A garment market in Guangzhou, China. Although even higher tariffs are on pause, the minimum US duty on goods from China is 30%. Photo / Qilai Shen, The New York Times
A 90-day pause on additional tariffs on China offers no relief to US companies already facing extraordinarily high import taxes imposed by the President.
After fighting in the Vietnam War, Richard May returned to the United States and enrolled in business school, where an economics class made a big impression on him.
He learned about British economist David Ricardo’s 19th-century theory of comparative advantage, the idea that a nation should specialise in what it does best and trade with others for everything else. He started his own business in 1990, designing medical treatment beds and garage doors in the US. Applying Ricardo’s ideas, May used manufacturers in Asia to turn his blueprints into products.
This model worked well for May’s company, MFG Direct USA, for the better part of 35 years. But this year, amid President Donald Trump’s barrage of tariffs, he feared that his company might not survive another 60 days. To bring his garage doors into the US from China, he now had to pay an 83% tax to the US Government, a compilation of four different existing and new tariffs.
May, 78, said he went into “survival mode”. He laid off staff and cut expenses drastically. His team worked 12 hours a day trying to find new customers. He made it through the shock, but the business is facing big challenges.
“We’re hanging on by a thread,” he said. “We’ve been doing everything possible. We’re working harder just to stay in business.”
Just over six months into Trump’s campaign to rebalance global trade, some American small businesses are already on the brink. Others have chosen to throw in the towel. Last week, the US and China agreed to extend, by another 90 days, a pause on tariffs that would have soared to a catastrophic 145%, averting a worst-case scenario – a complete halt of trade between the world’s two largest economies.
But the pause has done nothing for many American small-business owners paying the tariffs it left in place, such as a minimum 30% duty for goods from China or a 50% import tax on products made from foreign steel and aluminium. The average effective US tariff rate soared to 18.6% in early August, the highest level in more than 90 years, from 2.5% when Trump took office in January, according to the Budget Lab at Yale, a research centre.
We’re hanging on by a thread.
Many businesses stockpiled key supplies and components before the tariffs took effect, but the full effect of the import taxes is becoming more apparent as those reserves dwindle, dealing a final blow to some companies already struggling with other challenges.
Howard Miller, a family-owned manufacturer of handcrafted clocks and home furniture based in Zeeland, Michigan, said last month that it planned to shut down operations next year after 99 years in business. The company, which employs nearly 200 people at factories in Michigan and North Carolina, said in a statement that it was already grappling with a soft housing market when tariffs hit supply chains and “sparked recession fears”.
“Our business has been directly impacted by tariffs that have increased the cost of essential components unavailable domestically and driven specialty suppliers out of business, making it unsustainable for us to continue our operations,” said Howard J. Miller, the company’s CEO and grandson of its founder.
In July, Jennifer Bergman, 58, closed West Side Kids, a toy store in New York City founded by her mother 44 years ago. She said that operating a toy shop in the age of Amazon was already difficult, but that the tariffs made it impossible to go on. The prices for everything from her bestselling scooters to inexpensive knick-knacks went up, and she spent most of her days dealing with price increases. She also said she found that people were more hesitant to spend because they feared the effect of tariffs on the economy.
They think I’m the first to fall, but that others are going to follow.
As Bergman looked at her finances in June, she realised that she would struggle to make rent in July. She said sales representatives from toy brands had told her that other shops were struggling, too.
“They think I’m the first to fall, but that others are going to follow,” Bergman said.
Sari Wiaz, owner of Baby Paper, which makes paper-like toys, said the tariffs on her products imported from China had been “devastating”. Her costs are up 25%, and the uncertainty is making it hard to plan for the future. Wiaz, 67, noted a stark contrast to the support that communities and the Government had provided to small businesses during the Covid-19 pandemic, a period that also caused local businesses to collapse.
In a networking group for small manufacturers, she said, she noticed that many otherwise scrappy business owners were “starting to give up”.
Holly Eve, 38, is starting to face the reality that she may have to shut her California-based company, Madame Lemy, a producer of all-natural powder deodorant and shampoo. She started the business nine years ago after struggling to find an effective, natural alternative to conventional deodorants. At the outset, she made the products in her kitchen.
The business experienced rapid growth during the pandemic, as online shoppers flocked to her products, depleting her inventory. Eve took out a small-business loan to expand, but her company hit a lull when online advertisements became more expensive and less effective. Her optimism heading into this year eroded quickly when the tariffs hit.
Her American contract manufacturers told her they would have to charge her 60% to 200% more, depending on the item, because they procure the necessary components to assemble her products from abroad. In addition, the tariff on importing boxes and other packaging she buys from China has also risen sharply. She said she was struggling to cover her loan payments.
“This just seems like a problem too large to solve,” Eve said. “It has completely wrecked my mental health.”
She felt she had so much of her identity tied up in the company – the business had sustained her through a painful divorce and devastating car accident – that the looming prospect of its failure was almost too much to handle.
She said she had found comfort in the support of her family. Her father, Stephen R. Landfield, who voted for Trump, wrote a letter to the White House on her behalf, explaining that her business will not survive the tariffs.
“Small businesses are the backbone of our country, yet these tariffs unfairly target them. Many will have no choice but to close their doors,” Landfield wrote. “I urge you to reconsider this policy so that American entrepreneurs and small-business owners like my daughter can continue contributing to our economy without being crushed by costs beyond their control.”
This article originally appeared in the New York Times.
Written by: Daisuke Wakabayashi
Photographs by: Qilai Shen and Aleksey Kondratyev
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