Why aren’t small American businesses getting exemptions in Trump’s Tariff Nightmare ask two home and housewares experts
By Bruce Kaminstein and Warren Shoulberg
While all the headlines and noise about the impact of this tariff craziness focuses on the big sectors of the American economy — auto manufacturers, Apple and tech players — lost in the discourse is what this is doing to companies that produce nearly half of America’s GDP and employ more than four out of every ten private-sector workers in this country.
It’s small businesses — those with fewer than 500 employees and often doing only around $20 million in annual sales — that have the most to lose during Trump’s Tariff Tsunami. And the fact of the matter is that they are already feeling the pain and starting to struggle to stay in business.
It is these smaller businesses, taken in their aggregate, that are the foundation of the American economy and unlike big sectors such as automotive and electronics, they don’t have the lobbying muscle or collective strength to get their message across to both the politicians in Washington, DC and the general American public.
Anybody who understands these businesses knows that no matter what the levels of tariffs set by the president or where they impact countries around the world, jobs in most small businesses are simply not coming back to America. This is especially true for manufacturing jobs which are long gone and not sought out by the American workforce.
“After more than three decades owning and running a housewares company I am now an angel investor that is backing young entrepreneurs with great ideas,” said Bruce Kaminstein, who spent his entire career in the $70-billion-a-year housewares industry. He now works with smaller start-ups and “These founders are producing products outside of the US because it is impossible to make these items which require multiple materials here in this country. The supply chain here simply does not exist unless you open a factory with expensive capital equipment.” These companies were forced to go overseas because of a lack of production facilities here in the U.S. OEM factories ( facilities that produce for other brands) exist in other parts of the world because these factories are part of their economies. “For example factories in China welcomed our business and helped us bring our innovative products to market with low capital cost to the entrepreneur.”
But it’s not just a matter of jobs, he said. “It seems to me that we would be less innovative with consumer products and things would be more expensive if overseas supply chains were not available or suddenly unpredictable with costs due to political issues. I just don’t think the current government understands the way the consumer product supply chain model works.”
The history of American manufacturing has been based on vertical integration. Companies in the past invented and produced their own products, limiting their facilities to their own inventions. As a result, a fork in the road developed about 40 years ago, where American entrepreneurs were able to take their own creations and source production into the open arms of factories in China and elsewhere overseas. This helped to drive innovation while not having to deal with expensive factory costs. This is the model for most consumer products today such as apparel, footwear, housewares etc.
“Would Apple computers be so innovative if they had to spend their capital on equipment to produce iPhones here rather than use that money to invest in things like research and development?” Kaminstein and Shoulberg, a business journalist who has reported on the home furnishings industry for decades said. “Same for the smaller companies who simply wouldn’t be able to bring new products to consumers at a reasonable price if they had to set up their own manufacturing production in this country.”
The two experts say this all cannot be changed overnight. “Some government officials say that tariffs do not increase pricing. This is just not true, it’s a lie,” said Kaminstein. “Having imported for decades I know the tariff is paid for by the supplier, not by some foreign country and it will increase pricing so the company can pay its expenses. These companies are paying taxes and putting people to work. They should not be penalized for producing outside the US when it is impossible to produce these products within our country.”
It is these innovative companies, he said, that create good jobs in design, engineering and marketing among other areas. The uncertainty of the tariffs makes a small or even medium-sized business impossible to be successful. With things changing almost by the hour it’s unclear if the tariffs are going to stay, and if so at what level and to which countries will they apply to. We’ve seen that now some sectors like auto makers and tech are getting reprieves or even more concessions. “But what about a small company producing a sneaker or a great kitchen product?,” Kaminstein asked. “These small companies will have to pay these tariffs now and will be forced to increase their retail prices to stay in business. Should they be treated any differently than big automotive companies?”
As a veteran of global trade, Kaminstein said, “I have always been in favor of free trade — and fair free trade with other countries. I do not believe it is correct for countries to have higher duties to exclude other country’s products. But it needs to be negotiated over time so companies can plan their future. The uncertainty and all of this constantly-changing political motivation will kill the future of small business.”
Bruce Kaminstein is the founder and former owner of Casabella, an innovative housewares company and has been involved in international business for more than 35 years. He has commented on the global market for CNBC and other business media. Bruce is a member of the New York Angels.
Warren Shoulberg is a business journalist who has reported on the home furnishings and retail sectors for more than four decades for such media as Forbes.com, The Robin Report and the Business of Home. He currently frequently posts to his own blog, Warrensreport.com.
WarrensReport 