For small businesses across the United States, President Trump’s broad tariffs on Chinese-made goods could squeeze their already tight margins, and cause sticker shock for customers.
Sarah Pitkin, who owns four hardware stores in Virginia, said the prices of the power tools, barbecue grills and electronics that she stocks could all rise as a result of the 10 percent tariff on Chinese products, which took effect on Tuesday. At least 40 percent of the goods that Ms. Pitkin sells are imported from China through her distributors, who she said would probably pass the cost of the tariff on to her.
A $129 drill at her store, for example, might jump to more than $140. Profit margins for power tools are tight, Ms. Pitkin said, meaning she would have to charge her customers for the entire cost of the tariff.
“People can’t pay more for stuff, and won’t pay more for items,” Ms. Pitkin said. Referring to the size of her inventories, she added, “Your items shrink to the point where you’re really going to evaluate if you’ll keep certain shops open.”
Consumer electronics, electrical equipment, and textiles and apparel are among the top categories of goods imported into the United States from China, according to Census Bureau data compiled by Torsten Slok at Apollo Global Management. Tariffs on these imports, and others, are poised to have ripple effects throughout the economy, hitting small businesses that rely on the goods — whether directly or through distributors — particularly hard.
In a survey of more than 600 members by the National Small Business Association, set to be released next week, more than half the owners said they were concerned about tariffs under the Trump administration, and nearly a third were “very concerned,” said Molly Day, a spokeswoman for the association.
Kelli Courtney, who owns Margaret’s Boutique, a women’s clothing shop in Decorah, Iowa, buys most of the clothing from manufacturers based in the United States. On Tuesday morning, she walked around the store, examining the tags on dresses and jeans from various brands, including one called Democracy.
“That sounds very American, but if I look in their pants, in their jeans, it says, ‘Made in China,’” Ms. Courtney said. “When it comes across the border all sewn together, that company that I’m working with will pay the tariff, but of course they’re going to pass it on to me.”
How much of those costs that Ms. Courtney would on to her own customers is an open question. Raising prices too much could run her out of business. And small businesses don’t have the same leverage as big box retailers to negotiate with their suppliers for lower costs, she said.
Another issue looms over Ms. Courtney’s business decisions: potential tariffs on Canada. Roughly 15 percent of her clothing lines come directly from Canada, which along with Mexico was granted a one-month reprieve from U.S. tariffs after their leaders struck last-minute deals with Mr. Trump on Monday. On Tuesday, two of the Canadian clothing lines that sell to Ms. Courtney told her that they planned to absorb any costs from upcoming tariffs, rather than charge her.
But the uncertainty surrounding tariffs on Canada is already influencing Ms. Courtney’s business decisions. She was planning to feature a Canadian manufacturer’s merchandise at an event this spring, but “now I’m completely on hold,” she said.
The lingering threat of tariffs on Canada is a dilemma that Michael Howard, who owns Howard Family Designs, a furniture business in Warren, Mich., is confronting, too.
About 30 percent of the softwood lumber in the United States is imported from Canada, which is also the source of much of the plywood Mr. Howard buys from stores in his area. A sheet of plywood from his local supplier jumped to $80 last week, from $60 last month, he said. He attributed the surge to anticipation of sweeping tariffs on Canada.
That jump in cost is forcing Mr. Howard to raise estimates for his work. He now plans to quote one client $2,000 for a custom-made bookshelf, $300 more than he would have otherwise charged.
“I can’t absorb the increased cost of a product,” Mr. Howard said.
For Jennifer Zimmerman, who owns No Gluten Kneaded, a gluten-free bakery in Bohemia, N.Y., prices for crucial ingredients are likely to increase. She buys xanthan gum, a gluten substitute, from a wholesale supplier in Queens that imports it from China. Her gluten-free rice flour also comes from China.
Ms. Zimmerman thinks her suppliers in the United States will probably pass on the cost of the tariffs to her, which means she is considering raising prices in her bakery, too. But she is worried that customers won’t pay much more than what she already charges. Ingredient costs, including the high price of eggs, have already forced her to raise prices for her baked goods in recent weeks.
“It’s going to be harder for us to stay open,” she said.
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