The White House moved ahead with increased tariffs on $200 billion in Chinese goods Friday (May 10, 2019) after trade talks between the U.S. and China failed to produce an agreement. What does this mean for small businesses? According to three different surveys conducted recently, the impact will vary depending on the type of small business it is.
In March, BizBuySell’s March opinion poll surveyed over 1,000 small business owners regarding the President’s tariff.
President Trump has proposed a 25 percent tariff on Chinese imports if a trade deal is not reached. If tariffs were to increase, how would that affect your business?
39% | No Impact
32% | Negatively
19% | Unsure
9% | Positively
According to Bank of America’s Spring 2019 Small Business Owner Report, 59% of small business owners said they don’t think tariffs have any impact on their businesses.
Small businesses cover many different sectors, so the potential impact of tariffs depends on the type of small business involved, said Sharon Miller, head of small business at Bank of America.
According to National Federation of Independent Business (NFIB) economist William Dunkelberg, “Most of the negative impact comes in the form of higher costs related to tariffs placed on imports into the U.S., including aluminum and steel, but also tariffs placed on U.S. exports, including soybeans.”
In a recent survey, NFIB asked a random sample of its hundreds of thousands of member firms if their operations had been impacted by recent trade policy related changes with Mexico, Canada, or China.
30% | Said they experienced a “somewhat negative” impact
10% | Said a “significant negative impact”
5% | Said they’ve been “favorably impacted”
“In simple terms, a tariff is a sales tax imposed on specific imported goods or services,” said Dunkelberg. A 25 percent tariff raises the cost of acquisition by 25 percent, but how that increase in price migrates through the economic system is often very complex. Also, retaliatory tariffs imposed by other countries on goods we make and export have also disrupted markets and reduced sales as those tariffs make our products more expensive to other countries.
The activities of small businesses span the entire spectrum of production and delivery of goods and services, and their specializations will give them different exposures to the impact of tariffs and trade agreements. According to NFIB’s survey:
64% | Percentage of businesses in agriculture reporting a negative impact
57% | Percentage of businesses in the wholesale trades reporting a negative
41% | Percentage of businesses in manufacturing and in construction reporting a negative impact
What are the negative impacts of tariffs?
According to Dunkleberg, “beyond the direct impacts, changes in trade policy and retaliatory measures are surely a source of much uncertainty for many. Uncertainty surrounding trade policy will undoubtedly contribute to slower economic growth; the question is by how much.”
See also on SmallBusiness.com
Trade Tariffs Have Unintended Consequences Warn U.S. Retailers, Farmers