CHICAGO : Stephen Wang is counting the costs of President Donald Trump’s trade war. He had to put down 12 times more cash as a guarantee to U.S. customs that he would pay the bill for tariffs on the Chinese-made pumps, valves and motors he imports.
The cost of the guarantee – a U.S. customs bond – has shot up, an additional hit to importers already facing steep customs bills adding up to tens of billions of dollars for tariffs imposed by the Trump administration on incoming Chinese goods, as well as steel and aluminum imports.
Since coming into effect last year, the tariffs have pushed up manufacturing costs, upended decades-old global supply chains and inflated prices for consumers, resulting in lower sales and forcing companies to defer investments. This, in turn, has dimmed global growth outlook, roiling financial markets.
Other ripple effects are less obvious, among them the rising expense of U.S. customs bonds. But for small companies that can ill afford the added cost, the impact can be crippling.
Given the extra duties associated with Trump’s tariffs, importers have been forced to post bonds that are worth much more to guarantee they can cover the added cost of bringing Chinese imports, and foreign steel and aluminum, into the United States.
In some cases, customs bond requirements have increased 500-fold, according to Reuters interviews with a dozen importers, underwriters and customs brokers.
“Managing the cash flow has become tough,” said Wang. If the tariff war drags on, he warns, companies operating with thin profit margins and a weak capital base could go bust.
Wang is the chief executive of Hengli America, which procures supplies from China for customers such as CNH Industrial’s construction and farm equipment units.
After duties on its merchandise surged from zero to $6 million a year, U.S. Customs required Hengli to post a $600,000 bond. Its previous bond was $50,000.
Other importers reported similarly sharp increases.
Lisa Gelsomino, chief executive officer at underwriting firm Avalon Risk Management, said one client recently had to replace a $50,000 bond with one worth $26 million.
The rise in tariffs means that U.S. Customs and Border Protection (CBP) has issued thousands of importers with notices that their bonds are inadequate.
The CBP has issued about 3,500 insufficiency notices since January, it said. That compares to an average of 2,070 notices a year for the period between 2006 and 2017, according to data compiled by Roanoke Insurance Group.
