Tariffs could lead to bankruptcy of Akron-based EarthQuaker Devices, CEO says

Big Monk said:
I wonder how much is Tariffs and how much is just that Earthquaker doesn't seem to be as popular as they once were.
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I read that EQD is trying to make a point about the effects of policy. That they are standing up against this. If the bottom line is that it cannot possibly be due to tariffs, thats blaming the announced victim/ or whistleblower instead of supporting them.
 
jwin615 said:
They want to break/own it all.
Though, I don't find it a bit odd/perturbing that EQD had 52(?) employees and ownership has a lean on their house. I would think covid survival but they should have qualified for a PPE or whatever it was called.
It kinda seems like not the wisest choices were made, or at least poorly informed ones. I don't know their books or business. I'm also one who would leverage the farm...
But with the success/growth they have had...
Maybe they got a house they shouldn't have.
The old grow your business or grow your wealth-cant grow both. Pure speculation on my part but if you bought a McMansion and then borrowed against it... Yeah. The bank is going after the real estate.
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maybe - but if the thing your business needs is liquidity then in a normal economy keeping funds as liquidity in business and having larger long term debts that you pay out of your wage/dividend from the company makes sense
 
Big Monk said:
If people want to survive, they’ll have to absorb that 40-50% new tariff. At least for the time being.
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I think this is the point EQD is trying to make. Survival isn’t a decision. It either is/isn’t possible. What if you CANT absorb an unnecessary 40-50%. EQD has gotten a ton of credit/acclaim for their business model. Now all of a sudden it’s “oh well, too bad.” EQD isn’t a business; the people who profit from the company do so because their labor created the profit, not because they invested the capital. Businesses are pluses and minuses on a spreadsheet. EQD is a bunch of people earning a living…
 
The main issue is that tariffs have been applied indiscriminately with no thought into how to target them for the intended goal. If the goal was to "bring manufacturing back to the USA" then the way they have been applied shows a complete lack of understanding in how that might work. Nobody is going to build a factory overnight, especially if the tariff disappears a few days later. And in many cases products hit by the untargeted tariffs - for example capacitors and resistors - will make producing "USA made" products uncompetitive.

It's the lack of any planning, research or understanding in imposing massive, sweeping punitive tariffs which produce wildly unexpected and disastrous results. It's not even using a sledgehammer to crack a walnut. It's using a wrecking ball to thread a needle and derailing a bunch of trains instead. (And I must apologise to the English language. But it was well intended.)
 
Big Monk said:
Obviously Tariffs are affecting everyone differently but I can't see what's happened so far leading directly to an established company like them risking going under unless they were close to the edge already.
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I also don't know the actual story here, but it's not atypical for small businesses to make certain business decisions (expansion, necessary move to a new building, etc) that expose them to elevated risk for a period of time, and then get killed by economic changes or other circumstances beyond their control. I.e., it can just be bad timing / bad luck. Almost nobody expected anywhere near this level of tariffs, which are insane - even at 30%. And this tariff insanity is happening only 3 yrs after businesses could start recovering from the COVID disaster. The orange guy is just a chaos machine.

E.g., imagine you're a superb chef and you save up for years and then finally invest in starting your dream restaurant business ... and it's January 2020...
 
Going into business is always a risk. It takes money to set up a business and the business may fail for all sorts of reasons, both within and out of the potential entrepreneur's hands. And once established change can make reinvestment necessary, and no less risky. Tech changes, the market moves on to different service needs, blah bah blah...

If you operate on low margins there is little room for error. Tariffs the size of those introduced would make it very, very difficult for any business relying on stock or supplies from outside the US to compete. And it seems it was a solution looking for a problem. Having a "trade deficit" is an imaginary problem. It just means that you buy more from somewhere than they buy from you. I don't expect my local cafe to buy anything from me for the value of the coffee I buy from them. Nor do I expect my local supermarket to. Or even the guitars stores I frequent. It doesn't mean that my cafe is "treating me very badly".

The whole thing is idiotic and ignorant.
 
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