How small businesses are navigating tariff turmoil
How small businesses are navigating tariff turmoil
Grant Henegan has been preparing for this tariff moment for months. He woke up bright and early on Nov. 6, the morning after the election, to set his plan into motion.
“What we did here is we said, well, we would just get in as much as we possibly could” from China before Inauguration Day, said Henegan, owner of Viridien Patio + Fireplace, a small chain of outdoor furniture stores in the Carolinas.
Henegan should have enough extra cushions and sofa frames to last until Labor Day. Meanwhile, he’s also importing more from Indonesia to avoid tariffs on Chinese goods. As it turns out, he’s not the only one.
“So it does create a lot of constraints on the supply chain,” he said.
His strategy made shipping more expensive, so Henegan’s spending 30% more sourcing from Indonesia. In other words, he made a bet that, so far, hasn’t paid off.
“I think that’s one of the frustrations importers like myself have, that it’s hard to make good decisions,” he said.
Most recently, President Donald Trump imposed a 25% tariff on all steel and aluminum imports. There’s also a 10% tax on all goods from China. And come March, after a month’s delay, we may see a 25% tariff on imports from Canada and Mexico.
“We’re just holding our breath, really,” said Daniella Velazquez de Leon, general manager at Organics Unlimited in San Diego, which imports 90% of its produce from Mexico.
There is not a ton Velazquez de Leon can do while she waits out this tariff delay, and not much she can do if it does go through. Bananas don’t last forever, so she can’t stock up. And being physically close to the fruit farms is important.
“The bananas that we source from Mexico make it to the United States within two days,” Velazquez de Leon said.
That’s two days by truck. If she starts importing from, say, Ecuador instead?
“It takes the fruit over two weeks to arrive to the United States,” she said. That’s two weeks by container ship, during which the bananas may overripen.
Business owners who import from Canada are also in tariff limbo. Chip McElroy, CEO of McElroy Manufacturing in Tulsa, Oklahoma, imports 60% of the parts he uses to make specialty construction equipment, like machines that cut and fuse pipes. He needs hydraulic cylinders and aluminum castings that are hard to source.
“It’s not like going down to the local hardware store and looking to buy a screw,” said McElroy. “Those kind of items pretty much have to be built specifically for us.”
Looking for new suppliers is expensive. He has to visit the manufacturers and they’d need to make new molds and tools.
“It probably is very easily a $50,000 to $100,000 cost to our overhead just to resource one engineered item,” he said.
And all of this — whether it’s business owners paying more taxes on bananas or paying more to ship furniture or paying more to find new suppliers — involves paying more. And business owners stress it’s not just about increasing prices once. They’re worried about having to hike prices again after years of inflation.
“Right now, the math I’ve been doing is how much can I absorb so that my customers aren’t as affected,” Velazquez de Leon said.
But the math isn’t mathing. At some point, she said, consumers will have to make up some of the cost.
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