With former President Donald Trump floating higher and wider rates If he’s re-elected, small businesses that sell everything from bicycles to beer are worried about another cost increase they’ll have to pass on to customers.
Chris Smith, co-founder of Virginia Beer Co. in Williamsburg, Va., remembers first seeing the 5.5% surcharge in a statement from one of his suppliers, a U.S.-based seller of tap handles made in China. That fee went up in September 2019, after Trump imposed 25% tariffs on steel, and hasn’t gone away since.
Smith spends $15,000 to $20,000 a year on tap handles emblazoned with the names of his beers — about $1,000 of which covers the cost of the fare. He sells them to distributors who place them in bars and restaurants that sell his beer and mark up the price to cover the tariff surcharges.
“The beer business is a particularly low-margin, high-volume business,” he said. “Because of our size, we don’t have the volumes that a major player has.”
Any increase in our input costs absolutely affects our profitability.
Chris Smith, co-founder of Virginia Beer Co.
In contrast, Constellation Brands, which imports Corona and Modelo from Mexico, and recently reported Quarterly revenue reached nearly $3 billion removed their concerns about additional tariffs, he said the company has thrived in the Trump era. But smaller operators have less wiggle room, Smith said: “Any increase in our input costs absolutely affects our profitability.”
Small business owners have already faced tariffs on billions of dollars in goods, mostly from China, imposed by Trump in 2018. The Biden administration, which largely kept them in place, announced new fees Unique in May – although experts say mostly symbolic actions in the green technology conflict. To date, both White Houses have had tariffs in place it cost the Americans 79 billion dollarsthe nonpartisan Tax Foundation estimated this summer.
Consumers, reeling from a historic rise in inflation that has little to do with federal trade policy, likely won’t see the tariffs. they drop their wallets It has dramatically deviated from a few products targeted in recent years, such as washing machines or solar panels.
“If you were a business owner and your supply of something from China was directly affected, then you definitely noticed,” said Erica York, chief economist at the Tax Foundation.
Many of the big U.S. companies facing the tariffs have either retooled their supply chains to avoid them or absorbed the costs in whole or in part. According to experts, larger firms have more flexibility to acquire new suppliers and more opportunities to negotiate terms.
“Unfortunately for small businesses, they’re not in a position to pay 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 approximately 33 million small businesses employ nearly half of the nation’s workers and generating more than 43% The US Chamber of Commerce estimates gross domestic product. And it’s small and medium-sized firms that bear the brunt of the tariffs disproportionately, Gold said; in many cases, “they should go ahead and pass those costs directly to the consumer.”
Ryan Zagata, founder of Brooklyn Bicycle Co. in New York, had to do just that. He estimates that 95% of the more than 100 parts needed to build a bike are produced overseas.
“Whether we like it or not, Asia is the bicycle manufacturing center of the world,” said Zagata, which raised prices between 18% and 22% after Trump’s tariffs took effect. He expects it will have to rise further if re-elected Trump imposes his promised 20% tariff on all imports.
In addition to this fee, the GOP candidate also requires a position at least 60% On goods from China, a 100% rate to countries leaving the dollar as a common trading currency and a 2000% tariff On cars made in Mexico.
Felix Tintelnot, an international trade economist at Duke University, said the tariffs imposed on small and medium-sized businesses under the current and previous administrations are “pretty extreme” by historical standards. “Nowhere in the last 75 years have we had tariff levels this high.”
Taken together, the proposed duties would be “much larger” than those imposed by Trump years ago and could “massively disrupt the way businesses plan their supply chains,” York said. He expects tougher, long-term tariffs to have a “chilling effect” on investment and encourage retaliation from other countries. Even Germany, the main ally and trading partner of the United States warned about the result.
Economists are widely opposed to Trump’s tariff plans. they say the main result there would be higher costs for consumers. last week, joint letter The economist, who has won nearly two dozen Nobel Prizes, warned that Trump’s proposed “higher tariffs on goods from even 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 rejected those predictions, arguing that the huge revenue from the additional tariffs would fund everything from additional tax cuts to new child care subsidies.
“These Wall Street elites would be wise to review the record and acknowledge the shortcomings of their past work if they want their new predictions to appear credible,” said Brian Hughes, a Trump campaign adviser, arguing that the tariffs would provide stimulus. job growth and lower inflation.
San Diego-based entrepreneur Nichole MacDonald said her patented, 10-pocket Sash Bag has seen shrinking profit margins in recent years due to rising material and freight costs and tariffs not helping.
It sells its product — mostly made in China before Trump’s 2018 tariffs — mostly online, and said its costs have risen about 25% in the wake. It has since moved some production to India, but has largely eaten up cost increases. About 70% of his customers return for subsequent purchases, and he worries about alienating such a loyal customer with a price increase.