Spotlight: Small U.S. businesses disproportionately hurt by proposed China tariffs

Source: Xinhua| 2019-06-25 17:33:13|Editor: Li Xia
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by Xiong Maoling, Deng Xianlai and Hu Yousong

WASHINGTON, June 24 (Xinhua) -- The U.S. administration's threat to impose an additional 25-percent of tariffs on 300 billion dollars' worth of Chinese products have drawn a strong backlash from small American businesses, which would find it more difficult to absorb extra costs and could face layoffs and even closures.

"The small businesses are more vulnerable to tariffs because we don't have the deep pockets that big corporations do. We don't have multi chains and multi different products," Steven Stokes, CEO of Propel Trampolines LLC, told Xinhua in a recent interview.

Stokes, whose company is based in the western state of Utah, said his nearly 30 employees would definitely be impacted by the proposed tariff hike. "I may be forced to lay employees off and if, depending on how long the tariff was in place, it might even close our doors," he said.

Stokes, who testified Friday at a hearing over the tariff increase, said all trampolines his company sells are produced in the eastern Chinese city of Qingdao. It would be difficult to shift his supply chain "for many different reasons," he said, highlighting production capacity, availability of materials, workforce and machinery.

Stokes is among the over 300 witnesses who testified during an ongoing seven-day hearing held by the Office of the U.S. Trade Representative, at which companies and trade groups have been widely voicing their opposition to the proposed tariff hike.

Heather Shepardson, CEO of seasonal and holiday company Rauch, said in her testimony that a tariff up to 25 percent on Christmas ornaments is "unfathomable for me and my colleagues in our industry," most of which are small businesses.

"A duty of up to 25 percent on these imports would hit these smaller retailers the hardest, as they are less able to absorb such a tariff and often operate with smaller margins," said Shepardson, whose company has 72 employees.

Her remarks were echoed by David French, senior vice president of government relations at the National Retail Federation, who said the new round of tariffs would have a "disproportionate" impact on small retailers, which account for more than 98 percent of all retail companies.

"Most small retailers do not directly import products from China, which puts them in a 'take it or leave it' position with their suppliers," French said. "While direct importers may be able to move their supply chains -- at great cost -- over time, small retailers do not have the market power to demand their supplier absorb any of the tariff costs."

At a hearing earlier last week, M. Luisa Simpson, vice president for global policy of the Association of American Publishers, said a major tariff would impose "damaging and unanticipated" costs, particularly for a range of small- and medium-sized U.S. publishers.

"They simply will not be able to absorb any of the additional costs tariffs would bring, and the resulting reduction in investment will mean a loss to American readers for whom choice will unfortunately become limited," Simpson said.

Moreover, she said, if these smaller publishers try to pass this huge cost on to consumers, they may "well price their products out of the market, and given their lack of any financial cushion, could see their business sharply limited, or even closed."

Bryan Riley, director for free trade initiative at the National Taxpayers Union Foundation, said the administration should issue a "blanket exemption" to small businesses if the new tariffs are imposed.

"Many small businesses across the United States do not have the time, knowledge, or resources available to secure a timely exclusion from the tariffs," Riley said, adding that the process imposes a disproportionate burden on them.

Stokes from the trampoline company said small businesses are vulnerable, but they're the ones who eventually grow up to be the big businesses.

"If you wipe out small businesses in their early stages and in their first decade or second decade, they won't grow to be the big companies later," he said.