The Trump administration’s tariffs on imports from China, Canada, and Mexico have created uncertainty and frustration for many American businesses. Erica Campbell, owner of a Catholic goods business in Phoenix, is waiting for a shipment from China and worries about the impact of future tariffs on her $2 million-a-year company. Many businesses that rely on Chinese factories for efficient and inexpensive production are now facing higher costs due to the tariffs.
They report having to raise prices, delay investments, and even cut jobs to offset the expense. Treasury Secretary Scott Bessent believes that China will absorb the cost of the tariffs rather than passing it on to consumers. He also mentioned that Mexico has offered to match U.S. tariffs on China and urged Canada to do the same.
However, China’s Ministry of Commerce has stated that it “firmly opposes” the tariff hike and vowed to retaliate as necessary. Experts suggest China might take similar measures as it did in response to previous U.S. tariffs, such as raising duties on certain U.S. imports and adding companies to an unreliable entities list.
Tariffs strain U.S. business operations
The ongoing tariff threats and uncertainty have also impacted consumer spending and confidence. Data released by the Commerce Department showed that Americans cut their spending by 0.2% in January, the most since February 2021, despite rising incomes. Inflation has cooled, but economists warn that the tariffs will likely push prices higher.
Randy Carr, CEO of World Emblem, says he expects to raise prices by 5% to 10% and cut jobs if the 25% import taxes on Mexico are imposed. The Federal Reserve, which has been working to lower inflation, now faces the challenge of potential price distortions caused by the tariffs. Jeffrey Schmid, president of the Fed’s Kansas City branch, expressed caution about inflation and the possibility of elevated uncertainty weighing on economic growth.
The toy industry, which heavily relies on Chinese manufacturing, is particularly concerned about the proposed 20% tariff on imports from China. Curtis McGill, CFO of small toy maker Hey Buddy Hey Pal, called the move “a nightmare scenario.”
Photo by; Philip Strong on Unsplash
