For over 60 years, Auratone has been a key player in the audio industry, renowned for its iconic 5C speakers. Founded in 1958, the company has seen its products become a staple in music production, notably used in the mixing of Michael Jackson’s “Thriller” album. Auratone’s speakers have been instrumental in shaping the sound of songs by artists such as Paul McCartney, ABBA, Lady Gaga, and Taylor Swift. However, like many small businesses in the United States, Auratone is now grappling with the financial pressures brought on by new tariffs imposed by President Donald Trump’s administration.
Alex Jacobsen, the 35-year-old president and owner of Auratone, and grandson of its founder, Jack Wilson, expressed concerns about the impact of these tariffs on the business. Approximately half of the components required for Auratone speakers are sourced internationally, from countries including China and Europe. These parts are then assembled in Nashville or Minnesota before being shipped to a global customer base, with 60% of sales occurring overseas. The imposition of retaliatory tariffs by other countries on U.S. imports poses a dual threat, affecting both the cost of parts and the pricing of finished products sold abroad.
Jacobsen has previously navigated tariff-related challenges since 2018 when a 25% tariff was applied to certain components imported from China. Despite the increased costs, Auratone refrained from passing these expenses onto customers. Currently, the situation has escalated with a new 10% universal tariff and a potential reinstatement of a 145% tariff on Chinese imports. Although a temporary 90-day pause on many tariffs between the U.S. and China provides some relief, the company anticipates incurring at least $20,000 in additional import taxes.
Auratone’s flagship speakers, priced at $749 per pair, cannot bear the burden of these cumulative tariff increases without a significant price hike. Jacobsen contemplates the implications of the 90-day pause, particularly in light of President Trump’s indication that tariffs could rise substantially if a long-term agreement with China remains elusive.
The international nature of Auratone’s supply chain, with parts sourced from tariff-affected countries, complicates the company’s operational strategy. International customers have already begun to increase their orders, potentially in anticipation of price rises due to tariffs. Auratone’s annual sales, typically around $400,000, approached $200,000 by April amid this surge in demand.
President Trump’s tariff policy aims to safeguard U.S. jobs and incentivize domestic manufacturing. However, Jacobsen argues that the tariffs may have the opposite effect, pushing businesses like Auratone to consider relocating production overseas. Europe, where 35% of Auratone’s customer base resides, presents a viable option due to favorable trade agreements.
A CNBC Supply Chain survey indicates that high costs deter 57% of companies from relocating manufacturing back to the U.S., with 81% favoring automation over job creation should they return. Additionally, more than half of surveyed businesses predict that building a domestic supply chain would significantly increase costs, prompting 60% to consider moving operations to countries with lower tariffs.
Legal challenges against the Trump administration’s tariffs have emerged, with a group of small businesses filing a lawsuit to block the new rates, claiming an overreach of presidential power. A federal court has upheld the tariffs, ruling that immediate harm to businesses has not been sufficiently demonstrated.
Despite these challenges, Jacobsen remains committed to maintaining part of Auratone’s production in the U.S., driven by the legacy of the business and his grandfather’s vision. However, he advocates for governmental incentives, such as tax breaks, to support domestic manufacturing. Auratone’s history, rooted in financial assistance from the GI Bill post-World War II, underscores the potential impact of supportive policies.
As the company navigates these complex challenges, Jacobsen continues to explore strategic options to ensure Auratone’s survival and growth in an evolving global market.
Source: CNBC Make It
