BAT Tax Could Have Big Impact On Golf Equipment Industry

Morning Read's Alex Miceli considers the golf equipment industry ramifications of a Border Adjustment Tax, proposed by Paul Ryan (R-Wis.) and Rep. Kevin Brady (R-Texas) and now sounding like something President Donald Trump might endorse.

The 20% tax on imports is designed to keep manufacturing in the United States, and with all but Titleist/Callaway/Taylor Made* golf balls and a handful of other products made outside the US borders, customers are likely to see price increases on golf clubs. Miceli writes:

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.

Brett Conrad has penned this op-ed for Forbes against the concept, while Alan Auerbach and Michael Devereux just published an NY Times op-ed case for the tax.

Comments

[OWGR Fan]

TaylorMade has a golf ball plant in South Carolina and Bridgstone has a golf ball plant in Georgia.

http://pickenssentinel.com/news/1442/golf-balls-taylor-made

http://www.plasticsnews.com/article/20141001/NEWS/141009994/us-production-of-premium-golf-balls-gives-bridgestone-an-edge

[HBL]

U.S. golfers seem willing to spend $500+, almost every year, for the new driver which increase their driving by 7 yards. I see no reason to think that they will not be willing to spend $600 or, you know, wait a year and buy the same ciub for $199 from an on-line golf discount reatiler. Now the family that's on the edge and who needs a new refrigerator is a different story.

[Priussmug]

Raw materials and labor are such a small percentage of cost of a club

[Patches O'Houlihan]

What happens to those of us who have supply chains where no domestic alternative exists? We can't possibly avoid getting slapped with a tax and pass it right on through to our American customers.

That's who ends up paying the tax. Buyers.

[BDF]

Likely still cheaper than producing them in the US...Corporations love the $1 / hour workers

[Manku]

@HBL...unless you're being funny, I know very few golfers who buy new drivers every year, or even every couple of years. My driver is at least 5 years old, and I hit it just fine.

I play at a lot of swanky private clubs in LA, where people have the means to buy a new driver for every round, and I rarely see the newest and priciest clubs.

I'm not really sure who is buying these drivers, aside from a few single digit handicappers.

[John C]

After updating or switching a portion of my clubs almost every year for more than several, I finally stopped that practice and kept the same clubs in play - save a putter change - for past three years.

The new clubs have too much of a non-traditional look that is not appealing to me. I would rather buy used and get them reshafted to my specs.

[DrBunsenHoneydew]

Economic ignorance at it's highest. This proposal represents a 20% tax on American consumers. Republicans love big government and emptying people's wallets just as much as Democrats. This will also do absolutely NOTHING for American manufacturing jobs. American manufacturing has been sliding since it hit it's peak during WWII (well, wonder why it peaked then) and the jobs have been lost mainly due to technology. Also, what about American manufacturers that import their raw materials? This sure as hell wouldn't help them. Disgusting level of econ ignorance at work here. What happened to the days when republicans would at least pretend to be for free-market capitalism?

[GolfGirl]

Golf...and life... in the US is going to suffer under Trump. He's the worst possible person we could have in the White House. Hopefully we'll be able to get rid of him before too long. Really. Damn.

[Unmighty Mouse]

Then support a reduction in the number of clubs from 14 for any number of good reasons, including cost of clubs. "For the good of the game".

[OB]

Not to diminish what you do here Geoff, but the golf portion of this story is so minor compared to the mischief this will cause in so many sectors. I'm a Republican all for getting jobs back here, but if this is the best these guys can come up with are going to see a serious economic crash. The golf industry will be just one of many that takes a huge hit.

[Relational Operator]

The counter option to consumers paying more for golf equipment is for the club manufacturers to make less money.

[Avery Mann]

Calling this a Border Adjustment Tax is a phony cover for the real purpose of the tariff is to pay for the cost of the popular vote loser's wall that he wants to build that he said Mexico would pay for. The truth is that if it gets built, Americans are going to pay for it. Just another lie from a never ending stream!

[Ivan Morris]

It's a fake plot to turn golf into a 'reward' industry. Those who cannot pay, cannot play.

[Steven T.]

The used club business could soar- 2nd Swing, 3Balls, etc.

[Thanks King]

Production moved to Asia, and yet clubs on the whole are still way too expensive. Where are the shrinking costs due to cheaper labor, economies of scale and continuous improvement??

Are you telling me that R&D from year to year is THAT expensive to tweak a driver that is really the same driver, but with a different face insert or lower COG? Come on!!

[George Blunt]

1339 Days to go.

Lets Make Golf Expensive Again.

[HBL]

@manku - I only partially jest. Many manufacturers bring out a new driver every year with each new driver promising that the purchaser will be able to hit the ball further and straighter than ever before. Personally, I have used my current driver for a few years but someone is surely buying all those new clubs. I do know a number of people who not only purchase new drivers but purchase complete new sets every year.

[Steven T.]

@HBL Those people whom you know who buy new sets every year would be better off spending money on lessons.

[HBL]

@Steven T -not sure I agree with you. I think that they should spend their disposable money on what they think will give them the most enjoyment, whether its golf clubs or golf lessons. Either way, I'm not going to worry about how a BAT impacts spending on golf. After all golf is supposed to be aspirational. However, I am concerned about how a BAT would impact a family of limited means on their ability to purchase truly needed goods, like refrigerators.

[Steven T.]

@ HBL The problem with a BAT, as you point out with refrigerators and other necessaries like clothing, is that King Donald doesn't realize there is such a thing as a global economy where certain products are not made in the USA any more(not everyone can buy a SubZero) and the inflationary impact of tariffs. Anyone who aspires to play golf should consider buying a set of used clubs as a start. I did and eventually bought a set of new Ping Eye2 irons and Ping woods and a Ping Zing putter. I still have the putter.