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The Heavy Duty Parts Report
Each week Jamie Irvine and his guests have conversations that empower heavy-duty people. They discuss tips, tools, and technology that help heavy-duty parts manufacturers and distributors sell the right parts to fleets, repair shops, and truck operators.
The Heavy Duty Parts Report
New Tariffs are Rocking the Heavy-Duty Parts Industry
Episode 341: How are tariffs affecting heavy-duty parts companies? In this in-depth discussion, we talk about the history of tariffs, the real reasons behind them and whether they will go up in the near future.
After preparing for this episode, Jamie Irvine and Scott Boltz discovered that tariffs are not what they thought and there is a dark side to tariffs rarely, if ever, discussed by those promoting them.
Show Notes: Visit HeavyDutyPartsReport.com for complete show notes of this episode and to subscribe to all our content.
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You're listening to the Heavy-Duty Parts Report. I'm your host, jamie Irvin, and this is the place where we have conversations that empower heavy-duty people. Welcome to another episode. In this episode, we are responding to a request from a number of our clients to talk about a subject that is on their minds and that is tariffs, and so I asked our director of consulting services at the Heavy-Duty Consulting Corporation to do some research and go deep, and because of that, this is going to be an extended episode and it is not going to follow the normal format of our show, because we have so much material to cover, we need to get into it right away.
Jamie Irvine:So I'd like to introduce a returning guest to the podcast, one who hasn't been on for a while because he's been busy working at our consulting business. So Scott Boltz is our Director of Consulting Services. He's been on the show before. We're going to drop a link to an episode that we did together almost five years ago that aged very well in the show notes, and Scott's role as Director of Consult services at the Heavy Duty Consulting Corporation has been really integral in helping us to develop that company and to move beyond just me consulting with clients personally, but to actually be able to build a company that provides this service. Our why is to help heavy duty people thrive, so I am so happy to have Scott back.
Jamie Irvine:For those of you that don't know Scott, scott has worked in the trucking industry for over 20 years. He's been involved in technical, sales, marketing and commercial management in that 20 years and he has pioneered several companies into success, into the heavy duty aftermarket in North America. Scott, welcome back to the heavy duty parts report. So glad to have you here. Hey, welcome back to the Heavy-Duty Parts Report. So glad to have you here.
Scott Boltz:Hey.
Jamie Irvine:Jamie, Good to see you. My friend, how are you? I'm good. I'm good. It's nice. I get to see you every day now that we work together. This subject of tariffs it really came up because of our clients. They wanted to know more. There's some things that are being posted in the media about it and they really, at the end of the day, just want to know how it's going to impact them, whether they're a aftermarket manufacturer or maybe they are a distributor or repair center. That's involved in parts. So that's what we're going to talk about today. You've prepared some really great information and I'm looking forward to getting into it with you. So let's get started and I'll ask you the first question here Are we tariffs experts?
Scott Boltz:No, jamie, we are not. But this has been a bit of an endeavor to kind of delve deep into something that really affects anyone in the United States who's importing truck parts, whether they're finished goods or whether they're works in truck parts, whether they're finished goods or whether they're works in progress or whether they're raw materials, and all those categories are quite different. So I have a few disclaimers, if you don't mind. Yeah, let's go over them. Yeah, so we are not tariff experts. I've done a ton of research on them.
Scott Boltz:The real experts are the people that are working for the executive branch of the government and the lobby that lobby them, and the you know, the congressman and everyone else, as well as both foreign and domestic lobbyists in that regard. So I always like to open with a bit of a joke when I don't know everything. A man who carries a cat by the tail learns something that he can learn in no other way, and that's what we're going to do today. So we're going to grab the cat by the tail and we're going to lift it up and see what happens.
Jamie Irvine:So I mentioned in the intro that our clients were very interested in the subject of tariffs, so can you talk about the genesis of this topic?
Scott Boltz:the service company brought this to our attention in one of our strategic meetings, and he had some concerns about whether he's sourcing drums from what company, and are those drums coming from China, are they coming from Turkey or domestically? And he asked us basically to do some research on that topic to get a better understanding of it. And so, zeb, this is for you.
Jamie Irvine:Right, and then we asked a few of our other clients and they all expressed a similar interest. So when you look at these kinds of media stories, what are you seeing? And then we'll talk a little bit about what you're not seeing.
Scott Boltz:Well, I'm always skeptical of these type of articles that talk about what might be what could be what they think is coming, when there is nothing that is indicating that change. So if you read this article in its entirety from Truck Parts Service, they talk a lot about anti-dumping laws and other things like that, but right now there's been no definitive move and we have some data to show you later on about where we are at in that movement.
Jamie Irvine:Okay, so if that's the case, what are we really going to talk about then?
Scott Boltz:So we're going to get into, basically, a storyline of tariffs. What are they, how do they affect us in the parts industry in North America, how does it benefit the government, how does it benefit other entities other than the people that are actually making the final transactions, as well as how does it hurt the end user and everybody along the supply chain. So the first thing that I want to cover ad valorem is basically Latin, for you know, at value, and so we're taxing something at its value as it comes into the country. So, to give you a sense of scale, in 2016, the US imports were about $2.2 trillion, and we're going to get into what made up that volume at that time.
Scott Boltz:It's not just what we think. We talked about finished product, we talked about works in progress and we talked about raw materials, but there's also a financial component to it. So, from that interesting point, president Trump began elevating the tariff restrictions on imports from China, as well as other countries, at the same time that he was negotiating the free trade agreements amongst North America, and so the interesting point in that is that in 2023, the US imported about $3.9 trillion worth of product, so the imports after the tariffs went up. That's interesting.
Jamie Irvine:Yeah, because the general, I guess, consensus would be that the trade war and tariffs is designed to reduce what is imported in support of, let's say, US manufacture.
Scott Boltz:Exactly and what government officials will tell you. The reason for tariffs is. There's three different components of it to protect the United States suppliers and to do several other things, raise revenue being one of them. But that's not the net effect, that's not the reality on the ground. So we're being gaslit in some ways by that definition of tariffs.
Jamie Irvine:Okay, so that's interesting to me, because this is not necessarily what it seems. So you just mentioned what it could be or how we should be looking at it. Can you go into more detail? We talked about what they say it is what actually is it.
Scott Boltz:Correct. So this is a screen grab from ChatGPT to basically say what's the basic definition of a tariff, and you'll see that it's to protect domestic industries, it's to generate revenue for the government and it's to regulate trade, and then there's two primary types. There's an ad valorem, which is the at-value tax, and then a specific tax, which is fixed based on, usually, raw materials, based on weight or whatever shipping method that those units come into. The thing that I'd like to say about this, though, is that the net effect of those tariffs on heavy-duty parts manufacturers in the United States and Canada, heavy-duty distributors and service centers and fleets is outside of this definition.
Jamie Irvine:So, Scott, if that's the case, help us understand tariffs better. What are they really? So they?
Scott Boltz:are a mechanism in which the US government can impose political, financial and military influence upon other actors within the globe. In this case, for instance from this Wall Street Journal article, the Biden administration is proposing a total ban, not just a tariff, a total ban on components that belong to connected vehicles, which, anything manufactured within the last few years and going forward are considered connected vehicles, and that has actually a big impact on companies like Volvo, for instance. So when we get into the class eight market, those connected vehicles are going to be affected by these same pressures.
Jamie Irvine:I hope you're enjoying this conversation about tariffs. We're going to take a quick break and when we get back from the break we're going to talk about something that surprised Scott when he did this research. So stay tuned, we'll be right back. Are you deferring maintenance because of filter cost or availability or, worse yet, are you trading down to no-name filters to try to save a few bucks? Either way, you're rolling the dice. The good news there's a new premium filter option for fleets Hanks Filtration. If you're responsible for a fleet, you won't believe how much using Hanks filters will save you. But you've got to go to heavydutypartsreportcom slash Hanks to find out more. That's heavydutypartsreportcom slash H-E-N-G-S-T. Head there now At Diesel Laptops. They go way beyond diagnostic tools. They are your complete shop efficiency partner, from diesel technician training to complete repair information, parts lookup tools and robust technical support. They are there to support you every step of the way. Learn more and download your free starter pack today by visiting Diesellaptopscom. That's Diesellaptopscom. Hca Truck Pride is the heart of the independent parts and service channel. They have 750 parts stores and 450 service centers, conveniently located across the US and Canada. Visit HeavyDutyPartsReportcom slash HDA Truck Pride today to find a location near you Again. That's heavydutypartsreportcom. Slash hdatruckbride and let the heart of the independent service channel take care of your commercial equipment.
Jamie Irvine:We're back from the break. Before the break, we got a good introduction and a definition of tariffs, what it is supposed to be, or what the general consensus is, what it actually is. We're starting to talk about that. So, scott, during doing research in preparation for this, you found something that really surprised you Can you explain that to us?
Scott Boltz:Yeah, going through the regulatory website from the executive office of the president that manages tariffs, imports and exports, imports and exports One of the big things that keyed off that I didn't even know about was the consideration of imports and exports, of what they call foreign direct investment, which means money. So when American companies invest in Turkish companies, israeli companies, chinese companies, that's considered as an export as well, and when those returns come back, they pay some form of import duty relative to equity investments to reinvest earnings into intra-company loans. So I think what I gleaned from this research was that they're trying to stem the flow of money in and out of the country, just like it is a circuit board or a brake drum.
Jamie Irvine:Okay, so there's a lot more to this subject than most of us really understand. Unfortunately, we live in a time right now where there's a lot of war. When you were doing research, you really discovered that war actually has a big impact on tariffs, so we know that in a previous administration.
Scott Boltz:You know this isn't meant to be a political conversation.
Scott Boltz:It's just historically accurate that the US was much less engaged in war type activities around the globe, and it's not just whether or not we deploy our military or not, it's also how we deploy our financial instruments, which is why it ties into this topic of tariffs.
Scott Boltz:So when countries do things that displease the executive branch of the United States, we impose financial means upon them. We'll talk a little bit about Bretton Woods and how the IMF was created during that time, and we use that as a leverage piece to say hey, listen, we don't like what you're doing, we would prefer you don't do it, and so we're going to try to restrict your inputs into our economy to the best of our ability, and that's another way that wasn't listed in the previous notes about how tariffs are imposed, listed in the previous notes about how tariffs are imposed. So this is a long list that you can source from many places online, but there are conflicts going on around the country in which we have vested interest in who comes out the winner, and it all plays back into what we allow them to engage with within our own internal North American economy.
Jamie Irvine:Interesting, interesting. So, at the end of the day, who actually pays tariffs? Because the consensus, or like the message we get, is these tariffs are going to negatively impact countries that don't have our best interests at heart, and we're going to bring all this manufacturing back to our shores and it's going to really benefit us. And so these other countries pay the tariff. That's the message that I get. Is that true?
Scott Boltz:They do suffer some pressure on pricing in order to be able to play in the space. But the idea that by placing taxes upon imports that you level the game in the North American economy is absolutely false. That you level the game in the North American economy is absolutely false. I've worked for manufacturers in the past that have imported raw materials and have imported works in progress, and the person who imports that product pays the tariff. So their cost goes up.
Scott Boltz:The exporter again is affected by a reduction in imports because the cost has gone up. But the person who pays for it is the importer. But how does that trickle down and where does the benefit ultimately lie? So the importer pays the tariff. They translate those costs into their cost structure, their bill of materials, in order to produce the product, the finished good. That is then transferred to the distributor who is paying for the cost of goods sold. And if those costs go up, not because of inflation but because of taxation, they pay the cost of that transition. But they don't pay it by themselves. They transition that cost onto the end user, the service centers and the fleets that are buying the product. So that cost trickles down throughout the entire supply chain. And then my final note is who ultimately wins because the taxation process is stepped? Ultimately the IRS.
Jamie Irvine:I guess let's just talk about this for a minute. So if you have this cheap, low quality product coming out of, let's say, china or another country and it's coming into the North American market under what a North American manufacturer could make it for, because of things maybe like not as good quality or the labor laws that that country has, and basically having subservient people forced and pressed into labor at low wages, doesn't it actually actually, though, level the price of those products and make it so that buying the higher quality US made product is more appealing to the consumer? Is that not still true in this?
Scott Boltz:paradigm. This is not binary, this is not like black and white. So, yes, there is some truth in what you just said, but the majority of manufacturing depending on the product category, because that's very specific. So there's many things that we used to make here that we don't make here anymore, and we could turn that on very quickly, but it's just not cost-effective at the moment. So there's the bulk. What I perceive to be the bulk of what we're importing are things that we don't make. It's not that there's an American or Canadian equivalent that we're offsetting. That's a very small portion of the actual total bandwidth of the import.
Jamie Irvine:Yeah, and I think that that is. The problem is a lot of times with these headlines that we see it comes across in that very binary or linear way and the reality is it's just so much more complicated than that. Let me ask you something because people might not have picked up on it in one of our early slides when we had our disclaimer. If you read the information on that disclaimer, it talks about kind of the approach that we take with the free market. Could you talk about that a little bit in conjunction with what we're talking about here on who pays tariffs?
Scott Boltz:Indeed, yeah, so there's basically I mean, it's very vast, but you could break most economists into two camps the original founder of what we consider to be modern economics, which was Adam Smith, who was a Scottish economist around the time of the founding of the United States in the 1700s, developed a work called the Wealth of Nations, and in that work he's considered the father of modern economics, and it was very much a capitalist approach to. One of the biggest takeaways that most people take away from Adam Smith is what we call the invisible hand of the market. Like you, let the market handle it, supply and demand. All those concepts come out of that work.
Scott Boltz:In response to that, we saw Karl Marx create an economic paradigm in his writings. That was that the individual was at the peril of these companies that were leveraging their labor for their benefit, and so that's where the two kind of sides kind of plugged in and started opposing each other. So in modern day economics Milton Friedman is considered a modern economist who was very much in the camp of Adam Smith, as well as guys like Thomas Sowell. And then, you know, on the on the other side of that equation, the Keynesian side of the equation, is another economist who favors more of a socialist or other you know far end spectrum version of that.
Jamie Irvine:Yeah, yeah, and so this all plays a part in it, because anytime you have, like, government entities taking a position and interfering with the free market, that impacts things right, and so that really plays a part into the complexity of this issue and this question of who pays the tariffs and why Exactly.
Scott Boltz:Exactly. Ultimately, the consumer pays everything.
Jamie Irvine:Yeah, At the end of the day, that is true. So let's start helping heavy-duty parts people to understand how tariffs are going to like how it's been affecting them, how it's going to continue to affect them. That's what we're going to talk about next. So talk about this harmonized tariff schedule, because this is a resource people need to know about.
Scott Boltz:Indeed, indeed, and I didn't know about it in advance go down the rabbit hole that is the US tax tariff structure for imports and exports.
Scott Boltz:You need to be familiarized with the harmonized tariff schedule of the United States, the HTSUS, and specifically for most heavy-duty parts, that's going to be under the headings of Chapter 87. Okay, so there is a very long list. I have a couple examples on the screen, but there's a very long list that you can look up online, and that's only a portion of the knowledge you need. So you need to understand what products you care about, what their 87 code is, and then you have to go back into another website to look up on any updates on what's going on at the moment, up on any updates on what's going on at the moment, and so we could do this whole show just on break drums, just as Zeb brought up. But it's not just that, because we want to speak to the whole market. So it's so complex, if you read here on the slide, that the book of the tariff schedule is six and one quarter inches thick with more than 10,000 different 10 digit classifications, so we cannot present that in a podcast, of course.
Jamie Irvine:Right, but we do have all the links. So every single thing we talk about today, the links are going to be in the show notes to back up everything we say and to give you access to the site. So then you'll be able to do additional research on your own. All right, so talk to me about exclusions, because as long as the playing field is fair and even and level for everyone, then, ok, whatever it is, we'll deal with it, right? But is it? Is it fair and level and even for everybody?
Scott Boltz:So there's a saying that basically says there's no such thing as a conspiracy or a coincidence. So, that being said, if you go through the executive offices of the president's website for the trade representative, there are processes where you can apply for exclusions from these import duties. Ok, and they even report who they actually grant them to.
Jamie Irvine:So you can actually see that by going to this website, which, again, the links will be in the show notes, if you want to check it out for yourself, correct?
Scott Boltz:And my point in this is that anytime the government officials, either within the bureaucracy or within the elected offices, there's always the opportunity for the ability to influence favor of one thing over another in some form and shape, and that's why I say they're for sale. So companies that are experiencing these tariffs that are hurting their business, there is an opportunity to apply for some level of relief in that regard. But I'm sure there are other ways as well.
Jamie Irvine:Yeah, no doubt. So. In the past, we've talked about long wave cycles and we've talked about the four turnings, and when I say we, I mean you and I on this show all the way back in 2020, talked about this. So I just want everyone to listen into this short clip from one of our original conversations that Scott and I had in 2020. That really has aged well. Scott and I had in 2020. That really has aged well. What comes to mind is kind of some common characteristics within each generation, and so if you put what Scott just said in that context, you really are grasping these characteristics and differences between generations and how they impact people. And what the book is saying is that this actually rolls on a cycle.
Scott Boltz:So just to make sure that everybody kind of is on the same page, yeah, and the idea of the cycle, that is, as soon as one generation of a certain persona ages out, reaches mortality, they create a vacuum that is regenerated. So. So if we want to understand the buying decisions in at the trucking fleets and and the buying decisions that govern distribution, we need to look at who's emerging into power, and that's currently at generation x. Now the, the, the boomer generation, is hanging on for dear life, right there's in a lot of ways, uh, but at some point in time their money will leave the market and their, their, their efforts will leave the positions that they hold, and it'll be subsumed by the generation x well, scott, we just watched a clip from over five years ago and, uh, it has been really interesting to see how the things that we talked about back then have really aged well and are playing out in real time now.
Jamie Irvine:For those of us who maybe aren't as familiar with the four turnings generational turnings, things of that nature could you give us an explanation and then tie it to tariffs?
Scott Boltz:So there's something called the sacculum, which is about the length of a human life. Within that sacculum there's four turnings and if you think about it like a sine wave, as we discussed in our previous times, we see a rise to a peak, we see a fall back to normal, and then we see a fall down to a bottom and then a rise again, and that takes about the length of a human life, or 20 years per turn. So 80 years ago, if you start in 1929 with the Great Depression, that lasted. That fourth turning lasted all the way through World War II, which ended in Bretton Woods, which was the new economic paradigm that we created, which we now understand as global economics.
Jamie Irvine:Right. So how does that relate to today? Because I mean that was 80, 90 years ago. We saw that happen. Tie that into this idea of a seculum and how it's totally not surprising that we're seeing the things we're seeing today. Like, make that connection for me Sure.
Scott Boltz:So I mean we can lead backwards for a second and I'll get to today. But 80 years ago we were in World War II. 80 years before that we were in the American Civil War. 80 years before that we were in world war ii. Eight years before that we were in the american civil war. Eight years before that we were in the american revolution. And so it's not just a war cycle, it's an economic cycle, it's a social cycle, it's many different things. So fast forward to today and we're in this cycle now where the world's at much more war now than it's ever been in the last 80 years. And the same thing holds true that the economic shift and the society shifts, the politics shift and everything moves. So we're coming into a period where we're going to define the next 80 years of the future. What that might be and I don't know what that is, but how that relates currently to what we're dealing right now with tariffs is that we're going to be in a continual state of volatility until this period is over.
Jamie Irvine:You mentioned Bretton Woods, and that is something that came into effect just at the conclusion of World War II. Explain how that is really impacting today.
Scott Boltz:The Second World War ended in 1945, in the summer of 1945. A year before that, the United States took the initiative to bring in all of our allied countries that we were allied with, and get together and make the new economic paradigm and what that paradigm was sold as was. We are going to open up the only market that's going to survive this war, because we did not experience battles on our own home turf, so we're going to open up our market. We're going to be the only ones that survive economically. You know home turf, so we're going to open up our market. We're going to be the only ones that survive economically. We're going to help you rebuild.
Scott Boltz:So we rebuilt Japan and we rebuilt Germany and many of the other war affected areas, and in trade, for that you're going to give us assistance and trying our best at that time to stop the spread of communism. Okay, and so it was. It was a, it was a gambit, it was, it was a bribe, and so our Navy survived. We patrolled the sea lanes and opened up trade for everybody. We said no one amongst our group is going to have any war between each other. That's when the IMF was created and the World Bank and all these other systems, nato as well, to ensure that through economics we would have global stability and a group of allies that would fight against communism.
Jamie Irvine:So then, as you fast forward and we come to today and we talk about tariffs, what is the connection to today and what do you think we're going to see?
Scott Boltz:So, as normal with these four turnings, we don't see the next turning coming. And so in the late 80s, early 90s, we saw the fall of communism. As we understood at the time, it was the end of the Cold War. So tariffs become much more into play to protect American steel, american grain, agriculture and other things. And so when we start instituting that level of protectionism, the countries that are affected respond, so they elevate import tariffs from us, and then so it becomes a game of where are we going to stop with this elevation? And it fluctuates up and down, as the global economy does. But now we're in the fourth turning, and so under from 2018 to 2020,. There was a game between us and China where we raised tariffs and they raised them above us, and then we raised them again and they raised them above us, and so it just becomes this back and forth in which we're elevating the cost of goods. It's not inflation, it's elevation of cost of goods through taxation.
Jamie Irvine:So when we look at that time period where we saw, you know, so when we look at that time period where we saw the end of the Cold War and we saw really the rise of globalization especially early on in our career, it was really starting to take off. With that comes trade deficits.
Scott Boltz:So talk to me about the reality of trade deficits and in connection to things like tariffs, right, and so if you listen to any politician speak, doesn't matter what side they're on they'll often bring up the previous guy's trade deficits and we're losing at a trade war. And it's a bit of a gaslighting statement because it's by design. We traded and leveraged our Navy and our military to protect the global economy in order to create a deficit, and so we're coming out of that now and we're seeing a lot of reshoring on shoring and near shoring within our trade agreements within north america that are going to address this, but it's often sold to us as some type of fault of some other administration and it doesn't matter what side they both do it.
Jamie Irvine:So where is this going to take us then? If you kind of indicated this is coming to an end now, what do you kind of envision that looking like?
Scott Boltz:Well, we can lean on what we know in the near history, and so manufacturing of HD parts globally and in North America are going to remain relatively flat. If you look to the um, this is a graph of um. Auto parts includes heavy duty and normal automotive. But the love, the level from 2018 is flat 100. You'll see a dip in China, but it regrew back to normal, but they're only back to where they were um six years ago. The rest of the world, on the other hand, is growing with us, so it's just a trade-off. We're moving where we're sourcing parts from to other regions like India and Turkey, and Europe.
Jamie Irvine:We haven't seen this kind of inflation since early 1980s. So, scott, I also want to talk a little bit about inflation, because tariffs are part of that, or maybe they're not. I don't know. You can answer that question better than I can, but when it comes to inflation versus taxation, we're seeing inflation right now greater than we've seen it in 40 years, or at least not this high since 40 years ago, which actually went much higher. What's the situation when it comes to tariffs? Is this inflation? Is this taxation? What is it?
Scott Boltz:Exactly, and so it's common for people to conceptualize an increase in pricing at the market level and attribute it all to inflation. At least in my understanding of it, it's not the case. Inflation, according to Milton Friedman, is strictly related to monetary policy of the US Fed. So the more money that we print and put into the market through the banking system, we devalue the dollar, and so when there is more dollars chasing less goods, you experience inflation. And the current inflation that we experienced through the COVID time was the infusement of money from governments, canada included, into their populace, as well as the United States, to stem any negative effect from the shutdown of the economy, and that was the inflation we experienced. So there was too many dollars chasing too few goods, and now your cost of bacon and eggs and gasoline and houses and everything else goes up. That is in my I need, in in my conception, you need to break away the increase in cost of goods created by taxation.
Jamie Irvine:Okay.
Scott Boltz:And so tariff is attacked and it affects the cost of goods, but it is solely at the whim of the executive branch of the government. So I don't want to conflate what is inflation, which is a monetary net effect, and then match that to how the governments of our countries can institute an increase in pricing without inflation.
Jamie Irvine:Okay, that makes sense. So what tool did you discover to help heavy duty parts people understand and keep up with the fast moving world of tariffs?
Scott Boltz:So you can go to the this website, which is the Office of the United States Trade Representative. It's part of the executive branch ofS government and they have extensive, deep resources on how you can go back to your HTS codes and pull them in to look things up. So you need the codes to work in this site. But all the information about any given tariff is updated relatively recently. Some of them go back to like 2016, but most of it is 23, 24. And there's so much information here. Like I said, if this was printed into a book it'd be 10 and a half inches.
Jamie Irvine:So let me ask you something Is this something that heavy duty parts people especially those that are involved in strategic planning for their company, that are involved in purchasing like should they be rushing out and looking up every code and spending an enormous amount of time on this? Or is there some information we could share with them about trade wars that might help them to see what's coming?
Scott Boltz:So we have a unique situation in our at least in the US electoral process, where we have one party who's been in power, we have another party who is in power and they both are operating, with regard to import tariffs, in the exact same fashion.
Jamie Irvine:Okay, explain that.
Scott Boltz:Explain that more to me If you look at the graph on the screen, um, in the section that is under the Trump administration, and you'll see how the trade war begins and they get to a certain level and then the presidency changes, biden comes into office and there's zero change. So both administrations are operating with an acceptable level within their political and economic policies at this level. So the idea that if Trump comes back in, or if the Harris administration, which is the Biden administration, comes back in, that we should expect any changes, no, so Trump brought it up to that level under his administration.
Jamie Irvine:Biden has kept it at that level. Would we expect Trump to raise it again, or why do we say that it'll just stay at this level now?
Scott Boltz:Well, personally speaking, I don't know what Trump's ever going to do, but I would. Who does? But I would, I would. I would say that if he was to raise them anymore, it would have negative effects on the economy in which he's trying to resurrect. Right, the probability of raising them is small. The probability of lowering them is I don't know the answer to that, because he does want to. He does want to maintain pressure on these foreign entities that we're trying to fight for reasons other than what's listed in the standard definition of tariffs.
Jamie Irvine:I believe the Harris administration would do the same thing probability that the situation with tariffs is going to remain relatively consistent with what it's been over the last few years, which kind of negates the inflammatory media coverage that suggested that we might see huge increases in tariffs.
Scott Boltz:Yeah, I don't know if you could take them much higher without crashing certain sectors of the economy.
Jamie Irvine:Okay. So if we're going to see more of the same um, that means pricing is going to remain high. So, like, what advice do you have for heavy duty parts? People Like I said. They're involved in strategic business planning, they're involved in purchasing. Um, if we're going to be in an environment where prices remain high, what? What strategic advice do you have for them?
Scott Boltz:I think the biggest takeaway is that you should eliminate any expectation for some return to a normal. This is the normal for the foreseeable future, and so if we're all purchasing products that are imported at the same price level with varying degrees, then you need to take pricing out of your value proposition. You have to find other ways to add value, whether it be through availability or speed or other things like that quality, but we have to find ways to differentiate ourselves, our individual companies, in such a way that takes price off the board.
Jamie Irvine:Yeah, and when we work with our clients and we talk about their value proposition, we talk about that in terms of five to seven commercial covenants that really make you differentiated in the marketplace, and one of the things I always emphasize is that you have to remove the barriers to entry. Those can't be really part of your value proposition, because we all need to know what we're doing and have years of experience. We should all be striving to have quality products at competitive prices relative to where prices are, and we want to be able to provide a wide range of products with good service levels. This is not your value proposition. This is the barriers to entry into the parts business. So if you're going to move beyond that, what would that look like? How do we help clients do that every day?
Scott Boltz:So we have a tried and true process that we walk through and we first establish the core values, the value proposition, the reason why they're in business, and that informs a process that we apply to those businesses, where we establish an executive summary of, basically in one page page, what it is that we want to do, and then we spend a really in-depth analysis on how we get there. We do an analysis on the current state and the future state, and then we develop a bridge between the two, and then what that is is it's a document that aligns your team, it aligns your customers, it aligns your marketing, it aligns your leadership in such a way that we're all on the same page. We know what we're doing and all we have to do is execute.
Jamie Irvine:So I'll tell you this If you want a disciplined approach and if you're willing to put the work in and you want to do this right, this is the process for you. If you want and or if you think that getting into the parts business is just a matter of being connected with some suppliers, buying some stuff and selling it out the door, this program is not for you, and I would highly encourage you to reach out to us, because we'd like the opportunity to talk to you and work with you Absolutely. Scott, thank you so much for sharing this. First of all, you did a tremendous amount of research. This deck is available. We've got it now.
Jamie Irvine:So if people want to review it with us, if they want more in-depth information, or if they want to work with us to help them with their business, head over to heavydutyconsultingcom. Or if you're already on the podcast website, heavydutypartsreportcom, you can always click the consulting button. It's in the top menu. It'll take you right through where you can book an appointment with us. Scott, once again, thank you so much for being on the show again. Really appreciate it. Thank you, jimmy.
Jamie Irvine:Thank you again for listening to this extended conversation about tariffs today and supporting the Heavy-Duty Parts Report. If you haven't already, head over to heavydutypartsreportcom, hit the follow button and subscribe to our weekly email so you never miss out on any content. If you'd like to listen on the podcast player of your choice, make sure you hit the follow button for free. If it gives you the option, please give us a five-star rating and a review. This helps us expand our reach. And finally, if you enjoy watching the video version on YouTube, make sure you hit the subscribe button and the bell notification once again, so you never miss out. As always, I want to thank you so much for supporting our show and, as always, I want to encourage you to be heavy duty.