Tariffs in the spotlight: Corridor firms address concerns, possible approaches

If there’s one point of certainty about the status of U.S. tariffs with foreign nations, it’s that nothing is certain.

Since the notion of increasing tariffs was first floated during the 2024 presidential campaign, the extent, magnitude and details have ebbed and flowed as dramatically as sea levels through the lifespan of a hurricane — and financial markets’ responses have been equally dramatic, from precipitous falls to aggressive gains.

For example, after the U.S. and China agreed on May 12 to suspend most of the new tariffs against each other for 90 days, investors responded enthusiastically, pushing the Dow Jones average up nearly 3% in a single day — after markets dropped suddenly by similarly dramatic percentages for days after the proposed tariffs were first announced.

While tariff rates have largely been lowered in recent discussions, many of the nation’s largest companies, from WalMart and Target to Home Depot, have recently warned that they might need to pass tariff-related cost increases on to their customers.

Yahoo! Finance reported May 21 that the Port of Los Angeles, the busiest container hub in the U.S., saw shipments drop by as much as 30% in early May as the latest iteration of international tariffs took a toll on shipping.

And in one of the newest iterations of tariff proposals, the Trump administration proposed a new 50% across-the-board tariff on the European Union, citing stalled trade negotiations — only to announce days later that the deadline for those proposed tariffs had been reset to early July.

So while the ultimate impact of tariffs on the U.S. and world economies remains unclear and many specifics are yet to be finalized, there’s been no shortage of views on the potential effectiveness of new tariffs — and whether their implementation would bring a net positive or net negative for domestic companies and consumers.

Several Corridor firms agreed to discuss the potential impact of tariffs on their businesses. While specifics were generally not addressed due to the ever-changing tariff frameworks, the local companies provided a range of views on how they might address tariffs in general terms.

Eco Lips

Cedar Rapids-based organic cosmetic manufacturer Eco Lips imports raw materials from approximately 50 countries, which means it currently faces tariffs anywhere from 10% to 46%.

“I’m in shock at the abrupt nature of it, and it has completely taken away any sense of predictability in my business — which is a small requirement, (to have) a successful plan,” said Steve Shriver, founder and CEO, in an interview April 21.

The raw materials required for the company’s cosmetic line and insect repellent line — Bug Soother — cannot be sourced from the U.S. because its climate is not conducive to growth, he said.

Beeswax, sunflower oil, cocoa butter, vanilla and essential oils are some of the main ingredients in Eco Lips’ cosmetic line, representing countries such as Vietnam, Madagascar, Indonesia, Thailand, Morocco and Zambia. And, like many companies, some of the company’s packaging and containers are imported from China.

While beeswax — a key ingredient in Eco Lips’ lip balm — can be sourced in the U.S., the organic component would be missing, Mr. Shriver said. To qualify as USDA organic, beeswax must come from bees that forage exclusively in organic environments. But unlike livestock or crops, bees can’t be confined to a specific area — they roam freely, often traveling several miles from their hives in search of nectar and pollen.

“You need such a great buffer zone,” he said, adding that no synthetic pesticides used to treat agricultural fields comply with those standards.

Sourcing the materials from countries with lower tariffs is possible, but it would mean reconfiguring “hundreds” of formulas for existing products, Mr. Shriver said.

“It’s going to have different color profiles, scent profiles, different melting points,” he said, of ingredients like beeswax.

“What we might have to do is give up our organic certification for certain things, because it does create limitations for our sourcing … there’s not a lot of certified organic raw materials available in the United States. If we have to — from a survival standpoint — drop some of our certifications that are very important to us on some of our products, we might have to consider it,” he added. Without the organic certification setting them apart from competitors, “then we (become) just another lip balm.”

Eco Lips has had to requote each new purchase order received from customers — split between contract manufacturers and retailers — in anticipation of price hikes.

“We’ve had customers ask to split the cost of the tariff with them,” Mr. Shriver said. “That’s not exactly how this works. We have to mark up our costs.”

Mr. Shriver has created a “tariff task force” that meets weekly. “We (are) basically just trying to keep an eye on it,” he said, calling the fluid situation a “tricky moving target.”

He’s reached out to Cedar Rapids Mayor Tiffany O’Donnell, who accepted letters on his behalf directed toward Gov. Reynolds, U.S. Sen. Chuck Grassley and U.S. Rep. Ashley Hinson.

“My ask to them and my ask to Washington is that they make accommodations, exceptions, specifically for ingredients that cannot be grown in the United States,” he said.

The implementation of the proposed tariff rates will create “stress on our pocketbooks and on my employees,” Mr. Shriver said. “Long term, it’s going to cause an inflation that’s going to require everybody (to) have an increase in their wages and benefits. Hopefully, it’ll balance out long term, but in the short term, it’s really just unpredictable.”

Crystal Group

In the pre-pandemic a number of companies focused on outsourcing products and materials from overseas, but Crystal Group, a Hiawatha firm that designs and manufactures rugged computer hardware for military, industrial, and commercial applications, didn’t focus on that overseas push.

“We take such pride in the design, the performance and the security of our products and our performance that, through our sourcing strategies, we’ve prioritized the domestic outlook,” said Crystal Group supply chain manager Katie Wagner in an April 9 interview. “We’ve prioritized supply chain integrity. We’ve prioritized having some resiliency in there. So our sourcing strategies have prevented us from having some of the risks that other organizations are having right now, especially some of the smaller manufacturers, or the very commodity focused manufacturers. We’ve been aware of the situation coming. If we can source Midwest, if we can source domestically, that’s a priority for us. At times it’s a requirement for our customers. The integrity and the performance of the product has really outweighed some of the cost implications for us.”

Crystal Group has always taken pride in vertical integration — taking ownership of multiple stages of the supply chain to increase control and efficiency.

“As the complexity of our product changes, we’ve had a significant focus on having a strategic supply chain,” Ms Wagner said. “That’s a piece that differentiates us. We realized a strategic supply chain could be a key differentiator for us. So either through this situation with tariffs, where we’ve proactively had conversations with our partners and suppliers around procuring material early, or implementing stocking strategies, we’ve been working to mitigate this, not in anticipation of tariffs, but just based on our core product.”

While Crystal Group has worked to limit overseas sourcing, it’s not possible in all cases, Ms. Wagner said.

“We do our best, but ultimately, we’re in the electronics world, so we’re susceptible to components that are only produced in certain parts of the world. We do have that risk, but anywhere we can eliminate that risk, we do.”

Still, those long-term relationships with domestic suppliers can help mitigate risk in many cases, Ms. Wagner said.

“I look back at the history from the ‘90s up through today — how do you drive efficiency? How do you drive costs out?” she said. “We’ve prioritized our relationships, so as these situations pop up, we have resources. We have folks that we can benchmark best practices with. We have advocates helping to mitigate our risk. So it’s not entirely on us.”

Currently, Crystal Group doesn’t issue any direct purchase orders to Asian suppliers.

“Anybody that we purchase content from, if it’s got overseas content, they have a domestic location,” Ms. Wagner said. “Manufacturing may still take place over there, and it may be more of a warehousing in certain situations. We’ve got suppliers within Canada as well. So we have a North American-based contact for essentially all of the products that we’re purchasing.”

Determining the origin of manufacturing content can be difficult at times, Ms. Wagner said.

“From a control standpoint, we’re certainly limited,” she said. “But the longer tariffs are in effect, the more impactful it is, and the more challenging it is to manage. I think a lot of the motivations are to reinitiate more domestic manufacturing, and that’s just going to take longer.”

CIVCO

Like many other manufacturers, CIVCO Medical Solutions is taking a “wait-and-see” approach to the situation.

“We’ve done the whole risk assessment, (and) it’s pretty minor, quite honestly,” CIVCO President Robin Therme said April 14.

The Coralville-based company designs and manufactures accessories for diagnostic and therapeutic imaging, as well as interventional procedures, with a primary focus on ultrasound. Though it has a plant in Mexico, CIVCO is USMCA-compliant and has not been immediately affected.

“I think we’re fine (from) that standpoint, but if other countries do a counter tariff, that’s where I feel like I have more risk at this point,” Ms. Therme said, “so I’m hoping that everybody can come to an agreement on that.”

Most of CIVCO’s raw materials are sourced from the U.S., with some exceptions.

“We have one material that we direct source from China, but we were in the process of moving it to another country,” Ms. Therme said.

The company is actively monitoring news and financial markets to track developments, making tentative plans where it can. Ms. Therme said CIVCO will pass on costs if needed, and has systems in place to track price increases or tariff surcharges from suppliers.

There have also been discussions of establishing bonded warehouses and implementing duty drawbacks to offset tariff costs for international markets.

“Half of my business is international,” Ms. Therme said. “What I’m most trying to figure out would be, if it was passed on, how do I deal with it in the U.S.? Looking at the competition, am I going to be in the same playing field? Because that has to come into play, too. Because if they’re manufacturing somewhere that’s not being tariffed and I’m being tariffed, I still have to be competitive.”

According to a May 21 Reuters article, there’s been a significant rush as of late to convert facilities to bonded warehouses for companies importing goods into the U.S. These goods can be stored duty-free up to five years, only incurring fees once they leave the warehouse. Currently, there are more than 1,700 of these facilities in the U.S.

Search traffic for bonded and Foreign Trade Zone (FTZ) warehouses increased by 150% between January and March compared to last year, WarehouseQuote reported, linking the surge in demand to President Trump’s tariff policies.

Rates for bonded warehouses can be anywhere from 1.5 to four times as much as their standard counterparts, owing to factors like increased security, compliance and bonding requirements.

Like Ms. Wagner, Ms. Therme understands the motivation behind tariffs is to encourage U.S.-based manufacturing, but thinks it’s not a realistically feasible goal.

“We don’t have enough workforce to do those jobs,” she said.

Timberline Manufacturing

New tariffs could drive some costs higher in the short term for Timberline Manufacturing, a Marion contract manufacturing firm that specializes in wire harness assemblies, control panels and circuit board assembly.

But for Timberline president and CEO Randy Walter, the company remains focused on being able to support its customers during any market or supply chain fluctuations.

“What we’re hearing in the marketplace is there is going to be some onshoring of things, so for us as a small business, we can probably have some more parts we’re going to be able to manufacture,” Mr. Walter said April 11. “We see this as an opportunity for us to be there for our customers that are bringing items back to the United States for production, instead of having it produced, for example, in Mexico or someplace in Asia. They’ll be looking for a domestic supplier. That’s where we’re seeing the benefits for us.”

If certain costs rise, Mr. Walter said, some impacts may be passed along to customers, while others may be absorbed by Timberline.

“We’ll try to have some balance of what we absorb ourselves and what we look at passing along to our customer base,” he said.

Timberline has a diverse supplier base, with most based domestically, but those suppliers may be importing products from Europe, Asia or Canada, Mr. Walter said.

“We’re trying to work with our suppliers, because they are the ones that are actually paying the tariffs directly themselves,” he said.

Most of Timberline’s manufacturing contracts are also with domestic firms, Mr. Walter said, largely limiting the impact of tariffs on the company’s operations.

But even if the impacts become more dramatic, Timberline’s goal will remain the same.

“There’s certain things that are out of our control, and this is probably one of them,” Mr. Walter said. “We’re trying to manage the impact the best that we can as a company, for our customers and for our employee-owners. That’s our goal.” 

Story by Annie Smith Barkalow and Richard Pratt.