By Matt Ginsburg, Managing Director, Huntington Distribution Finance†
Key takeaways
- Tariffs are often used to protect domestic industries or influence trade negotiations. In the marine sector, tariffs could materially affect component costs and pricing strategies.
- The strategic intent behind tariffs may include protection, political leverage, and revenue generation, all of which can have short-term and long-term economic impacts.
- Financial preparedness through strong liquidity, cost control, and careful inventory management can help marine businesses absorb tariff-related disruptions.
While many businesses were recovering from an economy rocked by a global pandemic, tariffs were introduced on materials like aluminum and steel – key imports for the marine industry. Though 95% of boats sold in the U.S. are made in America‡, manufacturers and distributors rely heavily on global supply chains for marine components. It’s difficult to accurately predict the benefits and drawbacks U.S. consumers and businesses will experience until the details are understood. The level of tariffs, countries involved, and the possibility of reciprocal tariffs can change overnight.
However, the uncertainty alone of what the future holds can delay planning, purchasing, hiring, and expansion. The impact on dealers and manufacturers has wide-ranging implications for the economy. The U.S. recreational boating industry is crucial to the country’s gross domestic product by supporting more than 36,000 businesses and 812,000 jobs, and generating about $230 billion of economic impact§. Smaller businesses may be less able to cover higher costs and therefore will be forced to pass on much or all of the increased costs to their customers. Some larger businesses might be able to absorb a portion of the increased expenses, thus undercutting smaller companies.
Understanding the basics of what tariffs are and their intended purpose can help leaders build strategies to minimize price increases and collaborate with their partners to weather the storm.
What are tariffs, and how could tariff policy affect the marine sector?
Simply put, a tariff is a tax levied on importers of goods from another country. The tariffs can be specific to certain goods, such as steel, and/or targeted at specific countries, such as Canada. Regardless of the targeted goods and exporting country, the responsibility for paying this tax falls on the company importing the goods. This cost can be absorbed by the importer, passed on to its customers, or a combination of both.
The bottom line is that the costs are not borne by the exporting company or country.
The U.S. Constitution gives Congress the authority to place and collect tariffs and to control commerce with other countries. Tariffs no longer are a key factor in domestic tax policy but have become a device of U.S. foreign policy and trade strategy. Congress now usually acts with the President to set tariff policy by authorizing the President to make trade agreements and enact tariffs.
In the marine industry, tariffs can introduce material cost variability for boats and parts manufacturing that could increase production costs, thereby driving up the overall price of boats. Higher prices combined with persistent inflation and higher mortgage rates makes borrowing more expensive and potentially leads to decreased boat sales – as the sector saw last year. New powerboat retail unit sales fell by 9.1% from January to December 2024, a year-over-year decline that was influenced by economic pressures and fluctuating consumer confidence≠.
2025 began much the same way. The National Marine Manufacturers Association (NMMA)’s latest industry sales data indicates that the overall flat or decreased sales in January could be attributed to elevated financing costs tamping down interest-sensitive purchasesⱢ. On the consumer sentiment side, the Conference Board Consumer Confidence Index® declined 7.0 points in February, the largest monthly decline since August 2021≠.
The strategic goals of implementing tariffs
Tariffs are often positioned as a means to protect domestic industries or gain negotiating leverage in international agreements. There are a few primary objectives behind imposing tariffs:
Protection: To protect domestic manufacturers, especially new and expanding companies, from foreign competition by making imported goods more expensive. The rationale is that more expensive imported goods would be less attractive to domestic companies than producing or sourcing locally – and customers would feel the same. This can create short-term advantages for domestic producers, but it could also drive up input costs for those sourcing components or finished products from overseas. Marine businesses could see a more immediate and financially significant impact from imported engines, electronics, or other parts.
Leverage: To impact the behaviors or policies of other countries that have trade barriers against the U.S. The prospect of the threat or implementation of tariffs may give the host country leverage with the exporting countries and companies. In the case of the U.S. imposing tariffs, this leverage in trade negotiations could allow the government to influence policy or seek concessions from trading partners.
Revenue: To generate revenue for the government imposing the tariffs. The U.S. Treasury collects the funds, which are put into the country’s coffers. The Tax Foundation, a nonpartisan tax policy nonprofit group, created a dynamic tariff revenue model to illustrate this. The dynamic model, which assumes a tit-for-tat counter tariff for the sake of calculation, estimates that a 10% universal tariff would raise $1.4 trillion over the 2025 through 2034 budget windowⱠ. Of course, estimating the revenue generated by tariffs is not straightforward and has high levels of variability. In the marine sector, tariffs on high value imported goods, such as marine engines, navigation electronics, or fiberglass hulls, could represent a meaningful revenue contribution.
Questions and uncertainty around tariffs that businesses face might be unsettling. Like most economic headwinds, businesses can’t predict the future, but they can prepare for it.
What you can do now
You can hope for the best, but preparing for the worst may require concrete steps that over time could mitigate potential tariff repercussions. Because the tariff impacts are likely to be wide ranging, the first place to start is to have capital available to ease immediate price increases wherever they arise. And if the market is volatile, having extra cash on hand may generally be a good idea. Access to capital, whether through internal reserves or credit facilities, can help absorb cost spikes tied to imported components or finished goods. Flexibility in cash flow can be crucial for dealerships or manufacturers carrying high-value inventories.
Uncertain times like these when every dollar counts can be an opportunity to evaluate core cost structures. Consider renegotiating supplier contracts when possible, reassessing the profitability of slower-moving product lines, and exploring outsourcing non-core functions if doing so enhances efficiency. Many of your partners may be doing the same to navigate volatility, and a collaborative approach could lead to savings.
Eliminating slower turning products allows for a lean inventory that in turn can result in enhanced cash flow, lower costs, and in the end, increased flexibility. Being nimble in a volatile business environment could allow your business to take advantage of unexpected opportunities or sourcing changes and avoid burdensome headwinds.
Finally, consider modeling tariff scenarios to better understand potential cost exposures and their downstream effects. Even if exact outcomes remain uncertain, and it does appear this will be the case for the foreseeable future, scenario planning helps support more informed financial responses in a market where adaptability is imperative.
Patience and preparation
In times like these – and the industry has been through some recently – the HDF (Huntington Distribution Finance®) team tells dealers that patience and preparation can help ease the concerns for their business, both known and unknown. Because owners often look ahead six months, a year, or even further out, it is important to be prepared for a downturn, regardless of its source.
This means having sufficient capital, keeping an eye on cashflow, closely monitoring inventory turn/aging, and managing overhead expenses wisely. Carefully maintaining inventory and securing backup sources of liquidity can be the difference between survival and closure. The Huntington Distribution Finance® team can help support your business so it can be on solid footing when dealing with future issues.
