‘It’s going to be tough’: US firms race to outrun Trump tariffs

When handbag designer Cheryl Moses learned that the roughly 2,700 purses and bags she ordered from her Chinese manufacturing partner wouldn’t make it onto a ship this fall, she initially agreed to wait.

Then Donald Trump was re-elected as the US President.

“I’m like, ‘OK, we’ve got to bring them in,'” said Ms. Moses, founder of Monkey Blue, a small business based in Philadelphia. His firm is one of thousands across the country preparing for the potential impact of Trump’s promises to impose tough new tariffs on all goods coming into the country.

Those efforts gained momentum this week as Trump said he would take action on his first day in office. He targeted the measures — a type of border tax — at China, Mexico and Canada, the U.S.’s three top trading partners.

Writing on social media, Trump said he planned to impose 25 percent tariffs on goods from Canada and Mexico and an “additional 10 percent tariff on top of any additional tariffs” on imports from China. has made

The post followed a campaign promise to impose tariffs of at least 10% on all imports into the U.S. and 60% or more on goods from China — many of which have already been done during that time. Those left behind by the measures face heavy revenues. His first term as president.

Some experts have said that Trump’s policies may ultimately prove less aggressive than promised, and that his statements should be viewed as the beginning of a larger negotiation on immigration and drug policy.

But regardless of how policy changes, the risks are already having economic consequences, as firms like Monkey Blue stockpile, shift supply chains, rework contracts and other measures to protect against potential impacts. Start taking action.

Chris Keaton, managing director of global strategy and analytics at Warehouse Prologies, said his firm has already seen an increase in activity “at the margin” as businesses respond to potential tariffs by finding room to stock up.

“Economic impacts are there whether they’re subtle or not,” said economist Wendy Adelberg, director of the Hamilton Project and a senior fellow at the Brookings Institution.

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

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

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

Even if Trump’s policies remain talk, Ms. Adelberg said the public could see higher prices, as well as possible shortages of some commodities, as stockpiling left some firms reeling.

He added that the simple fact that firms were unsure about what was to come was also likely to dampen economic growth in the coming months.

“Even if firms don’t think these tariffs are going to happen with 100% certainty, it’s not zero, so they should respond,” Ms Adelberg said.

Trump and his advisers have argued that the tariffs will help revive American manufacturing and bring new growth to American jobs.

But that could come at a price, business owners and economists warn.

Martin Puchtaruk, chief executive of Canadian solar panel maker Helian, said his firm was almost wiped out in 2018 when Trump imposed tariffs on foreign-made solar panels and had to absorb the fees.

The firm now does all of its manufacturing in the US, where it employs 400 people. Many of its suppliers have also set up shop in the US, lured by government incentives for renewable energy introduced by President Joe Biden.

Mr. Puchtaruk’s firm has learned from its experience, and is changing. Design its contracts so that consumers are responsible for unexpected changes in costs — whether due to tariffs or price increases that hit during the pandemic.

But despite those concerns, the prospect of renewed trade tensions between closely-linked countries such as Canada and the United States was worrisome, Mr. Puchtaruk said.

Some key materials – such as glass – still come from overseas and are likely to face price increases. The new administration may also introduce other policies that slow growth in the industry.

“We are talking to all of our clients,” Mr. Puchtaruk said. “There’s a lot of trouble.”

Economists say the evidence for current tariffs — which have existed for decades in sectors such as clothing and footwear — suggests that while they may protect some firms, the costs are high and they do little to boost overall employment. jobs, while raising costs for American companies. and consumers.

The National Retail Federation (NRF) has warned that the tariffs would cost US consumers $46bn (£36.6bn) and $78bn a year on clothing, toys, furniture, home goods, footwear and travel goods under Trump’s campaign proposals. There will be more cost in between.

A $40 toaster, for example, would jump to $48-$52, while a $50 pair of athletic shoes could jump to $59-$64, according to NRF estimates.

Trump’s move on Monday to target Mexico — a major supplier of grocery staples like fruits and vegetables and historically protected by a free trade agreement — comes amid a campaign to lower prices for Americans. illustrates the tension between its tariff commitments and other commitments.

Macquarie Capital’s Victor Schweitz said that while Trump’s views were mixed, he believed Trump’s fear of disrupting financial markets would limit his trade actions.

“Risks are high, but we believe the ‘guard rails’ are strong enough to avoid worst-case outcomes,” he wrote in a note to clients on Tuesday.

Such conditions are of little comfort to small business owners like Ms. Moses, who have little extra financial cushion for weather uncertainty.

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

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

But after a decade on her own, Ms. Moses — a former engineer who decorates her office with motivational posters promising that “something wonderful is about to happen” — said if her business, With two employees, he probably needs to find a business partner. , was to avoid expected changes ahead.

“It’s going to be tough,” he said. “It’s going to be tough all around.”

North American Correspondent Anthony Zurcher gives a sense of the race for the White House in his biweekly US Elections Insider newsletter. Readers in the UK can Sign up here. Those outside the UK can. Sign up here.