Small retailer cites ‘trickle-down effect’ of tariffs

J. Craig Shearman

As Nebraska appliance and electronics dealer Ron Romero listened to a Minnesota farmer worry about falling crop prices and a Missouri factory manager describe the anguish of laying off 200 workers during a forum in Washington this week, the impact of tariffs imposed in the growing trade war were clear.

“This is a trickle-down effect,” Romero said. “The farmer isn’t going to come into town to buy a new pickup truck and the salesman who would have sold it to him is not going to come in to buy a new TV.”

“We couldn’t be more discouraged by this ongoing trade war."

Ron Romero
Schaefer’s TV and Appliance

“We couldn’t be more discouraged by this ongoing trade war and what it means for our family owned company” he said. “Tariffs are taxes that will cause sticker shock for our customers and ultimately lead to fewer sales and make it harder for us to grow and create jobs in our community.”

Romero, owner of the 90-employee, single-store Schaefer’s TV and Appliance in Lincoln, Neb., spoke on behalf of NRF at a “Trade Builds America” event held Tuesday by NRF and other pro-trade business groups. Speakers included small business owners and executives; Representative Roger Marshall, R-Kansas, a member of both the Agriculture Committee and Small Business Committee in the House; and Forbes Media Chairman and Editor-in-Chief Steve Forbes.

Even though the majority of the appliances he sells come from U.S. manufacturers, wholesale costs are already going up because of the 25 percent tariff on imported steel imposed earlier this year, Romero said. The appliances are often assembled from imported parts ranging from motors to electronics -- he said the price he pays for refrigerators has gone up between 6 and 12 percent. He is also concerned by tariffs on a broad range of products from China, including 25 percent on $50 billion worth of goods that took effect this summer and 10 percent on another $200 billion that took effect this week.

"The problem will be magnified by higher prices consumers will face across the board."

Ron Romero
Schaefer’s TV and Appliance

As the tariffs force him to increase the price of merchandise, customers who previously might have bought a mid-level refrigerator, washer or dryer will likely drop down a notch to a less-expensive model, he said. Shoppers who might have bought a matching set of appliances when upgrading a kitchen might only replace units that no longer work. And some may choose not to buy at all.

Romero said the problem will be magnified by higher prices consumers will face across the board and as workers lose their jobs at American companies that rely on imported parts and materials to compete in the global economy.

Chris Pratt, operations general manager at Mid-Continent Steel and Wire in Poplar Bluff, Mo., said employment at his company has already been devastated by the tariffs. Mid-Continent, the largest U.S. manufacturer of nails, absorbed part of the cost after tariffs drove up the price of steel, but still had to raise prices 19 percent. The result was the loss of half the company’s orders in just two weeks this June, forcing the layoff of 200 of its 500 workers.

“Putting a tax on American consumers and businesses is not the way to deal with trade abuses.”

Steve Forbes
Forbes Media

Kristin Duncanson, a corn, soybean and hog farmer in Mapleton, Minn., said 40 percent of the value of her soybean crop has been lost this year because retaliatory tariffs China imposed on U.S. agricultural products have reduced demand and lowered prices. Hog prices are also down, prices for seed and fertilizer for next year’s crop are up, and banks are less likely to loan her money because of the reduced cash flow, she said.

“Let’s banish the word 'tariff' — tariff is just another way of saying sales tax,” Forbes told the small business owners. “Putting a tax on American consumers and businesses is not the way to deal with trade abuses.”

Representative Marshall said he’s heard from Kansas farmers seeing lower crop prices, a Caterpillar plant that bought steel for bulldozer blades from Canada and a factory that builds aircraft fuselages from imported aluminum that is now subject to a 10 percent tariff.

“People are asking what a trade war is going to be like, but it’s already started,” the congressman said. “It’s already costing Kansans their jobs.”

To learn more about tariffs, read why trade matters to retailers and the impact of tariffs on small business.