The news is filled with talk of tariffs, and what new ones will mean to American businesses. But many of us don’t really have a clear idea of how a tariff works.  A tariff, simply put, is a tax imposed by one government on goods from another country.  Tariffs can be used to raise money, or to help regulate trade by discouraging imports and foreign trade.  

Our dependence on Chinese goods is certainly a concern. The Federal Reserve recently noted that for the average U.S. supplier, 16.5 percent of total imported goods came from China in 2022. China’s share of U.S. goods imports went down from 22 percent to 17 percent during the same period. But not everyone agrees that tariffs are the solution, as they are usually passed on to consumers. Higher prices are the result, which may discourage sales.  Absorbing price increases from tariffs can mean narrower margins and less profitability for small businesses.

“Retailers are working to understand how the upcoming tariffs may impact current business models including costs, and on planning how to best navigate rising prices for U.S. consumers if tariffs go into effect,” according to a recent article in Forbes. “Further complicating the situation is the potential for consumer buying power to be reduced, leading to a fiercely competitive marketplace in the U.S.”

National Retail Federation CEO Matthew Slay commented that the steep tariffs proposed by president elect Donald Trump during his campaign could put a burden on shoppers. Americans have certainly become accustomed to low-cost Chinese goods, including those on the direct-to-consumer Temu site – which has allegedly captured a 17% share of the US e-commerce market just two years after launching in the U.S.

A return to more American-made goods would be a welcome development for many reasons, and supporting local makers and manufacturers is a start. Whether or not tariffs will be the other part of the solution to this dilemma remains to be seen.

Happy Retailing,

Carol “Orange” Schroeder

There won’t be a Specialty Shop Retailing blog next Monday due to the holidays.