US companies up against ‘nightmare’ tariff wall

Donald Trump took the trade world by storm when he returned to office, announcing new and higher tariffs on imports, starting with goods from China and quickly spreading to almost every country in the world.

As the confusion from the threats, negotiations, climb-downs and carve-outs starts to clear, a new economic landscape is emerging. Trump is building a steep, and often expensive, wall of tariffs, the likes of which has not existed in the US for nearly a century.

“It’s been an absolute nightmare,” said Jared Hendricks, owner of the Utah-based Village Lighting Company, who took out a $1.5m (£1.1m) loan backed by his home earlier this year to cover the unexpected jump in his costs.

Since April, most goods coming into the US have faced taxes of at least 10%.

The pause on some of Trump’s plans to levy even higher tariffs is now coming to an end, and larger taxes are set to start on 1 August.

In recent weeks, Trump has sent letters to some countries outlining his planned tariffs on goods from their countries. He has also reached agreements, described as “frameworks”, with major trading partners, including the European Union and Japan, that leave key issues unresolved while establishing levies that were once unthinkable.

In general, goods coming into the US are to be taxed 10% to 50%, depending on their origin, compared to an average tariff rate of less than 2.5% at the start of the year.

Though Trump has dropped some of his most extreme threats, his plans still represent a “dramatic shift”, one poised to be “significantly disruptive”, said Wendy Cutler, senior vice president at the Asia Society Policy Institute.

“We’re definitely in a tariff world,” she said.

Trump said the measures – delivering on a top campaign promise – have been “unbelievable”.

They are bringing back US manufacturing, he said, opening up overseas markets and raising money for the US government – which has already collected more than $100bn in tariff revenue this fiscal year, a record. He is also using them to push other countries on a range of non-trade issues, including military spending and social media.

“We have the hottest country of anywhere in the world,” he said recently.

Mr Hendricks, who employs about a dozen people, though, said the new levies had created a range of challenges for his business selling Christmas lights and decor mostly made in southeast Asia.

He is expecting many of his shipments to arrive after 1 August. He struggled to compete with bigger players also pressing suppliers and shipping firms to deliver before the deadline.

The new costs hit during the off-season, when he has little money coming in.

“A hundred billion dollars in tariffs and they’re celebrating that?” he said. “That’s on the backs of people like me that are now trying to figure out how to pay payroll.”

Larger businesses, too, say the tariffs already are hurting their bottom lines, even though the White House has granted some exemptions and the full plans have yet to come into force.

General Motors recently told investors it paid more than $1bn in tariffs from the beginning of April through the end of June, despite carve-outs for car parts from Mexico and Canada. Tesla spent an extra $300m.

Toymakers Hasbro and Mattel expect tariffs to cost tens of millions this year and have reduced their sales forecasts, while aerospace manufacturer RTX, formerly Raytheon, said the measures would cost it $500m, after mitigation efforts.

Source: BBC