Headlines in all the news media today are focused on the Trump Administration’s latest international wrangle with the nation’s biggest economic foes and allies. I’m talking about raw material import tariffs. It doesn’t matter about your politics, tariff wars will clearly have an effect on businesses dependent on targeted materials.
In the HVAC Industry, the major products we sell, install, and service are made from two commodities targeted for tariffs — aluminum and steel. The fear is costs for these materials will rise (they already have). This will lead t0 manufacturers raising prices to distributors (it is starting to happen). That means cost increases to contractors. You may already be feeling the pinch.
Many economy pundits warn of the dangers such price increases will have on the overall economy. They talk about things the government should be doing to alleviate those issues.
Some Background on Tariffs
History shows that the United States has been embroiled in trade wars in the past. The good news is that we survived. The question is — did those tariffs have the intended outcomes? In this case, President Trump is using the tariff as leverage to reduce our deficit by forcing trade partners to play fair. We can only hope that it works.
The fact is tariffs are just another tax. It doesn’t matter if you are a contractor or a consumer, you will pay what the market will bear. So let’s look at this from a slightly different angle.
In the Performance-Based Contracting™ world, you sell services that go well beyond the cost of the equipment itself. You focus on your customers’ comfort, safety, health, and energy efficiency issues within their homes.
This not only includes maintaining equipment, but also involves truly understanding how that equipment works in conjunction with duct systems and other factors impacting airflow.
In the Performance-Based Contracting world, your services can give customers better ROI despite tariffs causing equipment prices to rise.
Win-Win with Performance
By testing and measuring, you not only see how the equipment is functioning and whether it is delivering the comfort and efficiency promised, you can also prove all of that to the consumer.
With commodity price increases based ultimately on international steel and aluminum tariffs, it becomes even more incumbent that you help customers get the very most out of their comfort systems. By selling air upgrades and duct renovations you could provide consumers better returns on their investment (ROI), because those actions will improve the longevity of their system and its performance.
How? The amount of time necessary to achieve ROI will actually be shortened by making systems perform better and lowering your customers’ utility bills. And as a result, you can actually earn more net profits while guaranteeing customer comfort and better energy efficiency.
Tariffs: Just Another Tax
Tariffs are just another tax. They do make life for the average American a bit tougher in the short term. In the long term they MAY create a fairer international economic marketplace which would really help to reduce this nation’s trade deficits. That certainly would be great for the American people.
Only time will tell on that score.
But if you are providing consumers performance-based premium services with shortened ROIs, these taxes could ultimately benefit your bottom line. Think about it.