Tariffs starting to bite, but how hard not yet clear

Published 8:55 pm Thursday, October 4, 2018

By Martin Moylan, Minnesota Public Radio News

 

Along St. Paul’s Grand Avenue, the nation’s trade war with China is starting to hit home.

At Treadle Yard Goods, owner Michele Hoaglund said that about half the bolts of fabric filling the pine shelves around her store come from China. And that fabric will be subject to the latest round of tariffs. Most vendors haven’t said anything to her yet about tariff-inspired price hikes. But Hoaglund’s starting to hear price hikes are on the way.

“One of our very good fashion vendors has informed us that any subsequent shipments will have a 10 percent increase and, after the first of the year, possibly 25,” Hoaglund said.

Last week, the Trump administration imposed 10 percent tariffs on $200 billion worth of goods from China, and plans to hike the rate to 25 percent at year-end.

Hoaglund is contemplating how she’d deal with that. She hopes to avoid raising her prices but may be forced to.

“We can only stay in business if we can make money off of what we sell,” she said. “We’ll take it probably more on a case-by-case basis, depending on who the vendor is, and how much we get from them. And I may switch vendors so that something is not coming out of China.”

Just a few blocks to the east, Mike Schumann is trying to figure out how tariffs on Chinese goods will affect the furniture he sells. He’s co-owner of Traditions Classic Home Furnishings. A lot of his furniture and the fabric that covers it comes from China. Both products are hit by the new tariffs.

“Just within the last week or so we started getting notifications from our vendors that there are going to be some surcharges on many of the products that we sell,” Schumann said.

The severity and timing of tariff-related price hikes will vary. For instance, some suppliers have inventory in the U.S. that avoided the new tariffs. But Schumann said he’ll have to pass increased costs along to customers eventually.

“We’re going to get hit unless this gets resolved. There’s just a time delay,” he said.

The trade tiff with China will cause him some headaches. But Schumann praises Trump for trying to slash the nation’s trade deficit with China and boost employment in the U.S.

“He is not a particularly nice person,” Schumann said. “But he’s willing to step up and take the hit and make this an issue.”

Jason Schneiderman, the owner of Schneiderman’s Furniture, said a third or more of his inventory comes from China and some suppliers have hiked prices 5 to 10 percent in response to the tariffs.

Schneiderman said he’s deciding on a case-by-case basis whether to pass on price increases, based largely on what vendors do.

A lot of retailers say it’s too early to tell what the latest round of tariffs means for them, including Best Buy.

“We are still working with our vendors to figure out what the impact will be. I think it is too early at this point to truly know what the impact will be to customers,” said Jeff Shelman, a spokesperson for the consumer electronics chain.

Target did not respond to an interview request but noted that CEO Brian Cornell has said the retailer is concerned about anything that would cause higher prices on everyday products for American families. Cornell has also said there are many things Target can do to remain price competitive and profitable until a resolution is reached.

Mike Frattallone, co-owner of the 21 metro-area Frattallone’s Ace Hardware & Garden stores, said his stores sell a lot of stuff from China. But so far he hasn’t seen any price hikes he’d attribute to the latest round of tariffs. But he knows that may not last.

“Maybe we’re just slow to get there and it takes a little longer for the manufacturers to pass those on to us, hoping that they can get this handled, where they won’t have to pass off.”

Most consumer goods had escaped the initial tariffs in Trump’s trade fight with China. But the latest round of tariffs hit a wide range of consumer goods — from backpacks and dishwashers to flooring and grills. Retailers are concerned about the planned increase in the level of tariffs in January and the possibility the charges could spread to items that are so far exempt, said Hun Quach, vice president for international trade with the trade group Retail Industry Leaders Association.

“We’re really concerned about the potential for these tariffs to hit the clothing that you put on every day, the shoes that you put on your feet and the toys that American families play with every day,” she said.

Quach said it’s not fair that consumers are caught in the crossfire.

“We’ve been trying to tell the administration that these tariffs are being paid by American consumers,” she said.