One of the most unconscionable things the government did during the pandemic was to impose “lock downs” — i.e., extended closures — on small, independently owned businesses while allowing large, corporate chain stores to remain open. Thousands of small, independently owned businesses went out of business as a result.
Fast forward to now, and a similar situation has developed, as regards the president’s tariffs. While they will affect large, corporate chain stores such as Walmart, they will have a disproportionate effect on small, independently owned retailers for essentially the same reason these retailers were disproportionately affected by the months — years, in some cases — of being “locked down” during the height of the pandemic — small, independently owned businesses are less able to absorb the losses.
The U.S Chamber of Commerce recently sent an open letter to Secretary of the Treasury Scott Bessent that asks him to consider measures to lessen the disproportionate impact of tariffs on small businesses by granting them an exemption if they can demonstrate that the add-on cost of tariffs will result in American workers losing their jobs. The exemption would apply to products that cannot be produced in the United States or which are not readily available from manufacturers located in the United States at the present time due to regulatory compliance costs. (RELATED: Trump’s Underwhelming UK Trade Deal)
A good example is chrome-plated parts.
It is effectively (read: economically) untenable to chrome-plate parts in the United States due to the cost of regulatory compliance. The process involves highly toxic materials and processes. Regulations regarding both are far less stringent — if they exist at all — in other parts of the world, especially Asia (China) and also Central and South America. That is why the bulk of chrome plating is done outside the United States — and by dint of that, the bulk of chrome-plated parts are imported into the United States.
Applying tariffs to these parts will obviously result in them becoming more expensive. But large retailers — who are able to leverage economies of scale by purchasing in bulk — can offer chrome-plated parts for less than small retailers and are also able to absorb losses because they can make them up on volume sales. They are also more able to ride out price volatility — caused by changing market conditions and supply chain disruptions.
This same dynamic favored large retailers during the pandemic, increasing both their market share and their profits at the expense of small retailers. The Chamber is arguing — with regard to tariffs — that something be done to level the playing field this time.
Before the damage is done.
Some imported goods, the Chamber’s open letter argues, can’t be made in America because it’s just not practical to make or produce them here. Coffee and bananas, for instance. These grow best in other parts of the world. Adding to the cost of these necessary staples of the American table by adding the cost of tariffs will only make them more expensive for Americans who are already struggling with the cost of staples such as eggs, which have become almost a luxury item for many Americans.
“Raising prices on those products will only hurt families struggling to pay their bills,” says Suzanne Clarke, the president and CEO of the Chamber of Commerce.
It will hurt worse if the breadwinner of those families becomes unemployed because his small business failed or because he got laid off from his job working for a small business.
“The administration should protect American workers facing imminent job loss from the impact of tariffs by allowing for exemptions for companies at risk of layoffs,” Clarke says.
“The Chamber supports many of the President’s policy goals, including eliminating unfair trade and non-trade barriers, and driving American investment. At the same time, we have heard from a historic number of small businesses who have made it clear: they need immediate relief from tariffs.”
It’s important to keep in mind that these small businesses have barely had time to recover from the effects of the pandemic, the worst of which, in terms of the lockdowns and partial re-openings, is only about two years in the rearview.
Many of the owners of these small businesses support the president and the policy goals he says tariffs will help to advance. They agree on the importance of bringing good-paying jobs back to America. But if they are forced to go out of business as a result of the increased cost of doing business, many Americans stand to lose their jobs, the Chamber says.
“As each day goes by, small businesses are increasingly endangered by higher costs and interrupted supply chains that will cause irreparable harm,” Clarke says.
Just as happened during the pandemic.
“We applaud the administration’s efforts to negotiate as many new trade agreements as possible that expand market access for U.S. companies and benefit American workers, but these deals take time, and many businesses simply can’t afford to wait while negotiations proceed.”
More finely, they can’t afford to eat the cost of tariffs, just as they could not afford to eat the cost of being closed for business for months on end while chainstore outlets did all the business.
A more global and long-term solution that would benefit all businesses — and all Americans — would be to deal with the regulatory overreach and compliance costs that have made doing business in America so expensive — and the cost-of-living so expensive for Americans.
But making sure American small businesses don’t pay for the costs of offshoring they have little control over would at least prevent a repeat of what happened during the pandemic, when tens of thousands of small businesses went out of business for good, would at least be a step in the right direction.
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