No Winners in Tariff Trade War
Let’s call these tariffs what they are, the largest tax increase on the American people, as a percentage of GDP, since I was in middle school in 1993. My issue is not that President Trump is pushing back on China for their violation of international IP laws and other unfair trade practices, I think putting China in check is long overdue. My issue is that President Trump is claiming that China and Chinese businesses will be paying this tariff. That simply isn’t true. This would be more palatable if the President said, “I was elected President under the promise that I would level the playing field with China. I believe the strategy that will most effectively motivate China to play by the rules is playing “hardball”, and as Americans it means we’ll need to deal with some higher costs and tariffs in the short-term in order to achieve our long-term objectives.”
Make no mistake, these tariffs are being paid for by American businesses, by small business owners, and by everyday American consumers. Regrettably, it’s the lower and middle class Americans that will be most impacted by these tariffs since a higher percentage of their wages are spent purchasing consumer goods, especially lower cost consumer goods which are often made in China. It is estimated that the median US household with earnings of $61,000 will pay an additional $500 – $550 per year due to these tariffs.
As a small business, these tariffs impact us directly at Cotopaxi. Fortunately, only 22% of our products come from China as we’ve worked to build a diverse supply chain in order to protect ourselves from geopolitical risk. Many other consumer product businesses are not so lucky. If the additional tariffs are put into place, we expect they will deliver a $1.3M loss for our business in 2020, assuming we make no changes (raise prices, shifting our product strategy away from those goods, etc.). Some will say, “just start making your product in the United States, and problem solved.” Changing a supply chain and shifting sourcing to other factories and countries is not something that happens overnight. This is something that typically takes 18 months or even years. Additionally, many of the highly technical gear we make is no longer made in the United States.
Lastly, and this is typically not something considered by most Americans, but I worry about the impact these tariffs will have on the people we’ve grown to love in China, from our amazing factory partners, to the hardworking mothers and fathers who make our products. They have become like family to us. Being Chinese does not make them less human. They are wonderful, hardworking people who have dreams for their children, just like we do for ours. Our key factory partner took a major financial risk to build a factory in a community where workers don’t have to live at the factory and can instead live at home with their children. Together with him we’ve created programs that help the children of factory workers take English classes, we’ve planted a community garden at the factory where workers can bring home vegetables and fruits home at night, and we’ve even helped factory workers get their first cars (they get a monthly car stipend that pays their car loan so long as they’re willing to drive some of their co-workers to and from work every day). Ultimately, a trade war is good for no one. It hurts American businesses, American consumers, and it hurts some of the most vulnerable people who are living and working in countries that need our help.