'Chaos': Small biz owner hit by Trump’s last tariff reveals key flaw that hurts companies

28.11.2024 15:14

Raw Story

President-elect Donald Trump is following through on a key campaign promise of imposing double-digit tariffs on goods imported into the United States. One small business owner is worried that the new tariffs could set American companies back in more ways than one.

On Tuesday, the New York Times reported that Trump's proposed new day one 25% tariff on goods from Canada and Mexico and 10% on Chinese imports is already provoking a back-and-forth with Mexican President Claudia Sheinbaum. She warned that if Trump followed through, she would retaliate with a new tariff on imports from the United States. The Times pointed out that the tariffs would affect a vast number of industries, including auto manufacturing, where many American car companies depend on parts imported from Canada and Mexico.

In Canada, Prime Minister Justin Trudeau has announced an emergency meeting with premiers of Canadian provinces to discuss how the proposed new tariffs could impact their local economies. Trump pledged that the tariffs would remain in place until the flow of undocumented immigrants and illegal drugs like fentanyl stop coming across U.S. borders.

In a recent interview with AlterNet, Prevelo Bikes founder Jacob Rheuban said the tariff will impact American businesses and consumers far more than international governments. Walmart — whose inventory is primarily made up of goods imported from China — has already signaled that the new tariffs would most likely be passed onto customers in the form of higher prices. Rheuban said while he'll do all he can to cut production costs to make up for the tariff, it may not be enough as his company doesn't "have a surplus operating budget."

(Jacob Rheuban)(Jacob Rheuban)

Rhueban's California-based company — which has six employees — primarily sells its bikes made for children domestically, though he said certain raw materials like tires and brakes are made in Asia and emphasized that the bicycle manufacturing industry as a whole uses those same Asian suppliers. He added that if Trump's goal is to make companies source their raw materials domestically, that would be a "really big undertaking" that would require years of planning.

"We're going to need support for that," Rheuban told AlterNet.

He added that his company — which was launched in 2016 — has prior experience with Trump tariffs implemented during his first administration. In March of 2018, Trump announced tariffs of 25% on imported steel and 10% on imported aluminum. Rheuban said the rapid timeline for implementation caught businesses like his off-guard. He also said that many businesses that imported goods scrambled to make orders before the tariff was imposed, which he said "snarled the global supply chain."

"There was a little bit of chaos," he said. "the last tariffs were implemented relatively quickly without time to make supply chain shifts."

The Prevelo founder told AlterNet that he hopes the incoming administration takes a hard look at reforming the de minimis exemption, which President Joe Biden started to do this fall. That exemption makes it so products valued at $800 U.S. dollars or less is exempted from import duties, which Chinese companies like Temu and Shein have taken advantage of. Rheuban said small American companies like his suffer as international competitors are able to flood the market with cheap goods.

"[The de minimis exemption] puts domestic brands at a disadvantage to companies shipping direct from China," he said.

Trump has framed his tariffs as a tax paid by other countries, though economists say that this is false. During her campaign, Vice President Kamala Harris repeatedly warned that Trump's proposed tariffs would amount to an additional sales tax that would hit American families to the tune of roughly $4,000 dollars each year.