A new survey this week asked how companies would respond in the first 3 months of 2018 if GSP expires after December 31. A few dozen companies already responded and the results are a bit surprising at first glance. (If you haven’t taken it yet, please take a moment to do so here.)
Delaying planned new hires (79 percent of respondents) ranked above all others, followed by delaying planned investments and raising prices (61 percent each), reducing orders (52 percent), and delaying worker benefit (e.g., salary) benefits (33 percent). Scaling back existing operations – either in terms of laying off workers, cutting salaries and benefits, or canceling current investment projects – ranked lower but still were expected by 20-30 percent of companies each.
That delaying hires ranked first likely shows two things. First, companies are confident enough in business going forward that they expect to hire more workers next year. Second, companies will reduce hiring before sales are ever impacted due to lower profit margins – and an abundance of caution. The latter stems from recent experiences during the last GSP expiration, which lasted nearly two years.
Some respondents offered additional comments (and permission to share them). For example, Olivia Vaz from Babco Food in New Jersey focused on what happened when GSP last expired:
“Last time when there was delay in renewal of GSP, we had severe cash flow problems and could not pay down the Line of Credit with a Bank. The Bank therefore cancelled the Line of Credit resulting in further difficulties. Due to severe competition in the market, we could not raise prices. Profit margins were extremely low. In order to survive, we had to lay off a few employees and could not take on new Agencies for distribution, impacting Company’s growth. We dread the same situation arising again.”
Mike Kinnison from Burris Company in Colorado focused on how GSP expiration would delay long-term investments in the United States (we’ve written previously about Burris’ growth here):
“Burris Company has been in the process of expanding manufacturing in the US for the last few years. A slow process and the capital required comes from the sales of products currently manufactured in Asia. Adding the cost of GSP will substantially impact the financials both in the short term and delay expansion capabilities in the US.”
Andy Sagar from HSV Automotive in Texas commented on how some products wouldn’t be able to compete with imports from China, which likely would lead to cuts across the company:
“Increased costs would make some of our products uncompetitive and competitors from China might win some of our business. This would reduce or eliminate our hiring plans for 2018. We might need to cut back on investments and benefits like 401K matching, bonuses, etc. due to reduced business.”
These are just a few of the companies who would be impacted negatively. If your company imports under GSP, please take a moment answer the survey here. (As always, no company-specific info will be shared publicly without express written consent.)