Business leaders hate uncertainty. It prevents proper planning and often creates an environment where luck is as important as a sound strategy.
President-elect Donald J. Trump thrives on chaos. He uses his messaging to keep adversaries (sometimes even friends) off balance and open to his frenzied negotiating style.
In January 2025, those two opposing approaches to risk management will collide when Trump is sworn in as the 47th President of the United States, and tariffs become ground zero in the Trump economic plan.
Mr. Trump frequently declares his “love” of tariffs on imported goods for their ability to generate revenue, protect U.S. industries from outside competition, and create domestic jobs.
Experts continue to debate how tariffs will impact the macroeconomy. For those of us in the golf business, it is essential to understand the potential impacts on golf brands and the retail price of products.
In their simplest form, the U.S. government imposes tariffs on imported goods. The company initiating the product’s entry into the country is responsible for paying the tax, which Customs and Border Protection collects before the goods are released into the United States. To clarify a point often mistakenly made, tariffs are never paid by the government of the country where the goods originate; they are a business expense borne by the individual companies that import the goods.
Trump’s most recent tariff threats focused on an all-encompassing 10 percent increase for all imported goods, 25 percent on goods from Mexico and Canada, and 60 percent to 100 percent on Chinese products. In the previous Trump administration, tariff threats were frequently made but never implemented; rather, they were used as a bargaining chip.
Many economists speculate that the cost of 2025 tariffs will ultimately be borne by the U.S. consumer, raising prices, fueling inflationary pressure, and ultimately bogging down economic expansion. Others believe tariffs will have a one-time impact on the cost of goods, perhaps driving prices minimally higher initially, but will not be a long-term economic drag.
What about golf?
Conversations with golf industry leaders suggest every major company is taking the talk about tariffs seriously. Still, most have not substantially changed their current strategies—at least not for now. However, many are considering potential options and preparing contingency plans if the facts change and tariffs become a reality rather than hypothetical.
The impacts of increased tariffs will vary widely within the golf industry, depending on the specific direction taken by the administration. The size of the tariffs, the countries targeted, and the products that receive exemptions will all impact how the costs are passed down to the consumer or absorbed by the companies themselves.
The bottom line is that tariffs do not benefit most golf businesses because they raise input costs. If the extra costs of a tariff are passed on to the consumer through higher retail prices, golfers will be inclined to purchase less or to trade down to lower-priced goods, neither of which is good for most companies’ P&Ls.
Conversely, some brands that import products may choose not to raise prices because they don’t want to impede demand. Ultimately, those brands will have lower gross margins and profits.
Some brands may be immune to or less impacted by the detrimental effects of tariffs because they manufacture in the United States. Because of their domestic sourcing strategy, those companies may see a competitive advantage.
How will tariffs impact various product categories?
Premium golf balls: Many of the premium-priced major brands/models are manufactured in the U.S., and their prices will not be driven higher due to tariffs, though the brands themselves may raise prices for other reasons.
Mid-grade/value golf balls: Most of these are manufactured outside of the U.S.; thus, the prices of these balls will potentially move higher due to the tariffs unless the brands or the trade decide to take reduced margins.
Golf clubs: Years ago, most golf club foundries and assembly operations were concentrated in mainland China. However, as costs to do business in China rose and Trump’s first-term tariffs took hold, a significant portion of the manufacturing moved off the mainland to other countries but remained in Southeast Asia. Many golf club manufacturers, but not all, will potentially be negatively impacted by the tariffs, either forcing higher prices that will reduce demand, or lower margins.
Golf bags: Like clubs, golf bags used to be primarily manufactured in mainland China; however, a significant amount of the manufacturing capacity has moved to other Southeast Asian countries and may escape the worst of the impact.
Apparel and golf shoes: These are the categories most exposed to the proposed tariffs. They are most likely to see immediate short-term impacts on the cost of landing goods back in the U.S., negatively impacting margins or forcing prices higher. Over the long term, many brands will likely look for alternate sourcing locations if they have not already done so.
Other potential impacts
Moving from an approved vendor in one country to another location in a different country or region can be highly challenging for any organization. And if it is a capital-heavy operation like a foundry, it can take years, along with a significant investment in local infrastructure, such as power, roads and water, to switch locations.
Tariffs can change with the stroke of a pen, turning what was once a tariff-free country into a heavily taxed zone without any significant warning. This creates massive uncertainty for all manufacturers and brands that import rather than produce domestically.
And golf course operations are not immune, as building materials, some raw materials used for irrigation, and some fertilizers/fungicides/herbicides are imported into the United States. Tariffs on Canadian lumber could have a particularly severe impact on the construction of new golf course clubhouses and properties, as well as on capital improvements to existing facilities.
Implications of Trump-o-nomics 2.0 for golf
The additional expense of a tariff on imported products will negatively impact the golf business, as either margins will become compressed from higher cost of goods, or some companies/brands will choose to raise prices, negatively impacting demand.
Some brands and products that already have U.S.-based manufacturing may benefit as their financials will be less directly impacted by the additional expense pressures.
However, production for some categories, like golf clubs, which are made in foundries, is not easily moved to the States, as environmental restrictions would make it cost prohibitive. Most production will likely remain out of the U.S., meaning either higher costs for the golfer or lower margins for the manufacturer.
A founding partner of Golf Datatech LLC, John Krzynowek has spent the past 25 years helping golf brands navigate the ups and downs of the marketplace for equipment and apparel. Prior to that he held senior management roles in golf equipment sales, marketing, and product design.