Trump Diamond Business

What will a US Border Tax Mean for the diamond and Jewelry Business?
Scrap Gold Jewelry (Photo: W.Scott / fotolia.com)

What will a US Border Tax Mean for the diamond and Jewelry Business?

President Trump has begun his presidency with a bang, making many of his campaign promises a reality. One such promise, however – that of a border tax on American companies manufacturing abroad – has got many in the jewelry business feel on edge.

Scrap Gold Jewelry (Photo: W.Scott / fotolia.com)

Scrap Gold Jewelry (Photo: W.Scott / fotolia.com)

A recent piece on JCK Online delves onto the proposal and its implications if it ever came true. President Trump has promised, throughout his campaign, to move manufacturing back into the US. He has also tweeted: “Make in U.S.A. or pay big border tax”. Many things are yet unclear: will the border tax apply to products already manufactured offshore or to companies that move their production overseas? And would it apply to mined or farmed products?

In an analysis on Forbes quoted by JCK, critic Steve Forbes explains what may come from the borer tax: “Importers will no longer be allowed to deduct an item as a business expense. To simplify things, let’s say a store imports a pair of sneakers for $40 and then sells them for $50, making a $10 profit on which it would owe taxes. Under the Republican plan, however, the retailer wouldn’t be able to deduct the $40 it paid for the sneakers. In fact, it would owe taxes on the entire $50!”

The National Retail Federation (NRF) is worried that the costs from border tax, however it may be levied, will “give some retailers tax costs three to five times larger than previous profit margins and would dramatically drive up the price of imported merchandise. Even retailers that do not import directly would see higher costs since wholesalers would likely pass along the increase. The vast majority of the imported items affected are not manufactured in the United States, so there would be no opportunity to substitute American-made inventory”.

And now to jewelers: since many of them sell items made overseas, “as well as a high-value products where a few extra percentage points can make a difference”, any taxing on imported pieces – from Swiss watches to Chinese- and Indian-made jewelry, and anything that comes out of the ground, like diamonds and gemstones, could be made increasingly more expensive, and demand could be instantly down.

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