For Klem’s, a general store in rural Massachusetts, each year seems more difficult than the last.
First there was the pandemic, then a breakdown in the global supply chain that left the store short of lawn mowers and shoes. Then a wave of inflation hit American wallets. All the while, Amazon continued to drive customers away from physical stores like Klem’s.
Today, Jessica Bettencourt, Klem’s owner, says she faces a new challenge that has her wondering if the store, opened by her grandparents in 1949, will survive. Radical customs tariffs that President-elect Donald J. Trump has promised to impose could raise the price of goods made overseas and cut into her company’s already thin profits, she says.
“A huge increase in tariffs could decimate us,” she said. “A retail store like mine already has low margins. It wouldn’t take much before “all of a sudden, those little pennies you could be making are gone,” she said.
Mr. Trump comes to office having launched a wide variety of tariff plans. He proposed a universal tariff on almost all imports, as well as levies ranging from 10 to 200 percent on products from China. Canada, Mexicothe European Union and elsewhere.
Mr. Trump has promised to use tariffs for several purposes: incentivizing companies to make their products in the United States, financing tax cuts, persuading other countries to stem the flow of drugs and migrants and even force Denmark cede Greenland to the United States.
Everett Eissenstat, a former Trump administration official and partner at the law firm Squire Patton Boggs, said Mr. Trump intends 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 unclear which pricing plans it will follow and when, adding enormous uncertainty and worry at a time when some retailers are already seeing consumers pull back after years of high inflation.
Even though the U.S. economy remains strong, there are concerns that further price increases from tariffs could weigh on consumer spending and growth in the future.
At a retail conference in Manhattan last week, 40,000 attendees from more than 120 countries shared their perspectives on new products and services in the retail industry. Some complained about the uncertainty the tariff plans had created for their businesses and the economy.
Speaking at the conference, Sarah Wolfe, senior economist at Morgan Stanley, said tariffs were the “biggest wild card” for retailers.
Even if the fundamentals of the economy were sound, “we have significant reservations when it comes to tariff policy, inflation and deregulation,” she said. “The timing, pace and scale of these policies are very unknown, leaving the door open to many different possibilities. »
Tiffany Zarfas Williams, a third-generation luggage store owner in Lubbock, Texas, who attended the conference, said her store had been hit hard by Mr. Trump’s tariffs on Chinese goods in China. during his first term. and that she was bracing herself for even more pain.
“I understand the need for a strategic trade policy with China,” she said. “But at the same time, why does my industry have to be so impactful?
Williams said she would stock up on more products before tariffs were imposed, but she was unsure how strong future sales would be.
“How do you plan when there is so much uncertainty?” » she added.
A tariff is a tax imposed on a foreign product when it is imported into the United States. By raising the cost of a foreign good, the goal is to make products made elsewhere – whether in the United States or in countries not subject to tariffs – more attractive to buyers.
Even though Mr. Trump insists that foreign countries pay tariffs, it is actually the company importing the product that pays the tariffs. And economists say the cost is often sent to American consumers in the form of higher prices.
Some U.S. manufacturers support the tariffs. Zach Mottl, president of Atlas Tool Works, a tool and die maker in Lyon, Ill., said expanded tariffs on imports from most countries around the world would help U.S. factories .
“President Trump’s universal tariff plan would deliver substantial benefits to our nation’s industrial capacity, spurring domestic job creation and expansion in critical sectors,” he said.
But the tariffs would likely weigh on retailers like Ms. Bettencourt, who sells 75,000 items in her store, ranging from lawn mowers, chainsaws, paint and barbecue sauce, to tropical fish, to live reptiles , kitchen utensils and Carhartt baby onesies.
She said she tries to buy American-made products where she can, but that isn’t always feasible for her and her customers. For example, it sells work boots made in the United States, but they cost $350 to $400, compared to $150 to $250 for those made outside the United States.
Manufacturers of lawn mowers and snow blowers, which are typically imported from China, have already told Bettencourt they will pass on the costs of 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 difficult trying to prepare or plan for this big, giant unknown.”
Analysts say some of Mr. Trump’s tariff threats may just be a negotiating tactic aimed at persuading foreign countries to make concessions, and may not go into effect.
But Mr. Trump also sees tariffs as a powerful tool for changing global trade structures and a valuable source of revenue to offset the cost of tax cuts. Achieving these goals would require extensive tariffs, likely to affect many different products and cause even greater difficulties for importers.
Business groups have pleaded with Mr. Trump to rethink his tariff plans. On Thursday, Suzanne P. Clark, president of the United States Chamber of Commerce, said in a speech that “broad and indiscriminate use” of tariffs would “stifle growth at the worst possible time.”
“Across-the-board tariffs would worsen the cost-of-living crisis, forcing Americans to pay even more for basic necessities like groceries, gasoline, furniture, appliances and clothing, and retaliation from our trading partners would hit our farmers and manufacturers hard, with ripple effects. throughout the economy,” Ms. Clark said.
In a post-election survey According to the Conference Board, more than 40 percent of 1,722 business executives surveyed said trade wars were the geopolitical issue that concerned them most. A third said they were looking to diversify their supply chains.
Economists and retail experts say some companies are importing more products before the tariffs take effect. But it’s costly for retailers to hold inventory in backrooms and warehouses, and higher interest rates have left companies with less capital available.
Beth Aberg, owner of two home furnishings stores near Washington, D.C., said retailers are “scrambling to place orders now” to avoid tariffs, but if they are wrong about what consumers would want to buy in the future, they may find themselves stuck. hold too much inventory.
“We can only afford to sit back to a certain extent, not knowing where this is going to take us overall with this administration,” she said.
Some companies are considering moving more of their supply chains out of China, fearing that Mr. Trump will hit Chinese goods with taxes again. In November, Steve Madden, the shoe brand, said it reduce imports from China up to 45 percent next year in anticipation of an increase in customs tariffs.
But some retailers say industries that could easily leave China have already done so, and companies that move factories to other countries, such as Vietnam and Mexico, could still find themselves vulnerable.
Michael Coleman, an executive with a fireworks retailer who was walking through the exhibit hall at the retail convention, said most of the fireworks sold by his company were made only in China.
“I would say the number of things you can only get in China is probably more than most people think,” he said.
For now, he said, retailers were “just waiting” to see if the president’s tariffs would materialize. If they did, retailers would face it, as they have faced many economic challenges in recent years.
“We hope this doesn’t come to fruition, but if it does, we will adapt with everyone,” Mr Coleman said.