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Anxiety about Trump administration tariffs was rising among small retailers and brands, including those with manufacturing in the U.S., even before another round of levies \u2014 broader and steeper than expected \u2014 were unveiled early this month.<\/p>\n
Tariffs announced April 2 have since changed a few times over, and sparked retaliatory levies from some countries. On Wednesday, the Trump administration escalated tariffs on China to 125% but ordered a 90-day pause on many others. Most countries besides China are still subject to a 10% baseline toll.<\/p>\n
Small retailers and brands are particularly vulnerable, for a variety of reasons. When major challenges loom, they don\u2019t have deep pockets, diverse supply chains or many cost levers to pull. Large retailers have more bargaining power with vendors, and in order to better absorb wholesale or manufacturing price hikes, they can tamp down other big expenses, like marketing, according to Greg Stoller, master lecturer at the Boston University Questrom School of Business.<\/p>\n
\u201cA Walmart of the world, the Costcos<\/span> of the world \u2014 they have the capital reserves to withstand what’s happening right now,\u201d he said by phone. \u201cIf they need to lower prices, if they need to raise prices, if their customers are delayed in paying, if they lose a few customers \u2014 none of this is going to affect Walmart. For a small business, this could be catastrophic.\u201d<\/p>\nThe pause may provide some relief, at least for a while, but probably does little to clarify the longer term outlook for businesses, investors or consumers.<\/p>\n
Surveys of small businesses in March already reflected rising concerns about the impact of tariffs. The NFIB Small Business Optimism Index, from the National Federation of Independent Business, recorded the third straight monthly decline. Although the NFIB reported that \u201cthe impact of new tariffs is yet to be felt,\u201d Wells Fargo economists led by Charlie Dougherty tied the report\u2019s uncertainty index (elevated), economic outlook (falling), sales expectations (down) and inflation pressures (\u201cbubbling\u201d) to tariffs clouding small-business outlooks.<\/p>\n
Research from Alignable, an online networking platform for small businesses, found more overt consternation around tariff policy, which has deepened as the months go by. Over 44% of these companies \u2014 and 57% of small retailers \u2014 anticipate revenue losses due to tariffs, per the firm\u2019s March report, released April 4. Nearly 70% expect trade policy uncertainty to last through this month and more than 40% believe it will last through the end of the year, Alignable also found.<\/p>\n
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“I just feel like it\u2019s stupid to get all wrapped up and worried and make changes in my business when I don\u2019t even know what\u2019s going to happen.”<\/p>\n
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Ariane Harris<\/p>\n
Owner, Dutch & Bow<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
The apparel and footwear space is especially hard-hit. Given that most apparel sold in the U.S., by far, is made overseas, industry representatives and analysts warned in recent days that there will be little escape from the ensuing rise in costs. William Blair analysts Dylan Carden and Anna Linscott estimate that in the aggregate increase in merchandise cost will be about 30%, saying in an April 3 note that \u201cit is safe to assume companies will have to eat a fair share.\u201d<\/p>\n
\u201cThe April 2 tariffs seem purpose-built to hobble the apparel industry,\u201d they also said.<\/p>\n
Ariane Harris, owner of Dutch & Bow, a boutique in Bend, Oregon, that sells sustainably and ethically made women\u2019s clothing, is in wait-and-see mode. Some vendors have reached out to touch base, but it\u2019s not clear how the situation will affect incoming orders.<\/p>\n
\u201cEven just today, I picked up my phone and saw that Trump is not going to go through with the bigger tariffs for 90 days on all countries, except for now China, he’s bumping up to 125%,\u201d she said by phone. \u201cHe’s all over the place so <\/strong>I just feel like it’s stupid to get all wrapped up and worried and make changes in my business when I don’t even know what’s going to happen. If I was carrying a whole store full of things made in China, then I think I might be freaking out more.\u201d<\/p>\n\nMost of her assortment is from Europe, with some from the U.S. and Vietnam. She sources some lower-priced merchandise from China as an option for customers on tighter budgets, and said that may end if the tariffs make it too expensive.<\/p>\n
One rationale for the tariffs (there are a few) is to incentivize the onshoring or reshoring of manufacturing to the U.S. However, they can be devastating not just to smaller U.S. stores or direct-to-consumer brands that manufacture their goods abroad, but also many smaller U.S. factories whose raw materials come from other countries.<\/p>\n
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“We\u2019re fighting two headwinds: Our costs going up significantly plus nobody\u2019s spending.”<\/p>\n
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Greg Shugar<\/p>\n
CEO and Creative Director, Beau Ties of Vermont<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
More than half of small businesses surveyed by Alignable say they can\u2019t negotiate prices with suppliers to adequately offset tariffs; many say U.S.-produced alternatives often cost at least 25% more and take six months or longer to obtain; and nearly 20% say they don\u2019t have a viable domestic sourcing option.<\/p>\n
Beau Ties of Vermont, based in Middlebury, makes woven silk jacquard neckties, bow ties, pocket squares and scarves, and sells them direct-to-consumer and wholesale. Most suppliers of the high-end silk, which requires a certain looming method, are in China, with only a few found elsewhere including Italy, according to Greg Shugar, CEO and creative director.<\/p>\n
\u201cPeople say, \u2018Oh, well, just simply move your sourcing out of China,\u2019 as if that’s easy,\u201d he said by video conference, noting that tariffs are being lodged against most countries where silk of any kind is made. \u201cIt’s not easy. Well, now it makes no sense. Where am I going to go?\u201d<\/p>\n
When tariffs against Chinese goods were first announced, Shugar was able to come to agreements with vendors to share the impact, but they have balked as the levies have escalated.<\/p>\n\n\u201cEveryone talks about negotiating with Chinese suppliers. Yes, we all are,\u201d he said. \u201cThere are just countless of small businesses that cannot survive. We don’t have the brand equity that Apple does, or that Walmart does, or whatever these brands are. We don’t have that, we’re done. And that doesn’t even take into account the macro-economy. There’s going to be a pullback in consumer spending. So we’re fighting two headwinds: Our costs going up significantly plus nobody’s spending.\u201d<\/p>\n
Harris said that she and other shop owners in downtown Bend have noticed traffic has slowed dramatically since the tariffs were announced several days ago.\u00a0<\/p>\n
\u201cI thought maybe it was just me,\u201d she said. \u201cSo we’re not selling as many and our overhead\u2019s higher. The cost to make the goods is more but the costs of operating a business, like shipping and things, are also much higher.\u201d<\/p>\n
As policies fluctuate, costs rise and uncertainty prevails, small U.S. companies are under pressure once again, just a few years after the pandemic, Shugar said.<\/p>\n
\u201cI just don’t think people understand how small businesses are in such peril right now. We don’t have the flexibility or the profit margins to withstand this for any significant period of time,\u201d he said. \u201cWe barely got through COVID. How did we get through COVID? They wrote us checks. They sent us money. That’s how we did it. What are they going to do now \u2014 nothing. I make s— in America! Why am I getting hit with a goddamn tariff?\u201d<\/p>\n<\/p><\/div>\n
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