Many American shop owners are feeling the fallout from the global trade war. One business owner, Sarah Wells, wonders how her 13-year-old business selling breast pump backpacks and similar products will operate under President Trump’s new import tariffs. Just this year alone, her company has had to deal with the impact of two rounds of tariffs that affected her shipments from China, and she is not alone.
Tariffs
The latest round of tariffs has caused Chinese import rates to rise to an unprecedented 54%, with many business owners facing significant changes in their daily operations or even closure. Though it is unclear how much consumers will pull back, small businesses are going into survival mode.
Retail Sales
The National Retail Federation had forecast retail sales to grow this year. Although slower than in past years, the prediction estimated sales would see pre-pandemic margins between 2.7% and 3.7%. The forecast was released before the magnitude of new tariffs became transparent, reaching global percentages between 10% and over 50%. The trade group says it’s “impossible to predict the magnitude of change on prices and consumer spending.”
Retail giants like Walmart are now pressuring their foreign suppliers for discounts to offset some of the tariffs. Smaller retailers do not have that kind of leverage and are paying the cost literally and figuratively. Most surveys show that retailers will start increasing prices. Then, there is the issue of scaling back.
Pulling Back
Like Wells, many business owners are considering pulling back to cover the exorbitant costs of doing business under new tariffs. Options include shrinking the store’s selection to reduce shipping costs, freezing hiring for the foreseeable future, pausing advertising, scaling back, and going into survival mode.
“What is the need-to-have versus the nice-to-have…Right off the bat, that’s where it will start,” says Jessica Bettencourt, who runs Klem’s general store in Massachusetts. The store, founded 75 years ago by Bettencourt’s grandfather, specializes in hardware, pet food, and clothes.
US-Made Goods are More Expensive
President Trump’s argument in favor of tariffs is that they would jump-start American manufacturing, forcing more companies to source their products domestically. Wells, Bettencourt, and many other small business owners have tried. US manufacturers could not tackle the scale of Wells’ orders, she says, when she looked into making or at least assembling her backpacks and purses domestically. The manufacturers told her the raw materials would have to be shipped from China.
Rising Domestic Retail Costs
Everyday items such as clothes, shoes, toys, and electronics have not been mass-produced in the US in decades, if ever. Smaller-scale operations are costlier, often double or triple the price of overseas options, and typically require imported supplies anyway, as Wells discovered.
Bettencourt uses work boots as a prime example. Her store carries American-made boots for $400 a pair, while imported options are at least half that amount. “Not everyone can buy a $400 pair of work boots,” she says. “So I do want to always look at that US-made product first, but I also have to offer my customers what they can afford.”
Small business owners like to be in control of their products and pricing, but the sweeping blanket of tariffs is taking that ability away.
