Issue link: https://iconnect007.uberflip.com/i/1531014
20 SMT007 MAGAZINE I JANUARY 2025 e best case with China is an overarching inflationary environment, and in addition, a migration away from China is inflationary for the industry. ere is the tariff overhang, which—if it's 100% from China—will not dou- ble the prices; some of it will be absorbed, but some will be passed to the consumer. Looking at all those things, the deflationary curve will be less than it has been over the past 20 years. Worst case, it potentially turns infla- tionary. at's my best guess, based on what I can see so recently aer the election. " ...the deflationary curve will be less than it has been over the past 20 years. Worst case, it...turns inflationary. " We'll see how much actually gets done. In Trump's first four years, being a nontraditional politician, he tried to execute a lot more of what he promised on the campaign trails than most. My guess is he's probably emboldened by the election results to take a harder line on China. Of course, I hope most companies had some type of strategy, no matter who won the elec- tion. It shouldn't be too tall an order to shi some priorities without completely destroying a company. Is it fair to summarize this conversation by say- ing that we need to pay attention to our mar- gins this year because they'll be under attack? Reed: at's fair. My number one message is that I hope you are planning the cost side of your business much more prudently than the sales side because it will be another slow growth period. Plan to protect your margins and base case; if you need to grow upside to your top line, fine. You'll want to cultivate an environment where you are protecting mar- gins. ere's more competition. e inflation is sticky. If there's an upside, it's protecting mar- gins with the ability to investor flex. Johnson: Appreciate the insight, gentlemen. Reed: My pleasure. SMT007