Why Retaliatory Tariffs on Playing Cards?

The bad news for the legal gaming industry is that Canada and the European Union have imposed a ten percent additional import tax on playing cards manufactured in the United States. The only good news, if you can call it that, is that China has so far not followed suit.

The new added import taxes are expressly called “retaliatory tariffs” by our trading partners – retaliation for tariffs President Donald Trump unilaterally imposed on some products exported from Canada and the EU into the US.

But why playing cards?

For Canada and the EU, winning this trade war means returning to the way things were before Trump interfered with the up-to-then smoothly operating world markets. Since Trump has stated no goals, there is no way for Canada or the EU to do whatever it is he may want. So, the question for them becomes, “How do we put political pressure on Trump to back off?”

These retaliatory tariffs are meant to send political, not economic, messages. They are only incidentally protectionist. Canada and the EU are not acting to protect their local playing card manufacturers. They would gladly eliminate whatever new barriers to trade they have created.

This is obvious from the size of the retaliatory tariffs: they are always exactly as large as Trump’s new tariffs. So, every time Trump announces another, say, $12.5 billion in tariffs imposed on goods from Canada, Canada responds by imposing another $12.5 billion in tariffs on specific goods imported from the US.

They are also extremely well targeted for maximum political impact on Trump and his supporters and enablers in the Republican Party.

The perfect retaliatory tariff makes US products imported into the foreign country expensive, with a local producer ready to take the American’s place, so prices won’t rise too much. Canada, which has so many maple trees that it has a maple leaf emblazoned on its flag, naturally imposed a tariff on American maple syrup.

My favorite Canadian retaliatory tariff is chocolate bars.[1] The largest US chocolate maker is Hershey’s, headquartered in Hershey, Pennsylvania. Trump carried Pennsylvania by the thinnest of margins. And none of the Hershey workers who will now lose their jobs are going to be enthusiastic Trump voters in 2020.

Canada also targeted paper towels and toilet paper, which will hurt the Scott Paper Company, also located in Pennsylvania. And it put a tariff on orange juice, an obvious reference to the swing state of Florida.

Canada and the EU are also focusing on specific US political leaders. Which brings us to playing cards.

Bicycle®, Bee®, Aviator® and many others are all made by the United States Playing Card Company, located in Kentucky. Not coincidentally, Kentucky is represented in the US Senate by Mitch McConnell, the Majority Leader. Both the EU and Canada imposed a 10% tariff on playing cards.

And both imposed tariffs on Kentucky’s other major export: Canadians called it “whiskies;” Europeans used the American term, “bourbon.”

Another political advantage of hurting the US playing card industry is that the major buyers of cards are casinos. And the Trump name is associated with casinos, even though he doesn’t own any at the moment.

So, even a president who is notorious for not reading might learn that his tariffs are resulting in jobs lost in Kentucky, and lost profits for every American company that owns or operates a casino in Canada or Europe.

About the only good news for the gaming industry is that the PRC has not yet followed suit. China did impose a tariff on “whiskies.” But so far playing cards can still be imported tax free.

Chinese Mainlanders do not buy many decks of playing cards from the US. But casinos in China’s Special Administrative Region of Macau do.

In 2004, I visited the Sands Macao three weeks after it opened as the first American owned casino in China. As part of the tour I got to see the room where the Sands destroys playing cards by the thousands, every day.

The most popular casino game in Macau, by far, is baccarat. Chinese players are much more attracted to this card game than they are to slot machines.

Chinese gamblers like to “squeeze” their cards. I have spoken with longtime Chinese baccarat players who believe that they can literally change the numbers on their cards, even after the cards have been dealt. This superstition results in cards with bent corners. So, the Sands and other casinos destroy playing cards after being used just once.

There is no easy way for a casino to pass on higher costs. If playing cards become more expensive in Macau, casinos can’t raise the price of bacarrat. So tariffs on US playing cards means either shifting to cheaper cards made in other countries, which can lead to security concerns, or taking a direct hit on the casino’s bottom line.

Don’t be surprised if China decides to follow suit. A tariff on US-made playing cards imported into Macau would not only hurt Kentucky-based US Playing Card Co., it would mean less profits for the US companies that own Macau casinos.

Sheldon Adelson has given more money than anyone else in American history to political candidates, almost all of them Republicans. His Macau operations include not only the Sands but the Venetian, the fifth largest building in the world when it opened on the Cotai Strip. His other casinos are in Nevada, another swing state; Singapore; and Pennsylvania.

Steve Wynn was another major Republican donor. Wynn’s casinos in Macau still bear the Wynn name, although they are now controlled by Elaine Wynn. The other Wynn casinos are also in Nevada and now Massachusetts.

MGM’s casinos in Macau are not quite as important to the survival of that company. But MGM is one of the largest employers in Nevada. Like Adelson’s Las Vegas Sands and Wynn Resorts, MGM Resorts International has thousands of shareholders in the US, many, if not most, in Nevada.

Macau casino stock prices began to fall when Trump began his trade wars. The more Trump imposes tariffs on China, Canada and the EU, the more those countries will impose retaliatory tariffs. For the gaming industry, this means layoffs, lost profits and lower stock prices.

Let’s hope this doesn’t spread beyond playing cards and bourbon.

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© Copyright 2018. Professor I. Nelson Rose is recognized as one of the world’s leading authorities on gambling law and is a consultant and expert witness for governments and industry. His latest books, Gaming Law in a Nutshell, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.

[1] There are actually two tariffs: 1806.31 is for filled chocolate bars; 1806.32 is for bars not filled. https://qz.com/1318475/the-full-list-of-229-us-products-targeted-by-canadas-retaliatory-tariffs/ .