and hung out outside one of them and asked a couple of nice looking folks if they were going to Salt Lake.  I felt a bit like one of those guys who comes up to you in the parking lot with the sad – and perhaps – true story of his sick mom in Duluth and if he could just get a few bucks to fill up his gas can he can get a few more miles closer to her, but hoped that my somewhat normal demeanor might help (though the stupid porn mustache I was sporting – that has since gone - probably didn’t help my cause.  Soon enough a station employee came around and told me I couldn’t be doin’ that, and I got it, but he suggested a piece of cardboard, a sharpie, and a thumb might work. 

I didn’t have much to lose, so I went ahead and made my little sign saying “SLC” and walked out to the road, setting my Patagonia Black Hole bag on the ground and my paddle prominently displayed so any river types would see it and take pity on me.

A bit forlornly I watched a few minutes’ worth of people accelerate past and avoid eye contact, when suddenly a car with California plates pulled over.  A guy jumped out, ran around, and said “I’m headed to Salt Lake.  Wow, that’s a classic old Black Hole!” I was pretty excited to get a ride quickly, but even so wondered “wow, that’s a bit of a weird thing to say.”  I hopped in and we were off, and it turns out that my benefactor turned out to be a great guy named Justin Wood, who in addition to being a longtime sponsored climber guy from Salt Lake is also a Patagonia employee who roams the country helping stores with their merchandising, and was returning from a work trip to Telluride that he’d used a rental car for (hence the California plates).  Between our respective Patagonia experiences and Salt Lake connections we had zillions of mutual friends and yapped for hours, and in no time I was delivered right to my door.  

About the time I was thinking about Bed and how happy I was to be crawling into it with Ash instead of onto the concrete landing in Green River, I got yet another text:  “Amtrak #5 is delayed….until 6:30 am.”  Yikes.  That would have put me into SLC at noon and blown a good half a day. 

I of course was quite keen for the train based on my experiences before the big delay, which I think was caused by the flooding in the Midwest.  Like everyone, I’ve had my share of plane delays as well for weather and other, more frustrating reasons and it’s actually easier to comprehend the implications of one late train going across the country relative to the zillions of flight options that exist in the sky.  And our ponderous train system seems to pale in comparison to the 200+ mph trains that form extensive networks in Europe, Japan, and other countries.  It’s almost more endearing than it is practical, but the price ($35 each way), the spontaneity (decide you want a ticket, go to the station 30 mins before the train arrives, buy ticket, and get on), and relative comfort  actually makes it a viable option….if you’re patient.  Or if you are lucky enough to find The One Car that’ll take you right to your house! 

Thanks again to Benj, Mike, Jeny, Brad, and Justin for indulging me and being great pards on fun Green River area adventures!