The threat sounds dramatic, but there is a simple calculation behind it. Small and micro -enterprises use Chinese supplies mainly to offer niche products at competitive prices.
Petersen has even indicated the fashion for home pizza stoves: it is a completely “discretionary” goods, which the customer buys only when the price is within the limits of comfort. Product cost increase by half – and such a scale of growth with a CLE of 145 percent. is real – makes it The consumer chooses a cheaper service (order a pizza in a chain store) and the demand is shrinking rapidly.
Large corporations have at least three protective discs on this situation: higher margins, access to financing and the ability to quickly diversify the supply chain. A small importer – like most online stores or family wholesalers – there is no such buffer.
Small companies have no way to defend themselves
The margin in retail trade imported from Asia often does not exceed 10-15 percent. With the growth of customs duties, the company would have to raise prices by several dozen percent or pay extra for each sale. Both variants end with pushing out of the market.
The problem complicates not only the level of rates, but also their unpredictability. In April, Donald Trump suggested that he may not raise their duties further, “because the Americans would stop buying” to indicate a few days later that the border level towards Beijing can reach up to 245 percent.
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Such a “pendulum” prevents small companies from planning inventory, negotiating a merchant loan or even calculation of catalog prices for the next quarter. As Petersen put it, Flexport customers are literally paralyzed – They do not know which country to order, because customs appear not only to Chinese, but also on Canadian, Mexican or Vietnamese goods.
Macroeconomic effects are already visible today. The customs administration noted that the value of imports from China has dropped, but still reaches $ 438.9 billion. annually – it is over 13 percent. all foreign purchases of the USA. Such a large volume means that every additional percentage point of customs is billions of dollarswhich will either pay consumers at higher prices or entrepreneurs in the form of shrinking margins.
It is not surprising that, for example, five owners of small companies from various industries decided to sue the government in the International Trade Court, questioning the constitutional foundations of the introduction of tariffs by referring to the Act on extraordinary economic rights.
Many companies may fall
The perspective of mass bankruptcies also worried players from outside the retail. The head of Southwest Airlines – looking at the decline in demand and growing costs – called the current situation in aviation simply recession.
The industries are more connected than it would indicate a simple PKD classification: The fall of thousands of small importers means less container traffic, less forwarding shipments and lower demand for air transport.
Will the White House really make the first move in this dispute? Petersen thinks yes, because at some point high prices will hit consumers directly – and this sounds like a delayed ignition bomb for an election year. However, before the course is possible, small importers must face capital requirements, which drain their liquidity: the duty fee occurs in advance, often many weeks before selling the goods. For companies financed mainly from trading, it is a simple way to lose solvency.
The history of American-Chinese customs wars shows that the spiral of restrictions can be unscrewed as quickly as it was shot. The problem is that small business does not work in the Turn/off mode. Lost working capital, terminated contracts with employees and broken relationships with suppliers are difficult to rebuild overnight.
So if the warnings of the head of Flexport prove to be accurate, Entrepreneurs who have been the fastest motor of innovation and employment in the US economy will become a victim of political gameplay.
