Who pays for tariffs? American businesses and consumers

Director, Special Projects and Executive Communications
May 10, 2019

At face value, tariffs on imported goods from other countries might sound like a reasonable way to protect American businesses and jobs. The reality is quite the opposite: Tariffs are a tax paid by American companies and consumers — not by the foreign governments targeted by the tariffs.

Tariffs can mean lower wages, fewer employees, deferred investments and higher prices for consumers.

The administration moved forward with plans to increase tariffs on $200 billion of Chinese goods from 10 to 25 percent. This is bad news for nearly every sector of the American economy — retail, farming, manufacturing and technology, to name a few. When faced with tariffs, companies are forced to cut costs elsewhere in their business to stay afloat. Ultimately, tariffs can mean lower wages, fewer employees, deferred investments and higher prices for consumers. Small businesses are particularly vulnerable, since they don’t have the resources and flexibility to quickly switch suppliers.

Through the Tariffs Hurt the Heartland campaign NRF is part of, we’ve heard many stories about the negative impact of tariffs firsthand from farmers and business owners across the country. The campaign has held 15 events, most recently in Cleveland during the 2019 Great Lakes Economic Forum.

Businesses in every industry across the U.S. economy are speaking out against tariffs, urging the administration to end the trade war that’s hurting their employees and consumers.

  • Arnold Kamler, chairman and CEO of bicycle manufacturer Kent International, says trade war volatility has set back his company’s expansion ambitions: “Our factory employs 125 people, but that could grow to 300, I thought: Eventually, we could build 1 million bicycles, right here in the United States. But Trump’s protectionist measures are getting in our way. We don’t plan to lay anyone off, but until the situation stabilizes, and we have some clarity about our future, we’ll just continue buying bike frames from China.”
  • High-end audio equipment manufacturer AudioControl imports about 25 percent of its parts from China. CEO Alex Camara says it’s been painful enough absorbing costs from the 10 percent tariffs, but now that they’ve climbed to 25 percent, he’ll be forced to “raise overall prices to dealers and retailers by 8 percent to 12 percent, costs that would be passed to consumers and that could crimp sales.” He’ll also have to restrict investments in new technologies.
  • Polaris, manufacturer of snowmobiles, ATVs and motorcycles, will take a hit of about $195-$200 million with the introduction of new tariffs. CEO and chairman Scott Wine says Polaris has already moved $10 million worth of supply chain manufacturing out of China, and may need to move more: “Ultimately if this was not resolved, we would have no choice but to move production to Mexico. This would essentially be forcing me to push jobs outside the U.S.”
  • Given just five days’ notice of the most recent round of tariffs, many importers will have to pay higher prices on orders already in motion. Missouri-based manufacturer Cap America has roughly $1 million worth of baseball hats already ordered that will now be hit with the higher tariff. CEO Phil Page says, “It’s very difficult to understand what the President is going to do by a business perspective. To spring it on us all at once like this is a very poor judgment on his part.”
  • Beth Aberg, owner of Random Harvest Home Furnishings in Washington, D.C., says the new 25 percent tariffs will stop her stores from stocking almost everything they carry from China: “Because furniture items are already higher ticket, an increase from 10 percent to 25 percent is really significant. I don’t think the administration understands how much damage it’s doing, both to the U.S. economy and the consumer.”
  • Tiffany Zarfas Williams, owner of the Luggage Shop of Lubbock in Texas, says that since tariffs went into effect last year, her vendors have raised prices on a regular basis: “I definitely want China to be held accountable, but I don’t know why we are punishing consumers in our own country. That’s the part that’s hard to understand as a small business owner in Texas.”
  • The threat of tariffs is creating uncertainty for Lisa Hu, founder of handbag company Lux & Nyx. She has largely abandoned plans to sell her products in department stores because she worries about new tariffs that could potentially arise between the time stores place an order and when the imports arrive: “Are these tariffs going to happen? Are they not? I’m having to make long-term decisions based on the little information I have now.”
  • Tariffs are dampening international plans for Cleveland distiller Cleveland Whiskey, which has laid off two employees it could no longer afford to pay. CEO Tom Lix says, “By 2018, there was not a single bottle of Cleveland Whiskey sold in Europe. The tariff causes the prices on the whiskey to be marked up. … The fact that we are manipulating these trade deals and using it as a political tool is absolutely absurd, and it hurts a whole lot of people. Mark my words, the economy won’t stay this good forever. We are making things worse for ourselves.”
  • Indiana farmer Brent Bible has seen a 10 percent price reduction in corn and 20-25 percent reduction in soybeans: “I want there to be no mistake that the consumer is paying for these tariffs. I wish China was paying them. I certainly would feel better about it that way.”
  • David Stephens, a soybean grower from Kentucky and president of the American Soybean Association, says “farmers are in a desperate situation” after getting caught in the crosshairs of retaliatory tariffs from China: “We need a positive resolution of this ongoing tariff dispute, not further escalation of tensions.”
  • Dale Livingston, a fifth-generation farmer of soybeans, corn and wheat from Illinois, is eager for the trade war to end — especially since its negative effects have been compounded by bad weather for crops. He’s never seen so many negative things happening at the same time for farmers: “Let’s quit playing these games and get it over with.”

Watch the video below to learn more about how tariffs hurt U.S. business and consumers.

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