How tariffs are crushing small businesses

Investment Analysis Clubs Macro Economic Trends and Risks
1

https://www.wsj.com/business/entrepreneurship/small-business-tariffs-e6dfaccb?mod=wknd_pos1

How Tariffs Are Crushing Small Businesses: ‘Nobody in Power Seems to Care’

Owners are laying off staff and tapping personal savings, hoping to hold out until a trade deal with China; an $8,752 fee on a $5,649 order

By Ruth Simon, The Wall Street Journal, May 11, 2025

Key Points

  • Small businesses are struggling with 145% tariffs on Chinese imports.

  • Small businesses lack the resources of larger companies to endure tariffs, facing challenges in supply-chain modification.

Some small-business owners are liquidating assets and considering layoffs due to tariff-induced financial strain.

…
Unlike larger companies, small businesses have fewer levers to pull to help them endure the new tariff regime. Most work with a single factory or a handful of suppliers, making switching production to lower-tariff countries especially difficult. Smaller margins, thinner cash cushions and tiny staffs leave them more vulnerable to trade battles and other economic storms.

The stakes are high, and deeply personal. Finances of small businesses and their owners are often deeply intertwined, with a business its owners’ largest—or only—asset. Personal guarantees can also make owners liable for their company’s debt… [end quote]

From ChatGPT:
As of the most recent data, small businesses employ approximately 45.9% of the U.S. workforce, equating to about 59 million people. Office of Advocacy

Small businesses are typically defined as firms with fewer than 500 employees. They represent a significant portion of the U.S. economy, accounting for 99.9% of all businesses and contributing 43.5% to the nation’s GDP. Office of AdvocacyU.S. Chamber of Commerce+1Office of Advocacy+1

In terms of job creation, small businesses have been a driving force, contributing 55% of the total net job creation from 2013 to 2023. Bureau of Labor Statistics+1Bureau of Labor Statistics+1

It’s important to note that definitions of “small business” can vary. For instance, the U.S. Bureau of Labor Statistics often defines small businesses as firms with fewer than 250 employees, while the Small Business Administration uses the broader threshold of fewer than 500 employees. Despite these differences, the impact of small businesses on employment and the economy remains substantial.Bureau of Labor Statistics

[end quote]

About 70% of GDP comes from services. Tariffs can impact services indirectly and be a significant burden at the same time tariffs are directly impacting goods producers.

The WSJ article describes the efforts of the Small Business Administration to help. The agency has endorsed bipartisan plans to double SBA loan limits for small manufacturers. In the coming weeks, it will announce additional programs to match small businesses with American manufacturers, fabricators and producers, she said.

But loans must be paid back. And new programs take time to develop.

The tariffs are here, now. They will have a massive disruptive impact on employment and the economy.

Wendy

8 Likes
2

TIG was very clear about his intentions, months ago. For that matter, I remember him warning US companies to get their supply chains out of China in 2019. Tariff on Indian goods is only 26%, and manufacturing pay rates in India are far lower than Chinese pay rates. Goods from Brazil are tariffed at only 10%. So why didn’t businesses change suppliers months ago?

Steve

1 Like
3

It is not that easy. Let’s say you are manufacturing iPhones. So first, you’d have to build a factory. And course establish a new supply chain for everything you needed in Brazil. And you need a trained-up workface. Obviously, that requires an enormous upfront outlay of capital. Even if it is simpler than iPhones, there are still the same basic problems.

But the tariff rates were carefully kept secret, so it was impossible to know if a big investment in say, Brazil would pay off. And we still don’t know what the tariffs will be because the 10% rate expires in July goes up to some other number that is still secret for now. As a business, you can’t make investment decisions with that level of uncertainty.

It was explained to me on the BRK board that TIG uses Sun Tsu’s Art of War tactics when negotiating. He tries to be deceptive and keep the other side guessing. That explains why a county like Brazil that we have lukewarm relationships with gets 10% tariffs, and our ally Canada gets 25%. You would never expect that, so that’s what he did to keep everyone off balance. And it worked.

5 Likes
4

I expect many small farmers will be negatively affected. The large Corporate farmers will get a leg up from the government. The small farmers are going to be crushed also.

5

It worked as in a good strategy or it worked meaning everyone is off balance? Because for trade and a countries economic viability I think it is a terrible way to negotiate. It would work if you were at war with them all but supposedly that isn’t what he wants. Nobody knows what is going to happen because even the countries negotiating with him might throw a spanner in the cogs.

5 Likes
6

TIG warned the “JCs” over five years ago, to get out of China. Mexican labor is considerably cheaper than Chinese. Indian labor rates make Mexicans look rich. Seems the “JCs” were not wiling to disturb their golf game and do the advance planning that they are supposed to do for their $20-$30M payday. Welchism in action again: don’t worry about the long term. Just do what puts the most loot in your pocket today.

A YT talking head was having a conniption this morning, about the honchos at Stellantis crying about tariffs. That company’s big vulnerability is the Heavy Duty Ram trucks, which are built exclusively in Mexico. Sergio Marchionne announced, in January of 2018, that that product line would be moved to their plant in Warren, Michigan. Sergio died that July. If the company had carried through with Sergio’s plan, they would not have that vulnerability now. But no, they did nothing. So, now, management is crying “CRISIS”.

Steve

1 Like
7

I’m pretty sure my sarcasm detector went off on reading that, but Wow, that was good for a huge laugh, lol.

3 Likes
8

CEOs probably did not anticipate a second TIG presidency in 2020, even though the first round of tariffs were not eliminated at the time. Even less so tariffs shooting up to 145% within the blink of an eye.

Tariff on Indian goods is only 26%, and manufacturing pay rates in India are far lower than Chinese pay rates. Goods from Brazil are tariffed at only 10%.

Who guarantees they don’t double or triple if TIG gets up with the wrong foot tomorrow morning? Remember, the art of the deal, be deceptive to the maximum extent, etc.

Bill Gates has just been on CNN

image
image1480×1280 80.9 KB

https://www.piie.com/research/piie-charts/2019/us-china-trade-war-tariffs-date-chart

1 Like
9

Did he warn them to get out of all the other countries also? He just negotiated a beautiful trade agreement with Canada and Mexico. Now he goes after them again? I think that proves Syke point that it would be to hard to plan for any of this if you were a company.

2 Likes
10

As high as tariffs are against other countries, they are higher for Chinese goods. Recall, he was blathering last week about cutting tariffs on Chinese goods to “only” 80%. That makes Indian goods at 26% a bargain, especially when you add in the cheaper Indian labor.

Steve

11

No one knew this would be the case four years ago. No one knew this would be the case four months ago. No one has any idea of this will still be true four months from now.

6 Likes
12

It was clear, years ago, China was the primary target. Recall, also, TIG imposed a steep tariff on Korean laundry washers in 2017. Obama imposed a tariff on Chinese car tires. Did Biden repeal any of the TIG tariffs early? Not that I recall. The washer tariff expired on schedule, a couple years ago. Rising tariffs have been the trend for a while, Marchionne understood that. If Stellantis had moved on Marchionne’s plan, the move would be done now. If Foxconn had built the flat panel display plant in Wisconsin, like it said it would, it would be done and in production now, so that Element Electronics could source display panels in the US, for the TVs it assembles in the US.

a quick jump into the WaBac machine.

DETROIT (Reuters) - Fiat Chrysler Automobiles said on Thursday it will shift production of Ram heavy-duty pickup trucks from Mexico to Michigan in 2020, a move that lowers the risk to the automaker’s profit should President Donald Trump pull the United States out of the North American Free Trade Agreement.

https://www.reuters.com/article/business/fiat-chrysler-to-invest-1-billion-in-michigan-plant-add-2500-jobs-idUSKBN1F0348/

Steve

2 Likes