How the U.S.-China Trade War is Affecting Business Owners
China is one of the United States' biggest trade partners, receiving more than 20 percent of America's exports and among the top three leading countries from which imports derive, according to the U.S. Census Bureau. With rumors of a trade war brewing between the world's two largest countries, consumers and business owners can't help but feel a bit apprehensive about what may result from the tit-for-tat tariff duel.
U.S.-China trade war explained
In a bid to renegotiate some of the long-standing trade agreements between the U.S. and China, President Donald Trump imposed tariffs earlier this year on a number of different imports originating from the Far East nation. The move resulted in retaliatory levies, setting off the trade war. Although the White House has argued the newly imposed tariffs are designed to bring China to the bargaining table, a number of Americans – both consumers as well as business owners – say higher tariffs do more harm than good. Indeed, 38 percent of respondents in a recent Gallup poll said tariffs have wounded the economy, with just 16 percent believing they've been a net positive. Additionally, while a majority have yet to feel its effects, 17 percent indicate the tariffs have hurt more than helped, only 6 percent indicating as much.
Latest trade tariffs and their effects
When tariffs rise, they can have both short-term and long-term ramifications. Although the U.S. economy appears to be firing on all cylinders – evidenced by more than 1 million jobs created by employers so far in 2018 and a 20-year low jobless rate, among other indications – business owners that engage in foreign trade are on the lookout for alternative partners in Southeast Asia, the Journal of Commerce reported. Their successes have largely been hit and miss. Additionally, JOC.com noted that manufacturers are dialing down their rate of hiring – and in some cases laying off workers – due to costly input prices. All told, approximately $250 billion in Chinese products would be subject to the proposed tariffs, which would comprise around 50 percent of what the U.S. receives from the world's most-populated country, The Washington Post reported.
American manufacturers’ take on tariffs
The business owner community has largely been united in their displeasure of the tariff back and forth, with some bracing for impact in terms of how the taxes will affect their operational expenses. Arthur Edelson, president of Spectrum Paint Applicator, told the Post his company could go belly up.
"If this tariff is enacted, the impact on my small company and its 20 employees will be devastating," Edelson explained, alluding to the potential that tariffs will make it more expensive for him to buy paint brushes made from hog hair. "I would be put out of business immediately without question."
At a recent government hearing, the U.S. Chamber of Commerce spoke on behalf of the business owner community, urging the administration and the U.S. Trade Representative's Office to reconsider.
"USTRs proposed tariffs on an additional $200 billion of Chinese imports dramatically expands the harm to American consumers, workers, businesses, and the economy," the Chamber said in prepared testimony, according to Reuters.
Keeping your business ahead of the trade war
The fallout from the trade war has yet to be determined, as thus far, only $34 billion of the proposed $200 billion are in effect on products sent from China. Here are a few recommendations for how business owners can stay ahead of the trade war and soften the blow:
- Consult with industry experts on what they do to offset tariffs
- Diversify your supply chain
- Write letters to legislators and trade associations regarding the effects of tariffs on your business
- Seek out trade partner alternatives
- Build regular SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis into your supply chain
- Run the numbers to see if your supply chain will be adversely impacted by higher trade costs
- Request a manufacturer's affidavit, or Certificate of Origin (COO), from vendors
Perhaps the most straightforward way to steer clear of tariff trouble is by buying domestic. At Clarion Safety Systems, all of our products are made in the U.S.A., manufactured straight from our state-of- the-art production facility here in Milford, Pennsylvania. However, given the dynamic political environment related to trade and tariffs, we understand that many of our clients need to ensure they have the most current Certificate of Origin (COO) information on file to maintain compliance with all applicable requirements. Please know that this is included with every packing slip with your products, and we're here to help answer any questions or other needs that you may have regarding your label and sign products and their materials. We can also provide North American Free Trade Agreement (NAFTA) certificate of origin forms to customers having products shipped to Canada or Mexico. These types of forms state that safety label or sign products are all of U.S. origin and provides a tariff classification number, allowing for preferential tariff treatment; they can help you obtain duty-free or reduced duty rates for qualified products entering NAFTA member countries (U.S., Canada, Mexico).