Trump’s 145% Tariffs: A Threat to Small US Businesses
- DENVER -- In 2017, Christina and Ian Lacey took a leap of faith, leaving secure jobs to transform their passion into a business venture: Retune Jewelry.
- The denver-based couple built a thriving business from their home, achieving an average of $360,000 in annual sales, largely fueled by appearances at music and art festivals.
- Christina, a former dental assistant, and Ian, previously in computer science, repurpose donated guitar strings and bass strings into unique earrings, necklaces, and bracelets.
Tariffs Squeeze Small businesses, Forcing Price Hikes and Tough Choices
CNN
DENVER — In 2017, Christina and Ian Lacey took a leap of faith, leaving secure jobs to transform their passion into a business venture: Retune Jewelry.
Their gamble paid off. The denver-based couple built a thriving business from their home, achieving an average of $360,000 in annual sales, largely fueled by appearances at music and art festivals.
Christina, a former dental assistant, and Ian, previously in computer science, repurpose donated guitar strings and bass strings into unique earrings, necklaces, and bracelets.
“We’ve worked around the clock, seven days a week,” christina told CNN.”This is our baby, and we’ve poured everything into keeping it alive.”
However, their hard work faces a significant challenge: tariffs. According to Arensmeyer, executive director of Small Business Majority, a group representing 85,000 small companies, the tariffs, some as high as 145%, pose a serious threat.
Arensmeyer warns that small businesses may be forced to raise prices,reduce staff,postpone expansion plans,or even shut down entirely to cope with rising import costs for materials unavailable domestically.
“Small businesses operate on tighter margins and have less leverage when negotiating with suppliers,” Arensmeyer told CNN.
The Laceys utilize recycled guitar strings, but rely on China for other essential components like clasps, chains, and hooks. Ian says they’ve searched for domestic suppliers, but these products simply aren’t manufactured in the United States.
“We’ve looked,” he said. “There isn’t a facility here that makes what we need.” The Laceys have already increased their prices in anticipation of the tariffs.
Arensmeyer notes that small businesses typically lack the cash reserves to absorb unexpected price hikes. He equates the tariffs to a crisis, leaving them with ”not much control.”
For The Mitchell Group, a second-generation family-owned textile company in Niles, Illinois, the lack of reserves coudl have dire consequences if production is disrupted.
“Tariffs have strained our liquidity due to our business model,” said Ann Brunett, director of operations. “We typically keep merchandise on hand,so we’re paying a 45% tariff – essentially more taxes – to import products that might sit on a shelf until our distributors need them. this ties up our cash.”
The Mitchell Group employs 18 full-time workers and 12 sales representatives, generating just under $10 million in annual revenue, according to company president Bill Fish.
Brunett said the company will do “everything possible” to avoid closing, emphasizing that the business “is everything to us” and they want to avoid laying off employees.
Fish has explored choice production locations in Vietnam, India, Malaysia, and even Europe. “No one has the infrastructure that China has,” he said. “We need our coated fabrics produced under one roof and to our demanding standards. Manufacturing parts in different countries and assembling in Thailand simply doesn’t work.”
While President Trump has touted tariffs as a way to boost domestic manufacturing, Arensmeyer cautions that a significant increase in U.S. production could take considerable time.
“It can’t be fixed overnight,” Arensmeyer said. “You can’t simply impose a tariff and expect people to buy domestically when those products aren’t even manufactured here.”
The textile and apparel industry in the United states has been shrinking for decades, largely due to cheaper foreign production and globalization, according to Sheng Lu, a professor at the University of DelawareS Department of Fashion and Apparel Studies.
Fish said that key materials used by The Mitchell Group, such as vinyl polymers and specialized textiles, are virtually nonexistent in the United States. china is the world’s largest textile producer, manufacturing everything from cotton and silk to synthetic fibers and vinyl polymers.
He added that he’s unable to find enough workers to staff a fabric factory in Mississippi.
“The textile business for our product type? It’s no longer here,” Fish said.
Tariffs Squeeze Small Businesses: A Deep Dive into the Challenges and Realities
By [Your Name/Expert Contributor Name] – Updated [Date of Publication]
The primary concern is the impact of tariffs on small businesses, particularly the rising costs of imported materials that are essential for their products but unavailable domestically. These increased costs are leading to notable challenges, including the need to raise prices, reduce staff, postpone expansion plans, or even, in some cases, shut down entirely. Areseymeyer, executive director of Small Business Majority emphasizes that the high tariffs are “a serious threat” to many businesses.
Small businesses typically operate on “tighter margins” and have “less leverage when negotiating with suppliers,” making them more vulnerable to unexpected price hikes caused by tariffs.They often lack the financial reserves of larger companies to absorb these increased costs, putting their financial stability at risk.
Yes, Retune Jewelry, a business that creates jewelry by repurposing donated guitar strings and bass strings, is a good example. While they use recycled guitar strings for their primary raw material, they rely on imported essential components like clasps, chains, and hooks. Because of this reliance on imported materials, they’ve already had to increase their prices to adjust to the impact of tariffs.
The article highlights that the products aren’t manufactured in the United States. Ian Lacey of Retune Jewelry says,”There isn’t a facility here that makes what we need.” The globalization of manufacturing has resulted in the decline of domestic production of various components, forcing businesses to source materials from abroad.
The potential consequences are significant:
- Price Hikes: Passing the cost of tariffs onto consumers.
- Staff Reductions: Reducing labor costs to compensate for increased expenses.
- Postponed Expansion: Delaying growth plans due to financial constraints.
- business Closure: In extreme cases, inability to sustain operations due to high costs.
Yes, The Mitchell Group, a second-generation family-owned textile company, also provides evidence of the same challenges. They are also deeply affected by tariffs on imported merchandise. They’re dealing with a 45% tariff on imported products, which ties up their cash flow because they need to hold merchandise on hand due to their established business model.
The Mitchell Group is experiencing a strain on its liquidity as of the tariffs. They have to pay tariffs on imported goods (like vinyl polymers and specialized textiles) that might sit on a shelf until distributors need them. This ties up the company’s cash reserves.The company is also a large employer, so avoiding layoffs is critical to them, but the tariffs make it harder to survive.
The Mitchell Group is focused on avoiding closure at all costs. They are looking at choice production locations in other countries. Though, they face logistical challenges. The company president, Bill Fish, acknowledges the infrastructure and standards offered by countries like China are challenging to replicate. They need their coated fabrics produced under one roof and to their demanding standards, which isn’t easily achieved by manufacturing parts in different countries and assembling them elsewhere.
According to Arensmeyer and other experts in the aricle, a significant increase in U.S.production could take a considerable amount of time. It’s not something that’s “fixed overnight.” The textile and apparel industry in the United States has been shrinking for decades due to factors like cheaper foreign production and globalization. Simply passing a tariff will not automatically help these businesses solve the problem.
He views the tariffs as a crisis for small businesses, leaving them with “not much control.” His commentary emphasizes that small businesses are at risk without a thorough plan to support them.
The article references Sheng Lu, a professor at the University of Delaware, who points out the state of the textile and apparel industry in the United States has been shrinking as of globalization and foreign production. Forcing companies to buy from domestic manufactures won’t necessarily work because the specific materials they need simply aren’t made domestically.
You can check out these additional resources:
- Original CNN article: (Link to the CNN article)
- Sheng Lu’s article on the textile industry: https://shenglufashion.com/2022/05/15/state-of-u-s-textile-and-apparel-manufacturing-output-employment-and-trade-updated-january-2022/
About the Author: [Your Name/Expert Contributor Name] is a [Your Title/Expertise].[brief bio highlighting relevant expertise/experience].