A key pillar of Donald Trump’s economic agenda is widespread tariffs on imports, specifically from China. We’ve heard from expert economists about how tariffs will affect our GDP, and from CEOs about the implications for their international operations. But what about the little guy—how will aggressive and broad tariffs affect your favorite mom-and-pop shop? Or your local mechanic?
In the immediate future, roughing the seas with the likes of 20 percent tariffs on all imported goods, and 60 to 100 percent tariffs on Chinese imports, will surely cause some small businesses to sink. Unfortunately, no industry will be protected from the consequences. For example, over 50 percent of food oils and fruits in the U.S. food supply are imported. When it comes to manufacturing parts and finished goods, we are the largest importer in the world. This means that your local restaurants and bodegas could immediately experience anywhere from a 20 to a 100 percent increase in their supply costs.
The reality is that, even at the local level, American businesses are intertwined in a complex web of global supply chains. Your favorite restaurant needs ingredients from Canada and Mexico. Your local mechanic needs parts from Japan and Germany. Your family-owned bodega needs goods from China and Europe. Interfering with this relationship without laying the proper groundwork of bolstering domestic production could have catastrophic effects on many small businesses.
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This is especially true when you consider that Congress is simultaneously considering proposals that limit the De Minimis rule. This rule protects small businesses across the nation from supply chain threats by allowing goods with a retail value under $800 to enter the U.S. free from customs fees and paperwork. The current rule makes it possible for small businesses to deliver affordable goods to customers—considering the possible implications of Trump’s economic agenda, Congress should fight to keep this rule in place.
Talking president-elect Trump off the ledge of widespread tariffs does not seem likely. But that may not be bad news, provided his administration can deliver on bringing sufficient manufacturing back to the United States. This cannot be a mere production plant or two in a select few industries—in order to mitigate the damage that can be done through high tariffs, the Trump administration will have to ensure that manufacturing is brought home en masse across the board.
Assuming we do in fact see 20 percent tariffs across the board, an ideal world would also see massive incentives for companies to manufacture and produce in the United States. This possibility may not be as far-fetched as it seems, considering we are already seeing signs of deregulation when it comes to manufacturing and environmental restrictions. It will be easier to accomplish in some industries than others—while manufacturers can open new plants virtually anywhere, those that rely on food imports have far fewer options.
Trump’s economic message is clear—imports should, and likely will, become a thing of the past. If that happens, our small business community will unavoidably feel immediate strain. However, there are steps we can take to mitigate the long-term consequences—and even grow our economy. Those steps include preserving common-sense import rules like De Minimis, instituting tax breaks for businesses using domestic supply chains, and creating incentives for producers to open new manufacturing facilities in the U.S. Only then can the president-elect truly achieve an agenda that puts America and its small businesses first.
Javier Palomarez is president of the United States Hispanic Business Council.
The views expressed in this article are the writer’s own.
