Trump's tariff agenda sacrifices American small businesses and families

Editor's note: He Weiwen is a senior fellow at the Center for China and Globalization (CCG). The article reflects the author's opinions and not necessarily the views of CGTN.

Erica Campbell, a small gifts business dealer based in Phoenix, Arizona, has been in the grips of anxiety ever since US President Trump announced 10 percent + 10 percent tariffs on imports from China. She'd ordered a shipment of Easter gifts, including colored eggs, Jesus rattle dolls, baby blankets, etc., scheduled to arrive at an American port early April. She was not sure if her shipment would be tariff-exempt as the tariffs would be in force at the time of arrival but hadn't yet been announced when the order was loaded onto a container. To make things even worse, the Chinese container may have to pay an extra docking fee which will be passed on to the cost of goods. In that case, she will have no choice but to raise the retail price, with a danger of sales coming down. She has been importing all her goods from China over the years, as the gifts were designed in America and manufactured in China. Now, with the 20 percent tariff and more in the pipeline, she's not sure if her business can sustain.

The above is a story from a New York Times (NYT) article on March 1 titled 'How Are We Going to Afford This?' US Companies Face Tariff Reality, reporting the great distress of American small businesses due to Trump's tariffs, based on a survey of near 100 American small businesses importing goods from China. 

Millions of American small businesses are at risk due to Trump's tariff policies

Unlike what Trump perceives, the tariff is paid for by American importers, not Chinese exporters. The American importers, with tens of thousands of small businesses among them, have to reduce their earnings or pass the additional cost to consumers. According to the American Chamber of Commerce, there are 33.2 million small businesses (with under 500 employees) in America, accounting for 99.9 percent of the total number of businesses, and 44 percent of America's GDP. The US Bureau of Census data also shows that small businesses account for 41.2 percent of total US imports from China. Hence, 20 percent additional tariff on imports from China will put their businesses in great distress. 

For instance, there are tens of thousands of small automotive parts producers in America, especially in molding and precision processing, with little economies of scale. Tariffs on steel and aluminum and other components from China will lift their costs considerably and further erode their meagre revenue.

Likewise, Trump's 25 percent tariffs on automobiles will also add to the troubles of American small businesses. There are over 40,000 car dealers across America, most of them small businesses. They may have to raise auto sales prices or cut their own earnings.

Self-inflicted tariffs will hurt US consumers and disrupt supply chains

It is largely difficult to find alternate suppliers in America. Julianaa Rae, a small silk products retailer based in Burlington, Massachusetts, has been importing from China for 20 years. She said China offers the best machines, best professional expertise and low prices. She had no choice but to source from China. The NYT article also cited a story: an owner of an outdoors and travel goods shop has been following the model of designing in America and manufacturing in China for 18 years. Due to the expected new tariff costs, he sent e-mails to 6 American companies for possible supply. He got no response from four of them. The other two responded with questions on specifications. After he replied all the questions, the fifth company stopped responding and the sixth company replied "Sorry."

The latest FED data shows that the US manufacturing production index stood at 99.0 in January 2025, with 100.0 equaling 2017's average. "Made in USA" has had no manufacturing increase over the past 7 years. The index for appliance, furniture and carpeting was 80.9, and that of clothing was 76.1. Hence, American small businesses have to rely to a large extent on imports from China. A smartphone has 1300 components. 95 percent of them can be found in China's Pearl River Delta. If supplied from America, several months are needed. At the end of 2024, there were 254 items for which US relied 100 percent on China for supply, 1006 items for 80-99.9 percent supply, and 1607 items for 50-79.9 percent supply, according to a 2024 report by the US-China Economic and Security Review Commission. 

The 20 percent tariff appears unlikely to wipe out imports from China, only to erode the revenues of American distributors, mostly small businesses. Or they will have to raise sales prices, passing on the tariff costs to consumers. 

Again, the small business owners are also consumers. A PIIE report has estimated that Trump's tariffs will lead to an additional expenditure of $1,200 per US household per year. Either as suppliers or consumers, the American small business owners are always losers.

US unilateral tariffs are sure to backfire and cause inflation

The rise of inflation is inevitable as a result of tariffs. "Last day consumption" suddenly exploded in many American cities just after Donald Trump won the presidential election on November 5, 2024. The shopping spree escalated further when Trump announced a series of tariffs. As a result, US consumer prices jumped again to 3.0 percent year on year in January, hitting the 3.0 percent mark for the first time since June 2024. The concerns over inflation rise and business revenue fall led to a low in non-farm new jobs in February, at 151,000, leading to a slight rise in the jobless rate to 4.1 percent, compared to 4.0 in January.

US tariffs on imports will undoubtedly incur strong counter-tariffs from China, Canada, Mexico and other countries, leading US exports to fall and creating new difficulties for American small businesses. Take agricultural products for example. China announced a 15 percent counter-tariff on US agricultural products, and 10 percent counter-tariff on American beef. It was immediately hailed by Australian cereal exporters and Brazil soybean exporters. Again, most American farmers are small business owners.

The Trump administration seems to have no sense about all the above sufferings and appears intent only on pushing on with its tariff agenda, with "reciprocal tariffs" targeting the whole world scheduled from April 2. The fundamental reason for this may stem from a totally incorrect cognition, perceiving tariffs as an income for the US and as a cost for other countries, and anticipating no retaliation. They have learnt nothing from past lessons. 

Washington will soon feel the boomerang again

A study by Oxford Institute of Economics found that 92.4 percent of the Trump 1.0 tariffs on Chinese goods was paid for by American importers, leading to an $88 billion fall in American family income during 2018-19. During 2018-22, extra costs from tariff hikes exceeded $166 billion in clothing, shoes, travel goods and furniture sectors, with most of the dealers and retailers being small businesses. This time, the Trump 2.0 tariff is sure to cover more imports and logically, lead to much heavier burdens for Americans, and for American small businesses in particular.

Howard Lutnick, US Secretary of Commerce, even went so far as to say that America will reshape the world trade order via unilateral tariffs. Of course, it is unlikely to happen. American small businesses and families will again voice strong disagreement and strive for change. Washington will soon feel the boomerang yet again.