National headlines have been filled with talk of tariffs this year. These taxes on imported goods seem to be on-again, off-again as global leaders hash out with the U.S. government if and how they will be applied. While people have differing opinions on the value of tariffs, the uncertainty surrounding them causes challenges for local businesses.
We wanted to share a look at the real-world results of the chaotic world trade situation on two Main Street businesses here in Lowell. As you may know, my wife and I opened Chimera Design in 2002. Chimera is our first example.
Since Chimera opened, we have always tried to find vendors and suppliers based in the U.S. We have no super patriotic claims in this regard but rather the viewpoint that keeping money as close to home as possible just makes good sense.
For example, we found a source for tungsten rings in Texas. However, prior to opening an account with that source — Wild Giraffe — we bought tungsten rings from a company in Ohio who imported them from China. Now, part of our sales presentation with these rings is to include the fact that they are made in the states.
Another example is the fact that we use people in the US to help us produce custom jewelry. Our relationship with Jason Simmons and his team in New York is going on 15 or 16 years. There is a very large custom design company based in India that has courted our business for a long time. Some of what they offer in terms of pricing and even software has an edge on Simmons, but we would rather keep our dollars in the U.S. whenever possible.
That said, in the past couple months, we have received emails from our two biggest vendors as they attempted to plan ahead and let their customers know what to expect. The net result was not a lot of clarity which is understandable since the tariffs seem to change on a daily or weekly basis.
We cannot imagine how much effort it is taking vendors who source things from all over the world as they try to order and/or plan for future sales. How do they price gems, pearls, diamonds, and gold and silver jewelry when the situation is so very volatile and fluid? That kind of juggling makes us appreciate our small mom and pop business.
There are some products we sell in the store that are produced in China even though we buy them from a U.S. supplier. At the end of last month, we received our first invoices that included the cost of new tariffs.
One was for the packaging we buy for the jewelry we sell: boxes for rings, pendants, earrings, and bracelets. On an order of boxes, the company clearly delineated the cost of the tariffs. Rather than just bumping up the price, “tariff on import from China” became it’s own line item. Bottom line was that a $278 order for boxes had $36.74 added to it for tariffs.
We do not charge for boxes when you buy jewelry here, so this is a cost we have to absorb. That boils down to about a 15% increase. We will be seeing if we can source similar products made in the U.S. Our supplier is trying to hold costs down, but at the same time, they cannot take huge hits in order to help Chimera Design.
The other invoice was for steel chains, also made in China. The increase here was approximately 13.5%. Since we sell these chains, the price we charge customers will reflect the higher cost. Again, we will be trying to find a source made in the U.S., but this may be a challenge – especially on items we sell every day.
To repeat, we appreciate our small business because we cannot imagine the pressure of trying to forecast pricing if we had multiple stores and needed to place orders of large amounts of any particular product. Our approach will be to move forward with caution and not order too much of any one thing at a time.
Bottom line is that if the battle over tariffs continues, we can expect our prices to go up more than 13-15% percent, and we will have to pass along price increases to our customers. Many folks were under the impression that the cost of tariffs would be absorbed by “someone else.” The bad news is that, in the end, consumers are going to foot the bill.
We spoke to one of our neighbors on Main Street to see how tariffs might affect his store. Jack Reedy owns Rookies and has been in business for 33 years. Reedy did admit that there were some shortages of supplies and products during the COVID-19 pandemic but that took a back seat to the current tariff situation.
We asked Reedy about the impact of tariffs on his business and his answer again points to the difficulty businesses face when planning for the future.
“Right now, all supplies from Ultra Pro and BCW have a ‘50% tariff fee’ that is added to the usual wholesale price,” Reedy explained when we spoke in early May. “This affects my supplies like comic bags, card holders, binders, etc. We have raised the price on some newer restocks already. Older supplies are the same price until we have to restock. I am hesitant to restock niche items for fear of the tariffs then lifting, leaving me having overpaid for something and having to eat the cost on the other side.”
Board games are a big seller at Rookies, and Reedy made it clear that pretty much all of these are made in China. The administration’s goal of having U.S. factories produce more products is fantastic, but it is very unrealistic to think that anyone could build a factory for board games — or any of a host of other products — and have said factory up and running quickly.
Depending on the product, estimates of getting U.S. based production up and running are mostly measured in years. Some things in jewelry would fall under the “never” category. Some gems and types of pearls will never be found in our country.
Reedy tried to look ahead and told us, “In the near future, it will start to effect board game publishers. Most board games are manufactured in China, and most of the game publishers are smaller companies that can’t just eat the cost of tariffs. Stonemaier Games (maker of the popular Wingspan) have stated that they are currently paying to store their games in China in the hopes that the tariffs end soon.”
The U.S. and China did recently agree to a 90-day pause on tariffs, but what happens if that doesn’t last? That could pose a problem to companies stocking up for the winter holidays.
“We are stocked year-round, but we usually load up in the fall for the coming holidays,” Reedy said. “Some companies are giving us an ‘out’ on an order if the tariffs are still in effect and we want to cancel our order. Our shelves may be a little more bare. People aren’t going to pay twice as much for a game or whatnot. If the tariffs aren’t lifted (for holiday buying), I imagine more and more product just won’t be brought into the states.”
Over three decades of doing business has given Reedy a lot of insight into his business for sure and business in general.
“I understand the desire to manufacture stuff in the U.S. But I think we have to pick our battles,” he concluded. “While I think it’s in our interest to build large ticket items like cars — and also not be 100% dependent on foreign countries for key products like computer chips, etc. — I don’t think we need to make everything. And we simply can’t make everything. Let China manufacture cheap stuff. Everyone benefits from free trade.”
The bottom line when it comes to the effect of tariffs on small town businesses resembles the situation on a national level: no one is quite sure what is going to happen and when it might happen.
From the two examples above, we can clearly see that prices will be going up if tariffs continue, but the volatile nature of the situation makes it almost impossible to say with any certainty how much they will go up and when. This summer and the upcoming holiday season could be very interesting and challenging.
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