President Trump lowered his tariffs on China, and Wall Street breathed a sigh of relief. But for many businesses, especially small ones, 30 percent is still a crippling burden.
The 145 percent tariff on Chinese goods that was in place for nearly a month was unthinkably high for businesses large and small. But even at the current levels, the overall average tariff rate on imports to the United States remains at its highest level since 1934, according to a report from the Yale Budget Lab released on Monday. Even Walmart, the largest retailer in the United States, said on Thursday that it would have to raise prices on some items in response to tariff-fueled cost increases.
And tariffs could rise again if the two countries do not reach a deal within 90 days.
The 90-day pause “may temporarily help unstick the effective trade embargo that has been in place,” Steve Lamar, the chief executive of the American Apparel and Footwear Association, said in a statement. But, he added, the 30 percent tax will still cause prices to soar during the back-to-school and holiday seasons later this year.
“What’s needed now is a long-term deal — not just with China but with all our trading partners — so we can predictably make long-term trade, investment and sourcing decisions,” Mr. Lamar said.
Unlike large retailers, which can absorb some of the cost of tariffs and have the heft to pressure suppliers, smaller companies that rely on imports from China tend to have minimal leverage to negotiate with their Chinese suppliers — and relatively tight margins. We talked to four business owners about the strategies they are trying as tariffs cut into their bottom line.
Cut the cheapest items
Marina Rosin Levine is the chief executive of Highline United, a footwear company near Boston, which makes roughly half of its items in China. This week, she visited her supply chain headquarters in the Chinese city of Dongguan, where conversations centered on a key question: Which shoes can it afford to sell in the United States?
The answer might at first sound counterintuitive: Only the company’s most expensive shoes — those priced at $200 or more — will start to make their way to the United States. Customers who can afford the more expensive shoes can probably afford the additional cost from the import tax. And margins on lower-value items are too tight for the company to import them and turn a profit.
“That means the consumer with lower discretionary income is the one that’s going to be impacted the most in terms of what’s in stock,” Ms. Levine said.
A pair of $400 boots might be available. But $99 Mary Janes probably won’t be, at least for now.
Consider layoffs
The latest easing is not reassuring to Cheyenne Smith. When Mr. Trump imposed triple digit tariffs on China in early April, Ms. Smith, who designs children’s rain boots that are made in China, contemplated drastic measures to save money. She considered closing a warehouse in Salt Lake City where she stores items for her brand, called Dakota Ridge, and laying off her work force of three employees.
Her costs were rising at the same time that her sales were falling, dampened by customers’ dreary outlook on the economy. Insufficient cash flow, especially for the busy holiday season later this year, became a pressing concern. Mr. Trump’s move to temporarily ease up on tariffs offered little relief.
“The word ‘temporary’ scares me,” said Ms. Smith, who was still considering moving her inventory to her garage and laying off her staff. “I have zero trust in how long this is going to last, or if it will go higher or lower again.”
Put new products on pause
Luis Prior, who owns Meavia Toys, a small toy company in Corbin, Ky., said the 145 percent tariff rate on Chinese imports was “completely unsustainable.” Had it stayed in place for several months, it would have meant the end of his business, which designs sensory toys for children with special needs and manufactures its products in China. Shortly after Mr. Trump unveiled his suite of tariffs on April 2, Mr. Prior halted all production of his toys and held his breath, hoping for a reprieve.
Now, with the tariff rate down to 30 percent, Mr. Prior said he planned to restart manufacturing some of his most popular toys again and get them to the United States as soon as possible.
Still, tariffs at 30 percent mean higher prices for his customers. And a lack of clarity from the Trump administration on what will happen in 90 days has kept his plans to introduce new items on pause.
“It’s still a very unstable and unnerving situation for small businesses that rely on China,” Mr. Prior said. “I don’t know what’s going to happen tomorrow.”
Split the cost
Mike Roach, who co-owns a women’s apparel store, Paloma Clothing, in Portland, Ore., made plans on Tuesday to approach his vendors that manufacture in China with an idea: He and his wife, the vendor and the vendor’s manufacturer would each take a 10 percent hit. Under that arrangement, shoppers would not see prices rise.
Whether Mr. Roach’s vendors and their Chinese suppliers all agree is an open question. But, he said, the latest easing in tariff levels at least makes the discussion possible.
“There’s no mitigation you can do at 145 percent,” Mr. Roach said. “That is a complete deal breaker.”
Danielle Kaye is a Times business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers.
The post How 4 Small Business Owners Are Handling Tariffs on China appeared first on New York Times.
