Colorado businesses caught in crosswinds of U.S.-China trade battle

Colorado businesses caught in crosswinds of U.S.-China trade battle

The economic uncertainty and concerns unleashed around the globe by the U.S.-China tariff battle are being felt in Denver and across the state. Business people are afraid of permanently losing overseas markets or losing customers when prices start rising.


Colorado farmers, ranchers and some retailers were hit by tariffs on imports and retaliatory tariffs by China during the trade battle last year. The Trump administration’s abrupt decision to boost those tariffs to 25 percent from 10 percent on $200 billion worth of products last week and threats to add another $300 billion worth of items have rattled the business community.


“These tariffs are just having a huge effect on everything,” said Gail Ross, the chief operating officer of Boulder-based Krimson Klover.


The company, which makes women’s clothes that sell in boutiques, outdoor retail stores and ski resorts, had only two products covered by last year’s tariffs: hats and bags.


“For us, we anticipate some of our products could be on this fourth list, but we don’t know which ones,” Ross said.


Last year, Krimson Klover built the cost of the tariff into the price of the product. It will be difficult to do anything at this point about the latest increase because orders have been placed and the clothes are being produced.



“It’s kind of late for us to say to our customers who’ve already given us an order, ‘Hey, we’re going to bump your prices up 25 percent,’ ” Ross said. “On the other other hand, we’re a little company that can’t absorb a 25 percent increase.


“It’s a fallacy that China is paying for the tariffs,” Ross added. “Let’s be clear. It’s like Mexico paying for the wall; that’s not happening.”


Agriculture is a main target of the $60 billion in tariffs announced by China on Monday in response to the ratcheting up of fees on Chinese goods. American soybean farmers have been hit hardest because China is their largest market. Soybeans are not a major crop in Colorado.


“Luckily, Colorado has been largely left out of the negative impacts of the Chinese retaliatory tariffs because most of the significant ones are on products that we don’t grow here in Colorado,” said Shawn Martini, vice president of advocacy with the Colorado Farm Bureau.


“Now, that can have spillover into the broader commodities market,” Martini added. “We’ve seen downward press on commodity prices at least in some part as a result of what’s going on with the tit for tat between the U.S. and China.”


Employees at Granite Imports load quartz, ...
RJ Sangosti, The Denver Post
Employees at Granite Imports load quartz, imported from China onto a truck on May 14, 2019 in Denver. Granite Imports is facing tariffs of more than 300 percent on quartz imported from China.

Wheat, one of the products in China’s cross hairs, is among Colorado’s major agricultural products. Another one of the state’s big exports is beef. Dale McCall, president of the Rocky Mountain Farmers Union’s board of directors, said China isn’t buying beef hides, which has been a blow for Colorado farmers.


McCall also worries about the ripple effects of tariffs. He said if Midwestern soybean farmers start planting more corn, another major crop in Colorado, that will drive down corn prices even more.


And McCall said it could take a long time to restore or replace the markets farmers and ranchers worked for years to build in China.


“The whole thing about the additional tariffs is that it just adds more uncertainty,” McCall said.


Meanwhile, implementation of the new farm bill, approved late last year, and congressional ratification of the United States-Mexico-Canada Agreement, which would replace the North American Free Trade Agreement, are stalled. That makes the situation even more unsettled, McCall said.


While tariffs of 25 percent are ominous, Austin Randall would trade that for the rate he has to pay — more than 300 percent.


Randall’s big tax bill doesn’t stem from the escalating dispute triggered by the Trump administration’s effort to stop what it says is China’s theft of American intellectual property and forced transfer of technology. Randall, who owns Granite Imports, was caught by the Commerce Department’s move to penalize China after a Minnesota company said the country was illegally dumping underpriced quartz products in the United States.


When Randall got wind of the move against China, his company stopped importing the quartz. Then he discovered the tariffs would be imposed retroactively to prevent the stockpiling of the material. Randall said so far he has paid about $112,000 in duties on two shipments of materials that cost $34,000.


Once the paperwork catches up with the other six batches of quartz slabs sitting in his Denver warehouse, Randall figures he’ll owe about $500,000.


And Randall will be liable for the additional tariffs as a result of the ongoing trade disputes, said William Perry, an international trade attorney who is representing businesses challenging the retroactive anti-dumping tariff.


“We ordered the quartz in June (2018). We received it in September 2018. The tariff wasn’t even in effect until November,” Randall said.


RJ Sangosti, The Denver Post
Granite Imports is facing tariffs of more than 300 percent on quartz imported from China on May 14, 2019 in Denver.


Randall, whose business imports and distributes granite, marble and other materials largely for residential construction, said he learned about the big tax bill the same day he was set to sign a contract to expand in Fort Collins. Those plans are on hold. Now, he’s just hoping that rumblings about the Commerce Department imposing the hefty penalties on other countries aren’t true.


“This doesn’t do anything to the Chinese companies, not a thing,” Randall said. “I’m one example. My guess is there are probably thousands of small businesses in the United States that were probably importing these slabs.”


Kay Martin, CEO of BOCO Gear in Boulder, echoed Randall’s sentiment. She said while she philosophically agrees with protecting U.S. intellectual property, she doesn’t understand how increasing costs for her company, which produces hats, will do that.


“One year ago, our duty rate was 6 percent. Today, it’s 31 percent,” Martin said.


Moving BOCO Gear’s production out of Chinese factories to other countries will be difficult and costly, Martin said. There are no U.S. facilities in the United States with the same kind of capacity, she said.


Ultimately, consumers will have to pay more, Martin said. “Are you willing to pay $45 and $50 for a hat, and how long are you going to do that?”