Tariffs’ Fallout ‘Really Grim’ for Tech Firm Owner 'David,' Says Florida Lawmaker
One of the more interesting exchanges during Wednesday’s House Ways and Means Committee hearing on Section 301 Chinese tariffs (see 1902270047) came late in the questioning when Rep. Stephanie Murphy, D-Fla., confronted U.S. Trade Representative Robert Lighthizer with accounts of how she said the duties were harming small businesses in her Orlando district. “Whatever your intentions were” in imposing the tariffs, “evidence on the ground is really grim,” Murphy told Lighthizer.
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Murphy told the USTR the story of “David,” a 30 percent owner in an electronics firm in Orlando “that imports components from China and sells finished products to American retailers.” His business was “upended” as soon as the third tranche of 10 percent tariffs took effect Sept. 24, she said. “When he went to work that day, he had to pay an upfront bill of $280,000 to release his goods from China that had already landed at a U.S. port. No notice from his government, no time to adjust, and since September, David has paid over $800,000 in tariffs. That’s a lot of money for a small business.”
The levies forced David’s company to raise retail pricing to cover the higher costs, said Murphy. “Some of the big retailers have agreed to pay more, but they’re just passing those costs on to consumers,” she said. Some of his smaller retail accounts “just simply won’t accept” the price increases, so “David has lost business,” she said.
The duties have “decimated” David's cash flow, “jeopardized his financing and made him unprofitable,” said Murphy. For David and other small-business owners in his predicament, if the 10 percent tariffs “endure” for much longer, “the damage could be really severe,” and if they rise to 25 percent, "the damage could be fatal," she said.
Lighthizer responded that he’s “sympathetic to situations like David’s, although I don’t purport to know the details of it.” There “clearly are people who import products who are negatively affected,” he said. “With the depreciation of the Chinese currency,” the 10 percent tariff is having only a 2-3 percent cost-increase “effect on his business,” Lighthizer said.
The USTR disputed Murphy’s account, given on David’s behalf, that the tariffs came with no warning. “This process of putting these tariffs in place was months going through with the hearings and all that, so I don’t want to let anybody have the impression that we just woke up and did this.”
For those who question whether the tariffs are worth the pain, “I always start with the proposition, ‘Do you think we have a problem with China?’” said Lighthizer. “If you don’t think we have one, then all of this is crazy. If you do think we have a problem with China, then we have to weigh what is necessary to move forward.”
The tariffs gave the Trump administration “tremendous leverage” to negotiate a comprehensive accord that curbs what USTR's Section 301 investigation found last year to be pervasively unfair trade practices in China, said Lighthizer. “I don’t think we should accept anything that doesn’t have structural changes” to dissuade China’s bad trade behavior, nor should the U.S. sign an agreement that can’t be enforced, he said. Murphy’s office didn’t respond to emails Thursday seeking more information about David’s company.
Meanwhile, iRobot, which Lighthizer challenged at Wednesday’s hearing to weigh U.S. manufacturing as a remedy against the higher costs of the List 3 tariffs on the finished goods it imports from China, said Thursday it’s “actively exploring changes in our manufacturing base and supply chain.” Any such sourcing changes “are costly and take time,” and iRobot “must remain competitive against foreign competitors during any transitions,” emailed a spokesperson.