'If this tariff takes effect, we are out of business': Small businesses warn of widespread layoffs and shutdowns if Trump doesn't back down from a trade war with China
- The Trump administration is expected to enact tariffs on an additional $200 billion worth of Chinese imports to the US.
- Some companies say they will have to immediately lay off employees to absorb the cost.
- Others warn they may have to shut down completely.
Win Cramer, the chief executive of an American audio products business, felt he was visibly anxious as he addressed a panel of US Trade Representative officials at a public hearing in Washington last month.
"If I come across as a bit nervous, it's because I genuinely feel this is the biggest moment in my company's life," Cramer said, according to testimony transcripts. He desperately wanted the Trump administration to understand how much its proposed import tariffs on roughly $200 billion worth of Chinese goods could hurt his 13-year-old business, JLab Audio.Because JLab could not afford to absorb the costs of a 25% tax on Chinese imports and has contractual price commitments with customers, Cramer said the company would have no choice but to cut its staff. He would immediately have to lay off 12% of employees, he lamented, with more to follow.
Cramer lives in California, but like hundreds of other business and industry representatives, he felt a trek across the country was worth the chance to testify before the USTR. Knowing they were allowed just five minutes of testimony each, more than 350 submitted requests to voice how further escalations in President Donald Trump's trade war with China could affect them.
The Trump administration has enacted punitive duties on about $50 billion worth of imports from the country, summoning tit-for-tat responses from Beijing. A public comment period for another round of tariffs targeting an additional $200 billion worth of products ends Thursday, after which Trump is expected to take action.
'If this tariff takes effect, we are out of business'
David Scheer, who runs a manufacturing company in Wisconsin, was among many of the witnesses who warned another round of tariffs could put him in a situation similar to Cramer's. Higher costs would endanger contracts with major customers, he worried. The only alternative would be to cut dozens of jobs.
"We are now between a rock and a hard place," Scheer said of ECM Industries, his Menominee Falls-based company. "I do not want to be in a position to tell 50 or 60 people they are losing their jobs as a result of these tariffs but I may have no choice."
For the manufacturing and construction company Transdesic International, layoffs aren't even an option."In fact, if this tariff takes effect, we are out of business," chief executive Russell Western said. "We may not be the largest company in the Northeast, but the cascading effect of destroying our business will hurt a lot of people."
Trump, however, asserts the tariffs will ultimately help defend the US against what trade officials found to be intellectual property theft and business practices that are perceived as unfair. Bringing back jobs by reducing the trade deficit, which the president views as a general sign of economic weakness, has been one of his signature promises since the campaign trail.
The trouble is moving production can be time-consuming, expensive, and isn't always an option for small-to-medium companies. For Econoco Corporation, a manufacturing company, it would theoretically take at least three years. Mark Zelniker, president of the Hicksville, New York-based company, said it would realistically "not survive" the associated costs and would be forced to close.
A handful of winners
A relatively small number of businesses testified in agreement with the president. Paul Czachor, chief executive of the American Keg Company in Pottstown, Pennsylvania, believes the tariffs will be effective "in eliminating China's bad practices while having no economic harm to US interests."
"It will effectively allow the US to bring more jobs back and spur growth by allowing companies in the US to be competitive making stainless steel kegs," Czachor said.
The US steel industry has been a rare champion of rising protectionism, which has sent domestic prices of the metal sharply higher. Trump recently visited Granite City Works, an Illinois steel plant that recently announced tariffs allowed it to increase production.
Winners from the trade war have otherwise been few and far between, especially as it increasingly hits consumer products and limits access to foreign markets. In July, Trump rolled out a $12 billion bailout package for farmers, a key constituency for the president and his party, who warned the trade war could lead to staggering financial losses.
Beijing has warned it will escalate economic penalties against the US if Trump acts further. While China doesn't import enough from the US to match proposed duties dollar-for-dollar, it could increase tariff rates or use other punitive measures like creating administrative headaches for American business."The Administrative motivations are understandable," said Darren Dunn, chief executive of SOG Specialty Knives & Tools in Lynwood, Washington. "But respectively, we must wonder if this process is beginning to spin out of control."