That’s why we’ve ended up growing in Mexico, to about 850 employees. We have a facility in Norcross, Georgia, and a facility in Houston, Texas, that do what we call “dailies”—the stuff that the uniform industry orders today and they need on their doorstep tomorrow. If an order comes into Norcross or Houston for name tags and company items by three o’clock in the afternoon, we ship same day.
Our Mexico facility works on the stuff that’s more for the retail industry, the stuff that takes a lot of people to produce. They also do raw materials for the United States. The way we’re able to do these custom-made products so quickly in the United States is we have blanks. Mexico also makes the blanks for us, and they ship it to us.
Tariff concerns: Basically, we’d take a 25% hit on the product coming in from Mexico. Our customer base is the U.S. and Canada. The advantage we have in Canada is 90% of our stuff for Canada is produced inside Canada. What isn’t produced inside Canada is produced in Mexico. And Mexico and Canada don’t have a problem; they still honor the USMCA. It’s the person in the middle that everybody seems to have to worry with.
The speed to market helps us at least have enough margin to be able to charge enough, to keep enough margin. But all of a sudden we take a 25% hit on Mexico, and it’s just not sustainable.
Tariff strategy: The retail business in Mexico is very labor-intensive and growing like a weed because we’re able to do things so quickly. We’re not going to move that piece right away out of that facility. It requires a certain amount of skill set, and the logistics of moving that amount of equipment quickly is just not going to happen.
But we have been looking at using automation and artificial intelligence for the supply-chain side of the business. The blanks that we manufacture are not a cost that’s easily passed on to the end user. That stuff looks like it will to the Dominican Republic. We won’t be moving entirely out of Mexico; it’s more we’re opening up enough expansion to be able to do the whole thing more efficiently.
The tariffs are a problem, but they aren’t the root cause of that. Mexico is not the cheap labor it was 18 years ago. Our team in Mexico is phenomenal, but we saw this coming a year or two ago.
One of the goals we set a few years back was to double the size of the business without doubling the number of people, because 1,200 people is a lot for a $75 million business, which was our revenue at the time. It would be a perfect time if we’re going to set up new automation, to set it up somewhere new and start expanding in that direction.
Fortunately, right now, the Dominican Republic imports more from the U.S. than they export to the U.S. So they’re not a danger for the tariffs. For right now, that’s a good thing, but you never know what five years will bring.
Message to Washington: The only problem is the uncertainty. Let’s say [Trump] put a 25% blanket tariff on everything coming out of Mexico. But will he honor the de minimus [tariff exemption] portion of that for small packages? Because really, every one of our packages is a small package. Today, we clear FedEx (international) as one big package. But if the tariff happens but the de minimus is honored, then I would just go to shipping each package individually. It would help defer some of the tariff. If the de minimus is not honored, then it turns into, is he going to honor any of the USMCA.?
There’s so much ambiguity right now. We’re planning as if it’s the complete 25%, no de minimis exemption, and you’ve got to pay it all. What would that look like? If anything less than that happens, we’ll at least have had the worst-case scenario covered. But it’s a mess.
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