‘I’m Not Apple’: Small Businesses Squeezed by Trump’s Tariffs

(Bloomberg) -- Figuring out how to pay another looming tariff bill isn’t the way Robert Heiblim would’ve chosen to spend National Small Business Week.

Heiblim and his 25-employee company now face paying a 25% duty -- up from 10% -- on almost half of the consumer electronics they have made in China as the trade war between the world’s two largest economies escalates. Their predicament came about all too quickly.

Negotiators had appeared to be nearing a deal when President Donald Trump on Sunday unexpectedly announced the tariff increase, which took effect 12:01 a.m. Friday, in response to what he said was China reneging on previous commitments in trade negotiations. The shocking development, coming on the week the U.S. Small Business Administration designated to celebrate entrepreneurship, is the latest blow to firms such as Heiblim’s that can’t easily pass along or absorb more costs -- especially on short notice.

“I’m not Apple who can just say, ‘Well, if you want the new iPhone, it’s now $1,000,’’ said Heiblim, president of Boulder International in New Jersey. “Suddenly, if you just need a whole lot more cash, it’s really disruptive.’’

Battle Lines Drawn

The U.S. tariff hike on some $200 billion in Chinese goods came as China’s top trade envoy, Liu He was in Washington for two days of talks through Friday. While Trump said a deal is still possible this week, he’s also threatened to impose an additional 25% tariff on $325 billion of Chinese imports. China has promised retaliation on U.S. exports.

‘I’m Not Apple’: Small Businesses Squeezed by Trump’s Tariffs

Unlike larger firms that can more easily handle the additional costs from the tariffs, smaller firms often must use cash to pay the tariffs that they’d otherwise spend on hiring more employees, marketing or expanding their businesses, said Heiblim, who’s chairman of the Consumer Technology Association’s Small Business Council.

Tom Lix, founder of Cleveland Whiskey in Cleveland, Ohio, employs 15 people but has not filled four positions that he planned to because of the tariffs. He had also hoped to expand distribution into Asia but hasn’t because retaliatory tariffs on whiskey sapped demand.

“We are going to get hit across many industries if we head down this path,’’ Lix said on a call Thursday with small business owners arranged by Tariffs Hurt the Heartland, an umbrella group of trade associations pushing back against Trump’s levies.

At least with the previous three rounds of tariffs that Trump imposed on Chinese imports, there was some advance notice, said Tiffany Zarfas Williams, owner of the Luggage Shop of Lubbock in Texas. Trump gave only five days’ notice with the latest increase.

“This has caused us to scramble,’’ Williams said on the call. About 85% of the goods she sells are from China, and she’s already heard from major vendors that prices will rise in line with the tariffs, she said.

Heiblim has a shipment of Bluetooth speakers and other goods en route from China that he expects to arrive in the U.S. next week, and he was initially concerned he’d have to pay the higher duty on them. But U.S. Customs and Border Protection said Thursday that the 25% tariff would be assessed only on products exported after 12:01 a.m. Friday.

“But it doesn’t help me for the next shipment,’’ Heiblim said.

©2019 Bloomberg L.P.