What a China Trade War Means for SMBs

steel tariffSaying there are mixed thoughts about U.S. President Donald Trump would be an understatement. But one thing that everyone has to agree on is that he does not hesitate to put his words into action. The recent advancements in the trade war with China is cause for concern for small and medium sized businesses in the United States.

Earlier this year in March the first tariffs on aluminium and steel had businesses extremely worried that prices were about to soar. After the strong negative reaction from the countries SMB’s exemptions were quickly put in place for the biggest importers. This was a much needed sign of a relief for most businesses but it was very short lived. These exemptions were all cancelled just a few months later and entrepreneurs were back in panic mode.

SMB’s Trying to Cope

While SMB’s were still scratching their heads on how to move forward the government announces $50 billion additional tariffs on Chinese products. Of course this led to China placing their own $45 billion tariffs on USA products. While China increasing tariffs have little effect on U.S. SMB’s it was obvious that Trump would attempt to counter with even more tariffs. This predicted response took just three days and would amount to $200 billion additional tariffs in the near future. This additional $200 billion would come from computer equipment, auto parts and other consumer goods.

Combining this additional $200 billion with the previous $50 billion makes up for half of all the products imported from China. Just two weeks after the first phase of tariffs were put into effect President Trump announced a threat to put tariffs on all imports from China. It was just a matter of time that a retaliation would come from China targeting United States agriculture exports.

US administration was proactive to China’s retaliation efforts by offering subsidies to American farmers for their exports that could be affected by international tariffs. This is great to protect farmers but what about other companies that will be impacted? There are over 6,000 imported items from China that would be taxed. Most of these being computer equipment, furniture and processed food. These tariffs will without a doubt negatively impact SMB’s throughout the country.

SMB’s and the Trade War

Without a doubt production costs are going to increase for those SMB’s selling products that have materials produced in China. SMB’s that are exporting products to China could also be affected by China’s retaliation tariffs. Speaking of retaliation, I would expect more and more knock-offs of USA products coming out of China as a result of this trade war.
china trade warFor those SMB’s that are selling only U.S. produced products could actually see an increase in business. Obviously only a small percentage of SMB’s will see this positive impact since it is extremely rare to have products will all U.S. material.

SMB’s that have imported products being affected by these new tariffs on China can request certain items be excluded. Of course decisions are on a case by case basis and there is no information as to what type of requests would be approved. The SBA directs SMB’s to visit https://www.regulations.gov/docket?D=USTR-2018-0025 in order to apply for a product exclusion.

How do you feel this trade war will affect SMB’s?

Leave a Reply

Your email address will not be published. Required fields are marked *