With former President Donald Trump set to impose higher and more far-reaching tariffs if he is elected to another term, small businesses that sell everything from bicycles to beer are nervous about another cost increase they will have to pass on to their customers.
Chris Smith, the co-founder of Virginia Beer Co. in Williamsburg, Virginia, remembers the first time he saw a 5.5% surcharge on a statement from one of his suppliers, a U.S.-based seller of Chinese-made faucet handles. The fee appeared in September 2019, after Trump imposed 25% tariffs on steel, and has not disappeared since.
Smith spends between $15,000 and $20,000 each year on tap handles emblazoned with the names of his beers — about $1,000 of which covers the cost of the tariff. He sells them to distributors who place them in bars and restaurants where his draft beers are sold, raising the price to cover tariff surcharges.
“The beer industry specifically is a low-margin, high-volume business,” he said. “We do not have the volumes that a major player has simply because of our size.”
In contrast, Constellation Brands, which imports Corona and Modelo from Mexico and recently reported quarterly sales of about $3 billion, dismissed concerns about further tariffs and said the company was thriving under Trump. But smaller operators have less leeway, Smith said: “Any increase in our input costs absolutely impacts our profitability.”
Small business owners have already faced tariffs on billions of dollars of goods, most of them from China, imposed by Trump in 2018. The Biden administration, which largely kept them in place, unveiled new tariffs of its own in May — though experts say they are largely symbolic moves amid a green technology impasse. So far, the tariffs in place under both White Houses have cost Americans $79 billion, the nonpartisan Tax Foundation estimated this summer.
Consumers finding their feet after a historic surge in inflation — which had little to do with federal trade policy — likely haven’t seen tariffs dramatically dent their wallets in recent years beyond a few targeted products, like laundry. machines or solar panels.
But “if you were a business owner and your supply of something from China was directly affected, you certainly noticed it,” said Erica York, a senior economist at the Tax Foundation.
Many of the major U.S. companies facing tariffs have adjusted their supply chains to avoid them, or have eaten some or all of the costs. Larger companies tend to have more flexibility in finding new suppliers and more leverage in negotiating terms, experts say.
Former President Donald Trump is calling for a blanket 20% tariff on all goods imported into the US
“For small businesses, unfortunately, they are not in a position where they can absorb these additional costs,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, a major trade group.
The nation’s roughly 33 million small businesses employ nearly half of the nation’s workers and generate more than 43% of its gross domestic product, the U.S. Chamber of Commerce estimates. And it’s small and medium-sized businesses that disproportionately bear the burden of the tariffs, Gold said; in many cases “they should go ahead and pass those costs directly to the consumer.”
That’s what Ryan Zagata, the founder of Brooklyn Bicycle Co. in New York City, had to do. He estimated that 95% of the more than 100 parts needed to build a bicycle are made abroad.
“Whether we like it or not, Asia is the bicycle manufacturing center of the world,” said Zagata, who raised prices by 18% to 22% after the Trump tariffs took effect. He expects that he will have to increase even further if a re-elected Trump were to impose the promised general tariff of 20% on all imports.
In addition to that tariff, the Republican candidate is also calling for a tariff of at least 60% on goods from China, a 100% tariff on countries that abandon the dollar as a common trading currency, and a 2,000% tariff on vehicles imported into Mexico have been built. .
The tariffs imposed on small and medium-sized businesses under current and previous administrations are “pretty extreme by historical standards,” said Felix Tintelnot, an international trade economist at Duke University. “We haven’t had rate levels nearly this high in the last 75 years.”
Taken together, these proposed duties would be “vastly greater” than those Trump introduced years earlier, York said, and could be “hugely disruptive to the way companies have planned their supply chains.” She expects that tougher, long-term tariffs would have a “chilling effect” on investment and could encourage retaliation from other countries. Even Germany, a key US ally and trading partner, has warned of this outcome.
Economists broadly oppose Trump’s pricing plans, saying their main outcome would be higher costs for consumers. Last week, a joint letter from nearly two dozen Nobel Prize-winning economists warned that Trump’s proposed “high tariffs even on goods from our friends and allies and regressive tax cuts for corporations and individuals will lead to higher prices, bigger deficits and greater inequality.” .”
The Trump campaign has repeatedly dismissed these predictions, claiming that the massive revenue from additional tariffs would fund everything from further tax cuts to new child care subsidies.
“These Wall Street elites would be wise to revise the numbers and acknowledge the shortcomings of their previous work if they want their new predictions to be seen as credible,” Trump campaign adviser Brian Hughes said in a statement. claimed that tariffs would stimulate the economy, job growth and reduce inflation.
San Diego-based entrepreneur Nichole MacDonald said profit margins for her patented 10-pocket Sash Bag have declined in recent years as material and freight costs have risen and tariffs aren’t helping.
She sells her product — which was primarily manufactured in China before Trump’s 2018 tariffs — mostly online, and costs rose about 25% in their wake, she said. It has since moved some production to India, but has largely eaten the cost increases. About 70% of her customers return for subsequent purchases, and she worries about alienating such a loyal customer base with price increases.
Nicole MacDonald moved some production of her Sash Bag to India after Trump increased tariffs on goods from China.
“I don’t have the ability to produce in the U.S.,” MacDonald said, estimating her production costs would double if she switched to all-U.S. suppliers. “So I keep doing what I do, because otherwise I have to completely disrupt my business.”
“The people implementing these policies are out of touch with what is actually happening,” she added. “I would have voted for Kamala Harris anyway, for a lot of other reasons, but I’m also a little disappointed that the Biden administration didn’t act on this.”
Vice President Kamala Harris has labeled Trump’s tariff agenda a “national sales tax” but has not detailed her plans for levies that already exist. Her campaign did not respond to a request for comment.
While entrepreneurs like MacDonald have no viable alternatives to suppliers abroad, many small businesses are proud to produce domestically, and some say they are willing to do so regardless of the election outcome. Not only can “Made in America” be a marketing advantage, in some cases it can also protect against a new trade war.
Sara Hauman, owner of Portland, Oregon-based canned fish brand Tiny Fish Co., isn’t too concerned. She has always tried to source and produce her products domestically, and only some of her packaging comes from abroad, a purchase she typically makes only once a year.
“We will inevitably be affected by tariffs in some way,” she acknowledged, “but because our vision is to leverage small, independent producers and manufacturers on the West Coast, we are limiting the ways we could be affected .”
Zagata said he is not “naive” and understands the increasingly bipartisan case for protectionism, but he does not believe China will pay for tariffs as Trump has suggested. So his company is already considering how to deal with possible new levies without compromising on quality or affordability.
“We’re going to survive,” Zagata vowed. “We are going to adapt. We’re going to do what we can.”
This article was originally published on NBCNews.com
