US businesses fight to get ahead of Trump's tariffs

BBC

Handbag designer Sherrill Mosee says Trump's tariff threats are already having an impact

When handbag designer Sherrill Mosee learned that approximately 2,700 handbags and backpacks she had ordered from her Chinese manufacturing partner would not make it aboard a single ship this fall, she is at first content to wait.

Then Donald Trump was re-elected president of the United States.

“I'm like, OK, we need to integrate them,” said Ms. Mosee, founder of MinkeeBlue, a small company based in Philadelphia. His company is one of thousands across the country bracing for the potential impact of Trump's promises to impose tough new tariffs on all products entering the country.

Those efforts took on urgency this week when Trump said he would act on his first day in office. He targeted these measures – a kind of border tax – against China, Mexico and Canada, the three main trading partners of the United States.

Writing on social media, Trump said he planned to impose a 25% levy on goods from Canada and Mexico and “an additional 10% tariff, above any tariff additional” on imports from China.

This message follows his election pledge to impose across-the-board tariffs of at least 10% on all imports from the United States, and 60% or more on products from China – many of which are already facing high customs duties resulting from measures taken during the campaign. his first term as president.

Some experts said Trump's policies may ultimately prove less aggressive than promised and that his statements should be understood as an opening salvo in broader negotiations on migration and drug policy.

But regardless of how policy evolves, the threats are already having economic consequences, as companies like MinkeeBlue begin stockpiling, changing their supply chains, reworking their contracts and taking other steps to protect against possible impacts.

Chris Caton, managing director of global strategy and analytics at warehouse giant Prologis, said his company had already seen an uptick in business as companies responded to possible tariffs by looking for space to s 'supply.

“There is an economic impact, whether it's bluster or not,” said economist Wendy Edelberg, director of the Hamilton Project and a senior fellow at the Brookings Institution.

In the days after the election, shoe giant Steve Madden told investors it was moving forward with plans to move manufacturing out of China, aiming to cut its imports from China in half. of the country over the next year.

Tool and hardware maker Stanley Black & Decker also said it has started discussions with customers about tariff-related price increases.

Executives at retail giants such as Walmart have discussed similar plans.

Even if Trump's policies remain mere talk, Ms. Edelberg said the public could see rising prices, as well as possible shortages of certain items, as hoarding leaves some businesses scrambling.

The simple fact that businesses are unsure of what will happen also risks reducing economic growth in the months to come, she added.

“Even if companies don't think these tariffs will be implemented with 100% certainty, it's not zero, so they should respond,” Ms. Edelberg said.

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Trump and his advisers have argued that the tariffs would help revive U.S. manufacturing and generate a new U.S. jobs boom.

But it can come at a cost, business owners and economists warn.

Martin Pochtaruk, chief executive of Canadian solar panel manufacturer Heliene, said his company almost disappeared in 2018 when Trump imposed tariffs on solar panels made abroad and it had to absorb the costs.

The company now carries out all of its production in the United States, where it employs 400 people. Many of its suppliers have also moved to the United States, attracted by government incentives for renewable energy introduced by President Joe Biden.

Mr. Pochtaruk's company has learned from its experience by changing the design of its contracts so that customers are responsible for unexpected cost changes – whether due to tariffs or the type of price spike that occurred during the pandemic.

But despite these protections, the possibility of renewed trade tensions between countries as closely linked as Canada and the United States is worrying, Mr. Pochtaruk said.

Some key materials, such as glass, still come from abroad and are likely to see price increases. The new administration could also adopt other policies that would slow the sector's growth.

“We are talking to all our customers,” Mr. Pochtaruk said. “There’s a lot of anxiety.”

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Donald Trump, a self-proclaimed defender of tariffs, delays an order for tariffs on solar panels in 2018

Economists say existing tariffs – which have been in place for decades in sectors such as clothing and footwear – suggest that while they may protect some businesses, their cost is high and they do not do little to boost overall employment, while raising prices for American businesses. and consumers.

The National Retail Federation (NRF) has warned that tariffs inspired by Trump's campaign proposals would cost American consumers between $46 billion ($36.6 billion) and $78 billion more per year on clothing, toys , furniture, appliances, shoes and travel items.

According to NRF estimates, the price of a $40 toaster, for example, would rise to between $48 and $52, while a pair of $50 sneakers could rise to between $59 and $64.

Trump's decision Monday to target Mexico — a key supplier of staple foods such as fruits and vegetables and historically protected by a free trade agreement — underscores the tension between his tariff promises and other campaign promises aimed at lower prices for Americans.

Macquarie Capital's Viktor Shvets said that while Trump's ideas conflicted with each other, he believed that ultimately Trump's fear of disrupting financial markets would limit his business actions.

“The risks are high, but we remain convinced that the 'guardrails' are sufficiently robust to avoid the worst consequences,” he wrote in a note to his clients on Tuesday.

Such gambles do little to reassure small business owners like Ms. Mosee, who have little additional financial cushion to weather the uncertainty.

As a small brand facing significant competition, Ms. Mosee said she was not in a strong position to raise prices on her bags, which typically sell for about $180 apiece.

It is looking for a new supplier in Cambodia and India.

But after a decade alone, Ms Mosee – a former engineer who decorated her office with motivational posters promising that “something wonderful is about to happen” – said she would probably need to find a partner salesman for his company, with his two employees. , had to survive the expected changes to come.

“It’s going to be hard,” she said. “It’s going to be difficult down the line.”

North American correspondent Anthony Zurcher makes sense of the race for the White House in his biweekly newsletter US Election Unspun. UK readers can subscribe here. Those outside the UK can register here.

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