Implementing tariffs “playing with fire”

Small business food shop
A panel met in Seattle as part of the “Tariffs Hurt the Heartland” campaign to discuss concrete examples of how retaliatory tariffs have affected Washington business owners and trade stakeholders. Photo: PxHere

A panel featuring representatives from small business, agriculture and the trade sector met in Seattle this month to discuss – and humanize – the effect that retaliatory tariffs are having on Washington state workers and industries.

According to data compiled by the Trade Partnership as part of the “Tariffs Hurt the Heartland” campaign, Washington businesses bore the brunt of $103 million in retaliatory tariffs instituted by the state’s trading partners. Research also found that levies have affected Washington’s competitiveness and caused the volume of state exports to drop by 28 percent in September.

The state imported $495 million in goods in September which became subject to 10 percent levies. These tariffs are expected to rise to 25 percent on Jan. 1, 2019.

The campaign has organized “town hall” panels across the country to bring greater attention to the consequences of tariffs on American businesses. The group convened a panel in Seattle this month featuring Washington Fruit and Produce Co., Farmers for Free Trade, the Washington Council on International Trade (WCIT), Port of Seattle, Walmart, Ricardo Beverly Hills, Ben Franklin Crafts and Seven Seas Exports.

Sam Cho, CEO of Seven Seas Exports, participated in the conversation and told Lens he praised the variety of perspectives represented at the Seattle panel to bring more attention to the issues and the different industries affected.

“The purpose of these panels is to create awareness. Often when these trade wars happen the media always talks about how bad they are for businesses and American consumers, but it is very rare you actually hear examples or stories of how that is true,” said Cho.

He hopes the town halls will also humanize the negative effects of implementing tariffs as part of trade negotiations.

Cho founded his business in 2016, which primarily ships agricultural products including poultry, diary and seafood.

He said that agricultural products suffer many long-term implications during trade negotiations, especially since those goods tend to be ingredients for other products. For example, a bakery needs eggs to make bread.

“When we have tariffs and trade wars, all of the sudden it becomes difficult to buy American goods, and you are forced to buy from somewhere else that might be cheaper or better.”

Since many of these ag goods are used as ingredients, once a vendor makes the switch from American agricultural products, it becomes difficult to transition back.

This happened in 2015 when the U.S. had an avian influenza outbreak. As a result, China stopped buying American chicken and poultry products because they were worried about the disease. The country then started buying from Brazil.

“It’s been three years and we still haven’t recovered. Brazil still supplies China with the majority of their chicken, and America has never gotten that market back,” he said.

Adrian Taylor, Owner of Bonney Lake-based Ben Franklin Crafts, told Lens that the 10 percent tariffs have had very little effect on his craft company because most of the products for the end of the year were delivered in mid-September. However, he recognizes that there is the possibility that he will be hit by the tariffs being discussed for Jan. 1 implementation.

His business directly imports approximately 11 percent of its inventory, and the rest are purchased from domestic vendors who source from both domestic and international suppliers.

When checking the products arriving for his business at the beginning of 2019, he found that 30 percent of those items will have 20 percent tariffs on them – on top of the duties already in effect for those items.

“That is pretty significant in a business that is run on a really tight margin,” said Taylor. “The margins of error have become even less…because of pressures such as wages, healthcare, cost of doing business and rent…everywhere we turn around there is an increased cost.

“Even though I understand the idea of putting pressure on another country to trade fairly, what they are doing is extraordinary—it’s basically playing with a loaded gun when it comes to our economy,” he said.

Also, most retailers and vendors have indicated that they are taking a “wait and see” approach with the anticipation of 2019 tariffs. Most are continuing with business as usual while under the effect of the 10 percent tariffs, however some have already made price adjustments.

Taylor said he wrote a letter to the president saying that he didn’t believe tariffs were good for small business.

“More retail sales in our country come from small business than from big giant retailers,” he said. “If we represent the bulk of retailing in the U.S., then they are playing with fire in that it is hard for business owners to keep on top of cost increases and to adjust prices accordingly.”

It’s also critical to remember that consumers will only bear so much when it comes to price increases.

Many of Taylor’s vendors are moving production to other countries, which potentially creates a lag in the pipeline of goods production. This may also create good shortages, he added, which should put pressure on efforts to reduce the barriers to bring American goods in.

Taylor is requesting a delay for the implementation of tariffs by three or four months and will monitor the situation.

“Ultimately I think free trade is the answer, not taxation,” he said. “The very thing they are trying to encourage is being diminished by imposing tariffs to keep us from importing goods, and it is hurting American businesses.”

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