By Alex Miceli
Golf-equipment prices could rise by 20 percent or more as the White House signals that the proposed border adjustment tax is acceptable to President Donald Trump.
The BAT has been a main tenet of a tax plan by House Speaker Paul Ryan (R-Wis.) and Rep. Kevin Brady (R-Texas), chairman of the influential House Ways and Means Committee, but had not been part of the president’s tax plans until recently.
According to published reports, White House chief of staff Reince Priebus and presidential adviser Steve Bannon favor the BAT, with Trump seemingly agreeing with his top advisers.
The tax would encourage companies to manufacture products in the U.S., providing tax breaks to firms that export goods and removing them for imports. The goal would be to keep those manufacturing jobs in America and cut the corporate income-tax rate from 35 percent to 20 percent. However, with 99 percent of golf clubheads, most bags and apparel made overseas, much of the golf gear bought in the U.S. would be hit by the proposed 20-percent tariff. In short, the $500 driver that you’ve been eyeing would cost $600 under the BAT.
Last month, 16 chief executives of top U.S. companies, including General Electric’s Jeff Immelt and Boeing’s Dennis Muilenburg, wrote to Republican and Democratic leaders on Capitol Hill in support of the BAT.
Considering the difficulties in the golf business, narrowing profit margins is not an acceptable alternative. The obvious counter to the BAT would be to start manufacturing in the U.S., but that move would be a challenge. Manufacturing facilities that can cast clubheads are in short supply in the U.S., and the expertise is not as readily available. Plus, the cost of manufacturing in the U.S. is what forced these companies to move production overseas, much of it to Asia, in the first place.
“I just think it's a cost analysis, which is we need to bring our products to market in a way that's conducive for consumers to be able to get into those products and a large quantity consumers to get into those products, and to be that you have to be positioned and market in the right place,” David Abeles, the chief executive and president of TaylorMade-Adidas Golf, said after a pro-am round last month at the AT&T Pebble Beach Pro-Am. “I'm sure the (Trump) administration's looking at tax benefits, certain duty-rate reductions, or whether it's componentry or in finished-good products how we might ultimately source and deliver those products to market in North America. So, we're looking at everything, and again we're waiting to see what happens here.”
Many golf leaders have been unwilling to discuss the proposed BAT, perhaps with hopes that by not talking about it, it might go away. Now that the Trump Administration has moved behind the Ryan plan, the proposal would force an industry struggling to improve poor sales, boost rounds played and stem a decline of golfers to make some tough decisions in the future.
“Whether it's in Asia, whether it's in Mexico, we would love to manufacture and assemble in the United States,” Abeles said. “We would hope that the current administration would find opportunities for companies like ours to make that beneficial for us, and bring as much work as we can into the United States as well.”
Alex Miceli is the founder and publisher of Morning Read. Email: email@example.com; Twitter: @AlexMiceli