CHICAGO — On Feb. 10, the White House issued an order reinstating a 25% tariff on all steel imports and increasing the tariff on aluminum imports from 10% to 25%. These tariffs will apply to goods coming into the U.S. after Wednesday, March 12.
For dry cleaners, these tariffs — particularly the Section 232 steel tariffs outlined in the Trade Expansion Act — could have an impact on essential supplies like hangers and various metal and plastic products regularly used in operations.
While there is some confusion over when other tariffs will be put into place and what the percentages will be, some companies are already reporting price increases and are developing strategies to manage the changing economic landscape.
In a recent letter to its customers, for example, 3 Hanger Supply Company stated that, while it has inventory at non-tariff pricing for the next 30 to 60 days and has tried to absorb increases for shipping costs, prices will be adjusted when it becomes necessary.
Supply Chain Impact
“At this point, the only tariffs in place are on China, which doesn’t impact our supply chain,” says Mack Magnus, president of M&B Metal Products Company. “One area in our supply chain that has been impacted is that we have seen domestic steel prices increase on the pending 232 steel tariffs.”
Magnus adds that with the new 232 tariffs, “all imported hangers will be subject to a 25% tariff,” with potential additional retaliatory tariffs from other countries following shortly after.
For Sam Monempour, vice president of 3 Hanger Supply Company, the situation demands immediate attention.
“As of March 12, all steel, aluminum and plastic imports, including derivative products, will be taxed at an additional 25% to 30%,” he says. “We fully anticipate that all of our imported supplies we are going to receive will be impacted with these cost increases.”
The first areas affected, Monempour says, will be concentrated on specific product categories that rely heavily on imports.
“Hangers and poly bags are loss leaders for distributors,” he says. “Everyone has them and we all have to compete for the business. The majority of these two items are imported, as opposed to chemicals and detergents that are more often made in the U.S. I would also group in paper goods like garment covers since a majority of the paper does come from overseas and gets manufactured here in the States.”
Manufacturers Report Minimal Current Impact
While some supply distributors are bracing for significant changes, Wesley Nelson, president of Sankosha USA, says his company shouldn’t be affected by the current and proposed tariffs at the moment.
“Right now, the tariffs do not affect our processes or our business at all,” he says. “Our products are made in Japan and Thailand. At the present time, there are no tariffs on products from that region.”
For those concerned about equipment purchases, Nelson advises dry cleaners to verify information directly with manufacturers.
“Don’t take everything you hear on the news verbatim,” he says. “Don’t make assumptions — actually talk to your local distributors and equipment manufacturers and see what the real situation is.”
He adds that, when it comes to equipment, the initial focus of tariffs tends to be on “auto manufacturing and large, very visible industries.” The drycleaning industry isn’t likely to be the first priority for trade restrictions, he says.
Vic Williams, president of Union Dry Cleaning Products, and whose company’s drycleaning machines are made in Europe, is taking a “wait and see” approach.
“We’re just in a holding pattern to see what they’re going to do, and see if it is going to apply to us,” Williams says. “If tariffs are applied across the board, it will affect us, but right now, it’s too early to say.”
Williams’ recommendation for cleaners considering equipment purchases also takes into account the recent EPA ban on perchloroethylene (perc).
“My advice would be, if you need something, to go ahead and get it so you don’t have to deal with any potential tariffs that might affect drycleaning machines,” he says. “We’re still getting more and more calls from people with perc machines, wondering what we’re going to do. They’re preparing to replace those machines — the third-generation perc drycleaning machines have roughly three years to be replaced, but the fourth generation’s got 10 years to go.”
Williams recognizes the uncertainty about the potential outcomes.
“We hope we don’t get a tariff, but that’s something out of our control,” he says. “We’ll just have to see how they play it.”
Price Increases, but No Major Shortages
Unlike previous supply-chain disruptions, the tariffs shouldn’t cause significant product shortages, says Kermit Engh, executive director of Methods for Management (MfM), which provides drycleaning business coaching services.
“The last time this happened, the effect was some scarcity of supplies,” he says. “We had this at the beginning of COVID. We couldn’t get hangers. We couldn’t get various things. In this particular case, I think it’s just going to be an increase in cost. Supplies aren’t going to change.”
Monempour agrees, but notes the cost increases will likely be substantial.
“End users should expect an increase of 25% to 30% on these items, possibly more if shipping costs go up as well,” he says. “Unfortunately, the distribution model is extremely low margin in the drycleaning industry, especially on loss leaders. We have to pass on the entirety of the cost increase we get from our manufacturers.”
Recommendations for Dry Cleaners
Industry leaders offer several practical suggestions for drycleaning businesses navigating the changing tariff landscape:
1. Consider Increasing Inventory Temporarily
“I would probably increase my inventory a little, just in case there is a supply glitch,” Engh says. “I would buy what I could now. Theoretically, supplies should not have a tariff attached to them at the moment if they are already here in the States.”
2. Explore Domestic Alternatives
Engh also suggests this situation creates the opportunity and the responsibility to look for more domestic vendors: “Does somebody make what I need? It may cost a little more, but I know I can get it.”
3. Use This as a Pricing Opportunity
For cleaners who have been hesitant to raise their prices, this development could provide a way to accomplish this with potentially minimal customer complaints. “This does provide an opportunity for operators to make pricing adjustments,” says Engh, “because everybody’s going to be feeling this, depending upon if it actually happens.”
4. Enhance Service Offerings
Monempour recommends dry cleaners do everything they can to keep their customers and increase sales. “They should increase their level of customer service as much as possible,” he says, “and provide specialty services — leather cleaning, alterations and tailoring, indoor and outdoor furniture cleaning, restoration services, shoe/purse repair, and pickup and drop-off laundry service.”
5. Remain Adaptable
With the fluid nature of trade policies, staying informed and adaptable remains crucial. “With all the unknowns associated with these tariffs, it is impossible to tell what the final impact will be — but we have already seen raw materials increase and we fully expect that to continue,” Magnus says.
Looking Ahead
While these tariffs present challenges, industry veterans recognize this isn’t the first economic adjustment the drycleaning industry has weathered.
“The majority of our customers understand geopolitical issues and agree that there’s going to be hard times ahead. For most of them, this is not their first time around and they have experienced fluctuations in the past,” Monempour says.
He remains cautiously optimistic about the industry’s resilience: “Hopefully, as the markets balance out, our drycleaning industry comes out ahead, stronger, more efficient and successful.”
Have a question or comment? E-mail our editor Dave Davis at [email protected].
