Small businesses brace for the punishing side effects of Trump's tariffs

Boston Globe

a day ago

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But small-business owners like Golden as well as job seekers and households at the lower and middle rungs of the income ladder are in for a rougher ride.
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Smaller firms, for instance, not only have fewer resources to weather unexpected costs, they also lack the bargaining power of megastores like Walmart to pressure suppliers to lower prices. They may also lack access to lines of credit available to bigger firms.
Nor can they afford long-term contracts that can keep costs down. Doug and Betsy Scheffel, owners of ETM Manufacturing, a custom sheet-metal fabrication and machine shop in Littleton, have to buy aluminum and steel on the spot market. Since 50 percent tariffs have been slapped on those imported metals, their costs have soared.
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'I don't know how to put a business plan together that makes any sense to anyone,' Scheffel said. Neither do many of his customers, who have delayed or reduced orders.
Inside ETM Manufacturing, a sheet metal fabrication and machine shop in Littleton.
TONY LUONG/NYT
Legrand Lindor, the owner of LMI Textiles, a small medical supply and manufacturing company in Milton, Massachusetts, said now not only did he have to handle the increase in prices, but his suppliers also expected him to handle the administration of customs, duty and taxes.
Both he and Scheffel are members of Small Business for America's Future, a nonprofit membership group in Washington that has been complaining about unpredictable tariff policies. The group also worries about a ballooning national debt, cuts in health programs that small businesses and their families rely on, and tax cuts that disproportionately benefit large corporations.
Scheffel said he had trimmed his staff in anticipation of federal reductions in health care spending because they won't be able to afford either the insurance he offers or the public plan from Massachusetts.
Increasing costs are hitting Golden, too. Overall, she figures the cost of her supplies and ingredients — flour, parchment paper, napkins, paper plates, forks, butter, sugar, cream cheese, spices, plastic wrap — is up 20 percent to 25 percent since January.
Golden has about a 60-day supply of small coffee cups left, she said. She expects that the price of a case will rise to $300 or $400, from $225, for her next order.
And it's not just foreign-made items. The clam shell containers for single-serve pieces of cake come from an American company. In January, a box of 500 was $55; now it is $69. A 5-pound bag of coffee beans from a local roaster in Augusta is $63, up from $55. And with a new 50 percent tariff on Brazil, one of the largest coffee exporters, she expects prices to rise even further.
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Katrina Golden at her coffee and cake shop, Lil Mama's Sweets & Treats, inside the Veterans Affairs Medical Center in Augusta, Ga.
SEAN RAYFORD/NYT
Higher costs and unpredictability are rippling through the labor market. 'I would hire two more today if I knew that I could afford to keep them,' said Golden, who employs four people. But with whipsaw policy changes, 'how do you plan?'
Companies, for the most part, aren't cutting jobs, but they aren't adding many either. And workers, even those fortunate enough to have secure positions, are cautious. Surveys show that more of them are choosing to stay put rather than take the risk of changing employers.
'Employers are kind of putting hiring on hold,' said Daniel Hornung, a senior fellow at the Massachusetts Institute of Technology, who was an economic adviser to former president Joe Biden. 'There's not much churn in the job market.'
At the moment, consumers face an overall average effective tariff rate of 18.6 percent, according to the Yale Budget Lab, up from 2.4 percent in January.
Ryan Sweet, chief economist at Oxford Economics, wrote in a newsletter that under the president's trade policies and budget priorities, high-income consumers are doing well but lower-income households are struggling.
Oxford estimated that households in the bottom fifth of the income ladder will see their real disposable income decrease by 2.5 percent to 3 percent because of higher prices caused by tariffs and cuts to health and social programs. Juicy tax cuts for the richest Americans mean the income of the top fifth will increase by the same amount.
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The squeeze is playing out at Lil Mama's. Golden's weekly net revenue once averaged $2,500 to $3,000. Recently, she has been struggling to make $2,000. If something doesn't change within the next three months, she said, she will have to raise prices. Fifty cents to $1 more on a small $3 cup of coffee; $5 instead of $3 for a serving of red velvet cheesecake or banana pudding cake.
'If we fail,' Golden said, 'that's it. There's no fallback.'
This article originally appeared in
.