Business owner voices concern about financial struggles: Ohio-based company EarthQuaker Devices faces potential bankruptcy due to tariff uncertainties, jeopardizing employees' livelihoods and their reliance on company income to support their families.
Pedal Makers In Peril: EarthQuaker Devices & the Tariff Nightmare
Ohio-based pedal maker extraordinaire, EarthQuaker Devices, is teetering on the brink of bankruptcy, a grim consequence of the recent tariffs. The company's CEO and co-founder, Julie Robbins, pleaded her case before the U.S. Senate Committee on Small Business & Entrepreneurship last week. Robbins' sharing of their financial woes, reported by the Akron Beacon Journal, painted a dire picture.
"We've perfect credit, and we've never missed a payment," Robbins stated, "but we're rapidly running out of liquidity."
According to Robbins' testimony, the tariffs would drive up the cost per pedal from just 2 cents on April 27 to a staggering $12.80 by December 28 – a colossal 640% increase. Exporting the pedals, a crucial part of their business, has been problematic, especially given the ongoing trade war. The company typically exports 30% to 40% of their finished pedals, earning them the Exporter of the Year distinction from the U.S. Small Business Administration in 2019. However, the current export activity has proved disastrous.
"This year our exports are down as much as 50% to 100% in some countries," the testimony lamented. "Our customers say this is due to anti-American consumer sentiment and the global financial fallout from the chaotic rollout of U.S. tariffs. It is devastating to see America's reputation fall so swiftly."
Adding to the woes, nearly all the raw materials needed for the pedals hail from abroad, with around 75% sourced from China. The fluctuating tariff percentages make it impossible for the company to calculate the exact costs of the raw materials upon their arrival at U.S. ports and clearance through Customs and Border Protection.
For Robbins and her husband, EarthQuaker Devices's president, Jamie Stillman, losing the company is unacceptable. They've taken out $1.2 million across five loans and used their family home as collateral to keep the business afloat. Laying off employees or cutting pay or benefits is equally unthinkable, given the company's reliance on their institutional knowledge and the employees' dependence on their income. Robbins proposes reversing the tariffs or exempting small businesses as a solution.
Last week, President Trump announced a "total reset" in U.S.-China relations, with both countries lowering their respective tariff rates for 90 days. While this step may offer some respite, it does not completely mitigate the ongoing negative impact on manufacturers and retailers across the country.
Other companies have shared similar concerns. NAMM (The National Association of Music Merchants), led by President and CEO John Mlynczak, has welcomed the changes but emphasizes that the 30% tariff on imports from China, along with the 10% tariff on imports from all other countries, will continue to wreak havoc.
Companies like Electro-Harmonix and Morgan Amps have also voiced their concerns, with Electro-Harmonix founder, Mike Matthews, stating they have enough inventory to weather the storm for a brief time. However, they will inevitably be affected by increasing costs if the tariffs persist. Meanwhile, Morgan Amps has confirmed that the tariffs will noticeably impact amp prices.
The music equipment industry is feeling the heat of these tariffs, with small businesses like EarthQuaker Devices and Electro-Harmonix bearing the brunt. Let's hope for a swift resolution that saves these custom pedal creators and many others like them.
- The CEO of EarthQuaker Devices, Julie Robbins, stated they have perfect credit and have never missed a payment, but are rapidly running out of liquidity due to the tariffs.
- The tariffs would increase the cost per pedal from just 2 cents on April 27 to $12.80 by December 28, a colossal 640% increase.
- Exporting the pedals, a crucial part of EarthQuaker Devices's business, has been problematic due to the ongoing trade war, with exports down as much as 50% to 100% in some countries.
- For companies like Electro-Harmonix and Morgan Amps, the tariffs will inevitably increase costs if they persist, while Morgan Amps has confirmed that the tariffs will noticeably impact amp prices.
- The music equipment industry, particularly small businesses like EarthQuaker Devices and Electro-Harmonix, is feeling the heat of these tariffs and needs a swift resolution to save these custom pedal creators.
- NAMM (The National Association of Music Merchants) has welcomed the changes, but emphasizes that the 30% tariff on imports from China, along with the 10% tariff on imports from all other countries, will continue to wreak havoc on manufacturers and retailers across the industry.
