For Klem’s, a general store in rural Massachusetts, each year has seemed more challenging than the last.
First, there was the pandemic, then a global supply chain disruption that left the store without lawnmowers and shoes. Then, a wave of inflation hit American pockets. All the while, Amazon continued to drive customers away from brick-and-mortar stores like Klem’s.
Now Jessica Bettencourt, Klem’s owner, says she’s facing a new challenge that has left her wondering if the store — which was opened by her grandparents in 1949 — will survive. The sweeping tariffs that President-elect Donald J. Trump has promised to impose could raise the price of foreign-made products and cut into her business’s already thin profits, she says.
“A big rate hike would potentially destroy us,” she said. “A retail store like mine has thin margins to begin with.” It wouldn’t take long before “all of a sudden, those tiny little pennies that you can make disappear,” she said.
Mr. Trump comes to office having presented a wide range of tariff plans. He has proposed a universal tariff on nearly all imports, plus taxes ranging from 10 to 200 percent on products from China, Canada, Mexico, the European Union and elsewhere.
Mr. Trump has promised to use the tariffs for multiple purposes: to coax companies into making their products in the United States, to finance tax cuts, to persuade other countries to curb the flow of drugs and immigrants, and even to force Denmark to cede Greenland to the United States.
Everett Eissenstat, a former Trump administration official and a partner at the law firm Squire Patton Boggs, said Mr. Trump intended to follow through on his campaign promises, including some form of tariffs. “The president keeps saying, ‘I’m going to do this,'” Mr. Eissenstat said.
But it’s not clear exactly which tariff plans it will follow and when, adding a great deal of uncertainty and concern at a time when some retailers are already seeing consumers retreat after years of high inflation.
While the US economy remains strong, there are concerns that further price increases from tariffs could drag on consumer spending and growth going forward.
At a retail conference in Manhattan last week, 40,000 attendees from more than 120 countries shared insights on new products and services in the retail sector. Some lamented the uncertainty the tariff plans had created for their businesses and the economy.
Speaking from the conference, Sarah Wolfe, a senior economist at Morgan Stanley, said tariffs were the “biggest wild card” for retailers.
While the fundamentals of the economy were healthy, “we have significant wild cards across tariff policy, inflation, deregulation,” she said. “The timing, the pace, the magnitude of these policies are very unknown, so it leaves the door open to many different possibilities.”
Tiffany Zarfas Williams, a third-generation owner of a luggage store in Lubbock, Texas, who was attending the conference, said her store had been hit hard by the tariffs Mr. Trump imposed on Chinese products during his first term. . and that she was preparing herself for more pain.
“I understand the need for a strategic trade policy with China,” she said. “But at the same time, why should my industry have so much influence?”
Ms Williams said she would stock up on more products ahead of any charges, but she was not sure how strong sales would be in the future.
“How do you plan when you have so much uncertainty?” she added.
A tariff is a fee imposed on a foreign product when it is brought into the United States. By raising the cost of a foreign good, the intent is to make products made in other countries—whether in the United States or in non-tariff countries—more attractive to buyers.
While Mr. Trump insists that foreign countries pay tariffs, it is actually the company that imports the product that pays the tariff. And economists say the cost is often passed on to American consumers in the form of higher prices.
Some US manufacturers support tariffs. Zach Mottl, president of Atlas Tool Works, a tool and machine maker in Lyons, Ill., said the broad tariffs on imports from much of the world would help American factories.
“President Trump’s universal tariff plan will bring significant benefits to our nation’s industrial capacity, spurring job creation and expansion in critical sectors,” he said.
But the tariffs would probably weigh heavily on retailers like Ms.
She said she tries to buy American-made products where she can, but that’s not always feasible for her and her customers. For example, it sells work boots made in the U.S., but they retail for $350 to $400, compared to $150 to $250 for those made outside the United States.
Manufacturers of lawn and snow mowers, which are usually imported from China, have already told Ms. Bettencourt they would pass the costs on from the tariffs, she said. Some suppliers said no additional costs would be added to products ordered in January, but after that, all bets were off.
“None of us really know what’s going to happen,” Ms. Bettencourt said. “It’s really hard to try and prepare or plan for that big, giant unknown.”
Analysts say some of Mr Trump’s tariff threats may simply be a negotiating tactic, aimed at persuading foreign countries to make concessions, and that they may not take effect.
But Mr. Trump also sees tariffs as a powerful tool to change global trade patterns and a valuable source of revenue to offset the cost of tax cuts. Meeting these goals would require broad-based tariffs, potentially hitting many different products and causing broader pain for importers.
Business groups have pleaded with Mr Trump to rethink his tariff plans. On Thursday, Suzanne P. Clark, president of the US Chamber of Commerce, said in a speech that the “broad and indiscriminate use” of tariffs “would stifle growth at the worst possible time.”
“Shallow tariffs would exacerbate the cost-of-living crisis, forcing Americans to pay even more for everyday essentials like groceries, gas, furniture, appliances and clothing, and retaliation from our trading partners would hit farmers hard.” and our producers, with ripple effects. throughout the economy,” said Ms. Clark.
In a post-election survey by the Conference Board, more than 40 percent of the 1,722 corporate executives surveyed said trade wars were the geopolitical issue that worried them most. A third said they were looking to diversify their supply chains.
Economists and retail experts say some businesses have imported more products before any tariffs take effect. But it’s expensive for retailers to keep inventory in back rooms and warehouses, and higher interest rates have left businesses with less capital available to save.
Beth Aberg, owner of two home furnishing stores near Washington, D.C., said retailers were “trying to order now” to avoid the fees, but if they guessed wrong what consumers would want to buy in the future , they could get stuck. holding a lot of inventory.
“There’s only so much we can afford to sit back, not knowing where this is going to go overall with this administration,” she said.
Some companies are looking at further moving supply chains out of China out of concern that Mr Trump will hit Chinese goods again with tariffs. In November, Steve Madden, the shoe brand, said it would cut its imports from China by up to 45 percent next year in preparation for more tariffs.
But some retailers say industries that could easily move from China have already done so, and that businesses moving their factories to other countries, such as Vietnam and Mexico, may still find themselves vulnerable.
Michael Coleman, an executive at a fireworks retailer who was walking the exhibit hall at the retail convention, said many of the fireworks his company sold were made only in China.
“I would say the number of things you can get from China alone is probably greater than most people think,” he said.
For now, he said, retailers were “just waiting” to see if the president’s tariffs materialized. If they did, retailers would deal with it, as they did with the many economic challenges of recent years.
“We hope it doesn’t come to pass, but if it does, we’ll adjust with everyone else,” said Mr. Coleman.
