Tariffs Force Businesses to Strategize to Preserve Profits

 

NEW YORK — Faced with the Trump administration’s 25% tariff on imports from China, Ruth Rau is looking to other countries to manufacture baby and toddler toys.

“No one domestically can produce the quality we want, and with the cost of shipping and the proposed new regulations, it’s not going to be cost-effective to produce them in China either,” says Rau, owner of Mouse Loves Pig.

The 25% tariffs President Donald Trump has imposed on thousands of Chinese-made products have small business owners trying to determine how or whether they can limit the damage to profits from import duties. Many owners will see if they can pass on the added expense to customers. Some, like Rau, are considering getting products manufactured in countries where the U.S. isn’t waging a trade war, but that’s an expensive alternative that takes time to work out. Others want to find U.S. suppliers, but depending on the product it may be impossible or not much of a money-saver.

Trump raised the tariffs to 25% from a previously imposed 10% last Friday after China refused to meet U.S. demands; trade talks between the countries broke up soon after.

Rau wants to shift production from Nicaragua but manufacturers have told her the prices she’d pay them could go up 30%. Rau, who lives in Winchester, Virginia, is looking at factories elsewhere in Central America as well as South America, hoping they’ll be able to produce toys in time for the holiday season.

Companies of all sizes contend with the Trump tariffs, which are a U.S. tax on goods, and with retaliatory tariffs on U.S. exports that countries impose. Small businesses have a tougher time because they lack the revenue streams larger companies use to absorb costs. Big players also have more negotiating power to get better prices from manufacturers, blunting the tariffs’ effect. If they’re already multinational companies, they can shift manufacturing from one country to another with relative ease.

Peter Horwitz expected the higher tariffs. Horwitz had already absorbed a 10% tariff on the paper and plastic products his company, Tiger Packaging, imports from China. He has already taken steps toward moving some manufacturing to countries including Taiwan and Malaysia.

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