Trump’s proposed tariffs bode poorly for small business.
When you work with startups, you get a ground-level view of economic trends in action. In the last few weeks we’ve been watching how the Trump administration’s new trade threats are affecting our clients.
As you probably know, President Trump just announced tariffs of 25 percent on about $34 billion of Chinese products, starting July 6. In response, China bit back, telling American businesses that they can start paying 25% more for the stuff they buy from China. Starting July 6.
How does this affect small businesses like our clients? For those who get certain raw materials from China, it’s bad news. Here is an example of how the proposed Trump trade tariffs affects one of our clients.
Our client, which started out as a two-person operation six years ago, is now enjoying worldwide sales. They called us recently to file applications on the world stage for international patent protection. We were ready to file in 8 countries (including China), when the Trump trade tariffs were announced. That political move led to a cascade of events that reached all the way to our humble offices. It led our client to forgo international patent protection, because suddenly their budget was upended. How did this happen?
The answer is Pumps. Fluid-lifting pumps. From China. Our client imports these pumps to manufacture their products in the United States. Unfortunately these pumps, along with breast-milk pumps, sump pumps, and other medical and industrial pumps, are among those parts that are subject to the 25% trade tariffs. And suddenly those pumps cost 25% more than they did yesterday.
This 25% had to come from somewhere in our client’s budget. Because they had to meet demand, production and importation was not going to stop. But they had to cut costs somewhere, and international patent protection took the cut.
Now, because their budget is getting chewed away by tariffs, our client cannot afford to protect their intellectual property around the world. This exposes them to infringement on the global market. They have already discovered knockoffs of their products, as blatant as some of the ones shown in the image above.
It is well-known that China has been violating WTO trade rules for years by not only selling knockoffs but by imposing extra-legal duties on American products, and by unfairly over-protecting their corn, wheat and rice from outside competition.
But the proposed Trump trade restrictions will not fix China’s bad habits. In fact the tariff threats have already caused China to double down and declare its own retaliatory tariffs.
Businesses, investors and economists are warning that Trump’s proposed trade tariffs are bad for American business. Already, here at the small-business level, we see our clients suffering under raised manufacturing-materials prices. This is not just bad for American small business; it will drive up prices for American consumers. President Trump says that the trade deficit with China is costing America jobs; however imposition of these proposed tariffs would make a tough situation much worse.