Opinion - Why Trump's unpredictable tariffs are so devastating for small businesses

Yahoo

2 days ago

Small U.S. businesses that trade with China have over the years been largely overlooked, including by Presidents Biden and Trump, Congress and the media. Additional tariffs up to 135 percent on goods imported from China pose an existential threat to these businesses, which sustain jobs and pay taxes in every state in the country.
It's time to recognize these businesses' contributions and take steps to save them and others engaged in this trade.
Most disheartening for these folks is that when they attempt to educate their congressional representatives they are lectured about how bad China is, about how most of the tariffs have been reduced to 30 percent for 90 days, and about how they will be made whole when President Trump's 'big, beautiful bill' is passed with tax relief for all.
In fact, none of these things will help these businesses avoid disaster. However, they did receive a temporary reprieve this week when a specialized court in New York ruled that many of the tariffs are illegal, suspending their imposition. And even then, hours later, an appeals court overruled the lower court, allowing the tariffs to continue — for now.
Some of the plaintiffs in the cases are small, owner-operated businesses that claim the president lacks authority to impose such sweeping, draconian policies without the consent of Congress. The administration will appeal any ruling that suspends tariffs, creating yet more uncertainty for companies engaged in international trade.
The effect of U.S. trade policy on small businesses is often illogical. Two examples are illustrative.
The first: A family business in Minnesota makes loudspeakers, employing older workers who are probably not employable elsewhere in the local economy. The owner imports parts from China, but most of the product's value is local. The tariffs he pays substantially increase his customers' prices. Meanwhile, loudspeakers from a competitor in Asia can be imported at a much lower tariff rate, effectively making his product uncompetitive. He has applied for an exemption from the tariffs based on unfair and illogical treatment, but the U.S. Customs and Border Protection agency has not budged.
A second example: A small business makes leather furniture in North Carolina. The leather is sourced from a supplier in China that is willing to do the dirty work of dealing with animal hides and has the skill to cut the material to exacting specifications. None of this work is done in the U.S., nor is it likely to be done here in the future. There is no one to protect in the U.S., no jobs to be lost to cheaper foreign workers. The blunt instrument tariffs are increased by a ridiculous amount one day, only to be slashed the next. Sure, lower is better, but even at 30 percentm prices will increase, and business will suffer and may disappear. The business owner has been to Capitol Hill for a hearing but never got to read his statement. He is his own lobbyist because he can't afford to pay for one. He feels powerless and angry — at Trump and Biden, at Democrats and Republicans.
Americans who import goods from China are damaged by such one-size-fits-all tariffs. Many of the imports are consumer products with Made in China labels, but there are other small companies that import intermediate goods and combine them with U.S intellectual property, and items manufactured here that form final goods sold in the U.S., other international markets and sometimes back to China. These U.S. micro multinationals are important innovators and local job creators. But mindless, excessive tariffs put them at grave risk.
Then there are small businesses that sell American food and other products to Chinese buyers. They sell pig sperm, fresh fruit, candy, ice cream, hydraulic fluid for wind turbines, high-end cuts of beef, used commercial aircraft parts, wine, seatbelts and many other things. Their existence is threatened by high retaliatory tariffs on the Chinese side, cutting them off from a market of over a billion consumers, negating what in many cases has been years of developing relationships and creating supply chains even while other Americans gave up on China as too complicated or politically toxic. The people-to-people diplomacy through business can often be more meaningful than the rare phone calls between Presidents Trump and Xi Jinping.
What to do? Start by acknowledging the economic contributions made by small businesses. Of the estimated 2.6 million jobs dependent on China trade, many are generated by entrepreneurial small firms. For every direct job created, others are generated to support the imports and exports. Elected officials need to listen and thoughtfully respond to their small-business constituents. They must recognize the contradiction of praising the importance of the almost mythical small businessperson while ignoring their pleas for tariff exemptions and other assistance.
Then tell Trump's Department of Government Efficiency to leave alone any government programs that help small businesses engage in international trade, such as the Small Business Administration, the Export-Import Bank and the International Trade Administration of the Commerce Department. Businesses involved in trade tend to be more profitable, grow faster and fail less frequently — that is, unless their government pulls the rug out from under them.
Douglas Barry teaches at The George Washington University and is the author of 'Smart Rabbits: Small American Businesspeople, Trade Wars and the Future of the U.S.-China Relationship.'
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