Angie Stocklin: The woes of inflation, tariffs and Made in the USA

Eight years ago, I was the co-founder and chief operating officer of One Click, an ecommerce business focused on sunglasses, reading glasses and prescription eyewear. Our business was experiencing fast growth, and we were still, as we had been from the beginning, a profitable company.

As the 2016 election wrapped up and promises of tariffs were on the horizon, my co-founder and I were filled with fears of uncertainty about our future. While many things were uncertain post-election, it was clear that rising tariffs on the items we imported from China and Taiwan were a major talking point, and these tariffs would ultimately impact our business in ways we hadn’t navigated before.

Financial models were quickly adjusted and readjusted as we looked at different scenarios and tried to determine the best course of action. How much more would we need to charge the consumer? Were there expenses we could cut? Or would fewer gross profit dollars be available to find new customers, potentially slowing our growth and forcing us to cut people and expenses to balance out the smaller-than-expected revenue? These policies were sure to impact our overall business, our customers and our employees, but we were still uncertain how that would look long term.

Did you notice that we didn’t consider moving our operations to the United States? It wasn’t an option. We had investigated glasses made domestically on several occasions. The truth is that the infrastructure needed to make injection-mold sunglasses and reading glasses in the United States was long gone. There was one factory in Florida, but the cost was prohibitive. In fact, it cost as much or more to make the glasses than we were currently charging our customers for a finished pair. It didn’t take much customer research to determine our customers weren’t willing to pay $100 or more for our glasses, even if they were made in this country.

We found a second factory in California that would import pieces of the frame from China—which might not be charged a tariff—and then assemble the glasses in California to earn the Made in the USA title. This was still significantly more expensive than importing a full pair but was much more affordable than making the glasses directly at the Florida factory. However, it would still add costs and time to our orders and didn’t feel entirely honest to just cut out the origins of the frame’s pieces and parts.

That left us the option of building our own factory, finding factories in emerging countries, or finding a way to absorb the extra costs as much as possible. We stopped short of pricing out our own factory because it felt like a distraction and would require loans and expertise we would need to acquire. And our research at the time showed us that manufacturing capabilities in other countries were in their infancy stages for many industries.

With the proposed tariff rates, we would have to raise prices to the consumer and/or reduce expenses and start searching for places in other countries with no import tariffs that could handle our volume. The alternative was not a product that was Made in the USA. The alternative to raising prices and lowering expenses, or finding new countries to manufacture our goods, would be to close our doors and go out of business.

If you have read any of my previous articles, you’ll know that the uncertainty surrounding the election was one of the major catalysts that led us down the path of selling the business. When we looked at our uncertain future and thought about the worst-case scenario of having to shut our doors and tell 85 people we no longer had a business that could support them, selling the business became our best option.

By the time the dust settled on the tariff negotiations for our industry in 2018, we were well into the process of selling One Click. Our business was lucky in the sense that the largest tariffs we incurred were on our eyewear accessories, which were a very small part of our overall business. Reading glasses, the largest part of our business, was ultimately considered a medical device, and tariff rates were negotiated to be much lower than the original 25% recommendation.

Talks of increased tariffs from Chinese imports are in the news again, and I feel for founders across the United States who are once again worried about the unknown and are scrambling to outline all their options. Every industry is different, but folks need to understand that manufacturing goods, especially inexpensive goods, in the United States is not an option that every business can afford—and increasing tariffs on imports won’t magically make production more affordable. The cost of these tariffs must be absorbed by the company or passed along to the consumer.

If you are looking for eyewear made in the United States, check out Randolph USA or Shuron.•

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Stocklin is an angel investor and exited founder who currently teaches entrepreneurship at Purdue University.