How U.S. Tariffs Will Impact All Outboard Prices
The marine industry world-wide is essentially paralyzed not knowing which of its options to activate given the 24% tariff on outboard engines implemented in the last two months by the Trump administration. The whole industry is waiting to learn what the “deal” will be between the U.S. and Japan. Japanese auto imports are obviously the big issue for both countries, and there the tariff is 25%.
The outboard engine tariffs are likely a tertiary issue for the negotiating teams after cars, agriculture, electronics, medical devices, steel, textiles, e-commerce and others, and one wonders how much serious attention will be given to the specific issues involved in this one very small category of trade. It seems the best can be expected is a 10% tariff, which seems to be the default minimum for most goods in most countries.
Consumer Caveat
Available inventories of engines at pre-tariff prices are slowly being sold off, so stocks of pre-tariff Japanese engines are not yet down to zero, but it is only a matter of time until they run out.
If you are a consumer planning to buy a Japanese outboard engine, or a boat powered by one, then our advice is to get your checkbook out and buy the engine(s) TODAY. They will never be cheaper.
If you have contracted to buy a boat that is to be powered by a Japanese engine, make sure that an engine is in inventory for your boat, and it has been assigned to the boat. Get the engine serial number to be sure. Chances are the builders will be under extreme pressure from dealers to make sure their customers have engines, and at pre-tariff prices at that.
Typically, builders keep a 30-day supply, or more, of engines in inventory, and since boats have been slow to move the last 12 months, in many cases there is dealer inventory. Jump on it.
Japan is an Easy Target
This is not the first tariff rodeo for Japanese-manufactured outboard motors. In 2004, Brunswick Corp., owner of Mercury Outboards, filed an anti-dumping petition against Yamaha—and by extension, the other Japanese outboard brands – with the U.S. Dept of Commerce (DOC). In this case, “dumping” essentially meant selling products abroad for less than their fair value. The DOC imposed a 18.98% duty on Yamaha engines.
But in February 2005, the U.S. International Trade Commission rejected Brunswick’s claim, stating that there was no injury to U.S. manufacturers, and nullified the 18.98% duty.
The Backstory
For decades, the outboard business in the U.S. was a cozy duopoly between Mercury and OMC (owner of Johnson and Evinrude). While both companies competed on features and had active marketing programs, there was pricing stability. Boat builders were largely independently owned and offered both Mercury and OMC engines—take your pick.
The first challenge to that duopoly came when Yamaha entered the U.S. market.
In a strategic masterstroke, Yamaha hired Sylvan “Ham” Hamberger to be the division manager of Yamaha Motors in the U.S. in 1982. Ham had spent 22 years at Mercury Marine, working his way up to vice president and general manager of worldwide sales before being cashiered in 1979 by Brunswick. He knew virtually every boat builder on a first name basis, as well as most major boat dealers in the U.S. Plus, he knew what would work quickly, how builders and dealers wanted to be treated, and he knew what consumers wanted, as well. In a couple of years, Yamaha had 15% of the market. (It went on to gain 28% of the market at one point, we’re told.)
The Era of Buying Transoms
Soon, Hamberger had signed supplier contracts with a number of saltwater boat builders whereby they promised to offer only Yamaha engines—something that made life easier for the builder and dealer, and was an important cost-savings program because they got a deep discount on the engines and didn’t have to inventory several different brands. The downside was that it robbed consumers of their choice of engine brands to power their boat.
Mercury and OMC took this strategy a step further. They simply started buying as many large-selling outboard-powered boat brands as possible. They were thus assured of putting their engines on the transoms. If you’ve ever wondered why Brunswick owns so many boat brands, this is the reason.
The End of OMC. Eventually, the debt burden of buying boat companies, the competition from the quality of the Yamaha 4-stroke, Mercury’s Mariner 4-stroke brand which had a Yamaha powerhead (the “Merc-a-ha”) — the debt service on buying the boat brands, and its own quality problems, overwhelmed OMC’s balance sheet. It declared bankruptcy on December 22, 2000.
By that time, the duopoly was history.
Weaponizing Tariffs, V 1.0
In 2004, Mercury introduced its own all-American supercharged 4-stroke engine – the only one built in the U.S. The other major 4-stroke brands all came from Japan and were naturally aspirated. Later in the year, Brunswick filed an anti-dumping petition with the U.S. Dept. of Commerce (DOC). The DOC quickly ruled that Yamaha and the other Japanese brands were selling their products for “less than fair value” and placed a 18.98% duty on all Japanese engine imports.
For several months it seemed as if the 18.98% would slow sales of the Japanese engines. But, of course, Yamaha appealed the DOC decision.
On Feb. 2, 2005, the U.S. International Trade Commission (ITC) nullified the DOC duty, ruling that there was no injury to American manufacturers by the Japanese brands. There would be no additional tariff.
Inflation is a Key Metric
Now, almost exactly 20 years later, a similarly-sized tariff threatens to upset the equilibrium that had prevailed for so long.
During the last 20 years, Mercury—being the market leader with something like 50% market share, perhaps more (only it knows for sure)—should have had textbook pricing power, and largely has.
When we examined Mercury engine pricing for the last 10 years, we found that price increases were only slightly higher than core U.S. inflation for the period. The average U.S. core inflation rate for those 10 years (2014-2024) was 2.83%.
But when we examined the Japanese core inflation rate for the same 10-year period, we found quite a different story. There, inflation averaged just 0.98%. Yet, the prices of Japanese engines sold in the U.S. rose right along with the Mercury outboard price increases, both of which were modest until Covid hit.
Core Inflation Rate Comparison
The average core inflation rate for the two countries over 10 years was 2.83% for the U.S. and 0.98% for Japan—per year. When the inflation rates are compounded over the ten years, we find America’s was 31.4%, and Japan’s domestic prices increased 10.9%.
This tremendous gap in national inflation rates meant the Japanese outboard companies could also have pricing power—but of a different kind: the power to keep price increases in U.S. among brands with competing models -- reasonable.
A Symbiotic Relationship
Mercury outboard engines of 60 hp and lower are all sourced in Asia—some from Japan and some from China. When we look at the retail prices of 60-hp engines and 250-hp engines from all brands, we find an interesting dichotomy. The figures below are from the NMMA for the period 2013–2023:
Average 10-Year Increase in All Outboard Average Retail Prices in the U.S.--
250-HP Outboards: +22%
60-HP Outboard Engines: +9%*
The above comparison, together with the relatively low Japanese inflation rate and lower hourly pay rate for Japanese factory workers versus American labor rates, all indicate the Japanese brands could underprice Mercury if they wanted to -- the threat of anti-dumping duties notwithstanding.
Also note that the rate of price increases for 250-hp outboards sold at retail in the U.S. increased far less—22%—than the compounded U.S. core inflation rate of 31.4%. Indeed, boat price increases for that 10-year period rode much higher than core inflation rates. Could it have been the low Japanese inflation rate slowed outboard price increases on the popular 250-hp models, or that the traffic just couldn’t bear higher prices? We’ll never know.
Creating a Win-Win for Companies and Labor
What the Japanese outboard brands seem to have done—without government intervention or tariffs—was to level the price playing field in the U.S. by pricing their products close to that of Mercury products. By doing that, they have at once protected the American worker while cushioning their own balance sheets from the cost of far more stringent labor laws in Japan, as well as cover added transportation costs.
In Japan, laying off workers in economic downdrafts is officially discouraged by the government, so long as the company can remain solvent. The result is not maximizing their bottom line with layoffs, and keeping as many of their workers employed as possible. In the U.S., companies need only give workers 60 days’ notice before laying them off.
A Level Playing Field
When we consulted the J.D. Power Boat and Outboard Engine Price Guide—which is available to VIP BoatTEST members—we discovered the following outboard pricing data for 2024:
2024 Price Comparison from J.D. Power
250-hp Model — Suggested List Price
- Yamaha F250ECB: $30,545
- Honda BF250DLDA: $28,789
- Tohatsu BTF250DLRA: $28,620
- Suzuki DF250APL5: $28,355
- Mercury 250CXL: $27,395
150-hp Model – Suggested List Price
- Honda 150: $21,511
- Tohatsu 150: $20,320
- Yamaha 150: $18,830
- Suzuki 150: $17,888
- Mercury 150: $16,590
Notice that the Japanese brands, in these two examples, are being careful to make sure their products are priced slightly higher than those of Mercury. Other data from J.D. Power indicates that average retail rates follow roughly the same relationships.
Mercury Is Not Immune from Tariffs
Even though Mercury’s powerheads and main components are made in the U.S. for the larger engines, Mercury’s outboards under 60 hp are made in China or Japan. Even some components on the large engines are made in China, including propellers, impellers, piston rings, and some electrical components, according to sources we checked.
The aluminum and steel used in the powerhead, driveshaft, and gears—even if sourced in the U.S.—will see an increase in pricing because metal suppliers will have a “blended” rate. While this might not be literally true, all suppliers must remain competitive.
About 30% of the steel and 50% of the aluminum used in making American products is imported.
The new blended rate will certainly be higher for metals, but not more than the normal price increases we’re used to—on average, just 1% or so of the final product cost, says one source. But there are lots of bits and pieces that will also contribute to higher costs.
Exchange Rates
Japan has had a declining population since 2008 due to a low birth rate, aging population, and limited immigration. As a result, it must encourage exports to keep its factories humming, and the Japanese government maintains a weak yen to make it easier to sell products into foreign markets.
At the same time, the U.S. dollar has strengthened against the yen. The dollar could buy about 40% more yen in 2023, than in 2013. That means that Japanese outboard engines could have been about 40% less costly for Americans due to the exchange rate alone from 2013 to 2023.
So, in addition to there being far less inflation in Japan than in the U.S., which keeps the “real” price of Japanese goods down, the exchange rate could also make Japanese goods cheaper in the U.S. because of the strong dollar.
The “Opportunity” Mark-Up
There is one other cost that is rarely talked about because it is hard for a third party to document: that is, using inflation—and in this case, tariffs—as camouflage for added mark-up to increase margin. A report in the Federal Reserve Bank of Kansas City Economic Review in 2023 said that its studies indicated more than 50% of price increases in its analysis could be traced to this culprit: “opportunity” mark-up.
In the period of 2022–2023, when inflation was running at 8% and outboard engines from any brand were in short supply, according to J.D. Power, Mercury raised the price on its 300-hp V8 by 7.4%. But in the same year, retailers raised the price on the Mercury 300s an average of 12.4%. They could get it because large outboard engines were in short supply. So, in this case it looks as if retailers, not the engine makers, were taking “opportunity” mark-up.
(In defense of the retailers, they also take big hits to mark-up in times of financial stress and weak sales, as we are going through right now.)
Where Will Outboard Engine Prices Go?
When we asked folks at the American divisions of the three major Japanese outboard companies, we discovered that all are waiting to see where the dust settles with the U.S./Japanese tariff discussions. No one was offering to speculate on future pricing, and all are waiting for the results of negotiations.
That leaves us to our own devices, and we are not experts on outboard pricing. But from what we’ve discovered, here’s what we think is going to happen--
- Prices of all outboard engines will go up no matter what the tariff is.
- All outboard brand pricing will remain clustered together, as Japanese brands chose not to disrupt 20 years of pricing equilibrium.
- Prices of outboard powered-packaged boats (most of them), will not only go up, but will go up far higher than the inflation rate, or the rise in engine prices warrant.
- More consumers will be priced out of boat buying, continuing a trend that has gone on for 25 years or more.
- No jobs will be saved in the U.S. Because of lower outboard engine and boat sales, there can only be a loss of jobs in the U.S. After all, no one needs a boat or an outboard engine.
The net-net: We can find no silver lining in the new tariffs for the boating consumer or the boating industry, as a whole.