Peter Elitzer, who runs a chain of discount clothing stores called Label Shopper, fears the tariffs will force him to raise prices, putting off already nervous shoppers.
Peter Elitzer
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Peter Elitzer
The prospect of tariffs under the new Trump administration is dividing businesses across the country.
Some are working to avoid potential import taxes or preparing to pass the cost on to their customers. Others, however, welcome tariffs as a defense against foreign competition.
Here’s a look at how three companies are preparing for the tariffs.
The national manufacturer
Mark McClelland belongs to the tariff-supporting camp.
If you’ve ever sat in the stands to watch a high school football game, you may have come into contact with the McClelland product. His company, Tower Extrusions, makes bleacher seats and thousands of other aluminum products.
“Think of a big Play-Doh machine,” McClelland says of the manufacturing process. “We take a log of aluminum and push it through a shaped die.”
The Olney, Texas-based McClelland Company operates eleven aluminum presses, producing bleachers, window frames, automotive parts and more.
“It’s kind of one of those old companies that people don’t really think about, but when you look around, our product is kind of everywhere,” he says.
Starting around 2010, McClelland’s company and others in the industry began to face increased competition from China. They fought back and won anti-dumping tariffs on Chinese aluminum products, but the threat from imports quickly metastasized.
Chinese aluminum products like these are already subject to anti-dumping tariffs in the United States. But domestic manufacturers now face increased competition from other countries, including Vietnam, Turkey and Mexico.
STR/AFP via Getty Images/AFP
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STR/AFP via Getty Images/AFP
“What was once just a China problem has now expanded,” says McClelland, with an increase in imports from Vietnam, Turkey, India and Mexico. “And of course, Mexico is the one that really worries me, because there is a direct route to our market.”
Foreign companies now supply about 35 percent of extruded aluminum products in the United States, McClelland adds, nearly double their share from five years ago.
“They sell at prices we can’t compete with,” says McClelland. “It’s going to shut down our industry if we don’t do something.”
President-elect Donald Trump has proposed adding a 10 to 20 percent tax on all imports, and McClelland is counting on these massive tariffs to provide a more level playing field.
He recognizes, however, that import taxes are a double-edged sword. His company now has to pay more for the raw aluminum it uses in its products because of the tariffs Trump imposed the last time he was in the White House.
“That drove up our raw material costs by 10 percent, whether we imported them or not,” McClelland recalls. “Even if it’s produced locally, it increases your costs by 10%.”
The importer
Among the business owners facing higher costs is Bobby Djavaheri.
It fears the tariffs will increase the cost of its popular air fryers and other appliances, most of which are made in China.
“I don’t think the American consumer understands what’s at stake here,” says Djavaheri, whose company Yedi Houseware Appliances is based in Los Angeles.
If Trump follows through on his threat to impose a 60 percent tariff on imports from China, he estimates that “a $130 item will turn into something well over $200.”
“It is the Americans who are directly taxed with these customs duties, not the Chinese,” explains Djavaheri.
Bobby Djavaheri (left) and his father Yedidia sell air fryers and other appliances, mostly made in China. Bobby worries that a 60 percent tariff on imports from China could push the retail price of his products above $200.
courtesy of Bobby Djavaheri
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courtesy of Bobby Djavaheri
Some have suggested that Trump is simply using the threat of tariffs as a bargaining chip and that import taxes are unlikely to take full effect — but Djavaheri isn’t counting on that.
“I take this very seriously,” he said. “We are trying to increase our imports before the president-elect is sworn in.”
Other importers are also racing to stockpile products before tariffs take effect.
“If companies have the means to develop this product, build inventory and reduce costs before the new tariffs are introduced, they will try it,” says Gene Seroka, executive director of the Port of Los Angeles. The port is busier than usual at this time of year, unloading hundreds of thousands of shipping containers from Asia each month.
One of Djavaheri’s suppliers also considered moving its factory from China to Mexico to avoid the highest tariffs.
But that won’t necessarily work. Last month, Trump proposed slapping a 25% tariff on imports from Mexico and Canadatwo of the United States’ largest trading partners.
The discounter
Peter Elitzer is another business owner who is concerned about the impact of tariffs.
He says even a 10% tariff would be painful for customers who shop at his discount clothing stores. Bargain hunters who frequent Elitzer’s Label Shopper stores on the East Coast and Midwest are already cautious about spending money.
“They only buy when they need something,” Elitzer says. “So it’s cold and they need a sweatshirt or a jacket, they’ll come get it. If it’s too cold in the spring and they don’t need to buy T-shirts , they don’t buy T-shirts.”
That makes Elitzer wary of filling warehouses ahead of potential tariffs with clothes that might not sell and risk going out of style. It will take its chances on imports from India, Indonesia and Cambodia, knowing that if tariffs were to be imposed it would have to raise prices.
“There’s no doubt in my mind that this is not going to be good news for the consumer at all,” Elitzer says. “Especially if they’re trying to get inflation under control. This is the worst possible time to do it.”
Most of the clothes in his stores sell for $19.99 or less, less than he charged a decade ago.
“The overwhelming majority of Americans don’t shop at high-end department stores,” he says. “They’re shopping at Walmart and the Label Shoppers of the world. And they’re looking for value.”