Business Owners, Farmer Say Tariffs Dragging Profits Down
A farmer in Indiana who grows soybeans and corn said that with President Donald Trump's tweet on China on May 5, corn prices dropped 4 percent, or another $50,000, for the unsold crop and expected summer harvest on his 5,000-acre farm. Before the trade war, a typical profit for the farm that Brent Bible runs with a partner would be about $225,000. This year, he's expecting a loss.
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"And we will burn through cash, burn through equity in the business at a fairly rapid rate if that were to continue. Our specific operation we could probably survive two to three years operating at the level of the loss we're projecting, and then it wouldn't be viable any longer; we wouldn't be able to secure loans."
Bible, three business owners and a nonprofit director, along with a National Retail Federation executive, spoke with reporters May 9 on a call organized by the trade group campaign called Tariffs Hurt the Heartland. But Bible still expressed optimism that a prolonged trade war with China could be avoided. "They're trying to solve a large problem, and it's acceptable to take losses in the process of solving that problem," he said.
Several on the call said that Trump's repeated claims that China pays the cost of the tariffs irritate them. In Judith Bannon's case, they actually created tension between her nonprofit, Cribs for Kids, and the hospitals and municipalities that buy their pack-and-play style cribettes to distribute to low-income parents. Bannon said the nonprofit had held the price steady at $49.99 for 20 years, and partners pushed back when she told them she'd have to raise it to $55 because of the tariffs. She said she finally convinced them it was necessary, and now she'll have to raise the price again to cover an additional 15 percent tariff.
Alex Camera, CEO of a small audio equipment manufacturer in Seattle, doesn't have as big a hit to his bottom line as other companies that are pure importers. That's because only 30 percent of his inputs are imported, and not all of those come from China. At a 10 percent additional tariff rate, he absorbed the cost -- which he estimated at several hundred thousand dollars, so far. But at 25 percent, he said, he won't be able to.
Third-generation retailer Tiffany Zarfas Williams, who runs a luggage shop in Lubbock, Texas, has not been so lucky. Almost 90 percent of what she sells is made in China. Her shop depends on sales of higher-cost suitcases, and she said customers pulled back when a $400 bag went to $440 and a $500 bag went to $550. With sales down during the crucial Christmas season, her business was not profitable in 2018 -- so the big cut in income taxes was not able to offset the drop in revenue. So far this year, sales are down 8 percent from the same period last year.
"It's all affected by the tariffs -- briefcases, suitcases, backpacks," she said. Some of her vendors did not pass along the 10 percent increase as soon as tariffs went up in October, but they all had by January. And, she said, no manufacturer can absorb 15 percent tariffs that start May 10.