they outweighed by inflationary effec
Small businesses are hit hardest by tariffs, as they don't have the cushion that large corporations do. Take a small furniture store that buys some woods or hardware in import—when tariffs drive up those costs, they can't always take the hit. Burdening the customers with it all risks driving them awRead more
Small businesses are hit hardest by tariffs, as they don’t have the cushion that large corporations do. Take a small furniture store that buys some woods or hardware in import—when tariffs drive up those costs, they can’t always take the hit. Burdening the customers with it all risks driving them away, but taking it on their own tightens already thinning margins.
In order to survive, small businesses are getting creative. Some are reconsidering their supply chains, sourcing locally even if it means changing their product lines. Others are negotiating harder with partners, or collaborating with other small businesses in order to make bulk buys and cut costs. Others are being straightforward with customers, explaining why prices are changing—surprisingly, honesty seems to breed loyalty.
It’s not easy by any means, though. For others, tariffs are a test of resilience and adaptability. People who can change quickly and find new ways to create value seem to prosper. For others, though, the higher costs are like a losing battle against forces well out of their reach.
See less
On the upside, tariff income puts money in local governments' pockets. Tariff income can amount to billions of dollars for countries heavily involved in trade, and that money can be allocated to infrastructure, subsidies, or some form of social program. Politically, it is a way to make "foreign busiRead more
On the upside, tariff income puts money in local governments’ pockets. Tariff income can amount to billions of dollars for countries heavily involved in trade, and that money can be allocated to infrastructure, subsidies, or some form of social program. Politically, it is a way to make “foreign businesses pay taxes” when a tariff is added.
However, that cost is usually not borne by the foreign exporter. The cost is borne by the importer, and then it is passed on throughout the chain, meaning that typically businesses and consumers are paying more. This can be an issue when thinking about the impact on inflation—food, electronics, and even raw inputs must be compensated for, which will also add to inflation (and/or costs), which ultimately reduces profits for small businesses and creates an increased cost of living for families. Frequently, inflation can negate or surpass the gain of tariff income.
So, the reality is that when the government thinks about tariff income, it is great to consider individually, but it tends to be money taken from one pocket to be put into another. The lingering question is whether or not the government is allocating the money wisely, e.g., investing in the impacted sector or providing protections to vulnerable sectors, rather than just patching a hole in their budget.
See less