When the nonprofit Cribs for Kids was forced to raise prices last year to cover the cost of 10% tariffs on Chinese imports, executive director Judith Bannon realized she had a problem.
The hospitals, fire departments, and police departments that bought the cribs to distribute to needy parents had taken President Trump at his word that China was paying the duties. They were caught off guard by the reality that U.S. businesses, including nonprofits, had to do so, with the bill due when their goods arrived at port.
“Finally, we got everyone on board and convinced them that we had to pay for the tariffs,” which meant the Pittsburgh-based organization could no longer keep the price of its cribs at $49.99, as it had for the past two decades. Now that Trump has followed through on a threat earlier this week to more than double the duties on $200 billion of Chinese imports to 25%, Cribs for Kids will have to repeat the process.
“It’s going to cause a nightmare for my staff as we try to talk to people we have contracts with,” said Bannon, whose organization provides the cribs for infants who might otherwise risk suffocation sleeping on a sofa or in their parents’ beds. “More importantly, it means that 25% less babies will be getting a safe sleeping environment.”
Thousands of small businesses across the U.S. are facing a similar dilemma, forced to choose between paring razor-thin profit margins even further and raising prices enough that customers postpone purchases. It may get worse before it gets better.
The tariffs that went into effect at 12:01 a.m. Friday, despite ongoing negotiations with a Chinese delegation, will be followed by duties of the same level on the remaining $325 billion of goods the U.S. purchases from China, Trump says.
The president has maintained his tactics will not only force Beijing to open its markets to U.S. businesses but convince it to end decades of intellectual property theft, all the while generating more cash for the U.S. than might be obtained through “even a phenomenal deal of the traditional kind.”
Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!”
— Donald J. Trump (@realDonaldTrump) May 10, 2019
Economists, executives from businesses of all sizes, and even some GOP lawmakers have long warned of just the opposite, noting that protracted trade wars — not just with China but traditional U.S. allies — risk undermining the benefits of GOP-led tax cuts in 2017 and looser regulations intended to stimulate growth.
“We remain concerned that we are shooting ourselves in the foot by imposing big new taxes on Americans,” said David French, chief lobbyist for the National Retail Federation, which represents an industry employing 42 million people and contributing $2.6 trillion to the U.S. economy. “It’s important to realize that thousands of small businesses across the country who are disproportionately burdened by these tariffs are scrambling to figure out how they’ll afford this tax hike that came on such short notice.”
Financial markets bear out the risk, despite slight gains Friday after Trump dangled the possibility that tariffs might be removed in future talks. The blue-chip Dow Jones Industrial Average, the broader S&P 500, and the tech-heavy Nasdaq have all tumbled more than 2% since the president announced his latest trade moves via Twitter on Sunday, May 5.
The administration had previously paused levy increases for three months after Trump and Chinese President Xi Jinping decided during a Buenos Aires meeting in late November to work toward a long-term agreement.
The moratorium expired in early March, but Trump stretched the timetable for talks and was upbeat about progress as recently as last week. That soured when Beijing began trying to walk back its commitments to pivotal terms, according to U.S Trade Representative Robert Lighthizer, the administration’s chief negotiator.
“I thought the talks had been going well, with the things I had been reading,” said Tiffany Williams, owner of the Luggage Shop of Lubbock, Texas, which her grandfather opened in 1951. “It came as a surprise on Sunday to see all those tweets go out and things change so dramatically. We didn’t have any time to plan.”
Williams has little choice but to pass the increased cost onto customers, she told the Washington Examiner, and it’s likely to be most noticeable on higher-priced items. A bag that originally sold for $400, for instance, would now cost $500.
“The customer has to think about it a little more,” she explained, with reasoning such as, “‘I don’t know if I want to spend that much on a suitcase. Do I even want do buy a new suitcase? Maybe I’m OK with the one I have.'”
In Seattle, Wash., Alex Camara finds himself forced to divert money that he would have invested in Audio Control, his 40-year-old company making sound equipment for consumers, to pay the tariffs.
“It frustrates me a little bit when I see headlines about tariffs being a tax on the Chinese economy,” he said. “No, they aren’t. They are a direct impact on costs and the cash I have available to spend on employment, on investment. We are a company that’s growing. We grow through investments in technology, and as a U.S. manufacturer, we require cash to do that.”
