Tariffs Raise Prices

“Where will this stop.” Dusty Kenny, seller on Amazon.

"Where will this stop."

How Trumps China Tariffs Create Uncertainty for US Amazon Sellers.

Trumps tariffs, particularly those aimed at China, has created so much uncertainty for small online businesses who sell their products on Amazon and other platforms. How they manage their business through the ever-changing landscape of the imposed tariffs on China, and any possible retaliation from China is a challenge they face with trepidation.

Small Online Business Owner, Dustin Kenny

Kenny, a Northern California-based seller of baby products manufactured in China, exemplifies the concerns. She faces a potential 125% tariff on her goods; a cost she fears could put her out of business. Tariffs were set at relatively low levels before the current Trump administration, which significantly increased them, sparking retaliatory measures from other countries like China.

The potential impact of these tariffs include:

·        Increased prices for consumers: Businesses may be forced to pass on tariff costs to consumers, potentially leading to decreased spending.

·        Competitive disadvantage for US sellers: US sellers already competing with cheaper Chinese products on Amazon could be further disadvantaged.

·        Shift in manufacturing: Some companies are exploring moving manufacturing to other countries like Vietnam, India, and Mexico to avoid tariffs.

·        Uncertainty and difficulty in planning: The fluctuating tariff landscape makes it challenging for businesses to make informed decisions and to plan for the future.

·        Impact on Amazon: As a major platform for third-party sellers and with its own Amazon Basics brand, Amazon could face pressure to raise prices, potentially affecting consumer preference.

Kenny Designs, China Produces.

While some view tariffs as a negotiation tactic or a way to bring manufacturing back to the US, the reality is far more complex. Many US businesses rely on China's manufacturing infrastructure and lower costs. Kenny designs and markets the baby products, she finds a manufacturer in China, orders what she needs, pays the tariffs, and unpacks her Chinese produced goods, in her small warehouse (probably a garage attached to her home). Kenny could sell her baby spoon for $9, reducing her prices to $7 then $5 due to competition and knockoffs. Adding a 125% Trump tariff has Kenny wiping her brow, wondering if she can stay in business.

American Made, Unlikely.

The option of finding an American manufacturer is unrealistic. Low production costs, excellent quality of product, a skilled and reliable workforce with stable supply chains just don’t exist in the US. These manufacturing qualities are available in other Asian countries and possibly India. Trump imposing similar tariff levels on these countries make it difficult to shift production elsewhere. Even if manufacturing moves to other countries, the factories are often owned by Chinese companies.

De Minimis

 A loophole called "de minimis," allows orders under $800 to bypass duties and taxes, has benefited some Chinese sellers, and millions of small online businesses like Kenny. Unfortunately, “de minimis” has also been exploited for illicit activities. The Trump administration's shifting stance on “de minimis” adds to the uncertainty for businesses. Trump has had to pause action on “de minimis”; the Post Office was overwhelmed with millions and millions of packages clogging logistics channels. There is no way the Post Office can examine or oversee the payment of tariffs, logistically impossible.

Relocation

Some US manufacturers, like Viper Industrial, see domestic production as a competitive advantage, while others are considering taking on manufacturing for companies seeking to avoid tariffs. However, the consensus among the Amazon sellers interviewed is that relocating manufacturing to the US is not financially feasible.

Challenging

Overall, the picture is uncertain, creating a challenging landscape for US businesses selling on Amazon, as they grapple with the potential impact of tariffs, retaliatory measures, and shifting trade policies.

Trump is causing a great big, unwanted economic storm for businesses of all sizes with his ill-thought-out attack on countries, using tariffs as a weapon against them. He called it, “… the big rip-off.” I wonder who is doing the ripping off.