Small Businesses Face Significant Challenges Amid U.S.-China Tariff Adjustments

The recent reduction of tariffs on Chinese imports from extremely high levels has provided some relief to markets, easing fears of an impending recession.

However, small business owners like Carina Hamel and Robby Ringer, who import products from China, continue to face significant challenges.

Their company, Bivo, which sells stainless steel water bottles featuring a patented nozzle design favored by cyclists and athletes, was thriving and nearing profitability before the imposition of high tariffs disrupted its growth.

Although tariffs were recently lowered from 145 percent to 30 percent on many Chinese goods, the impact remains substantial. "Six weeks ago, a 30 percent tariff would have been shocking and difficult to manage — and it remains so," said Mr. Ringer.

Due to the materials used and trade classification, Bivo’s non-insulated bottles face tariffs as high as 47 percent, while insulated bottles are subject to 37 percent tariffs.

Contrary to claims that foreign exporters pay these tariffs, it is actually importers like Bivo who must pay the duties upon product arrival at U.S. ports.

"The tariffs continue to exert a heavy toll on cash flow, forcing us to rethink our entire business strategy," Mr. Ringer explained.

Bivo has adjusted its sales forecasts downward by approximately 30 percent, largely due to reduced orders from retailers navigating economic uncertainty.

Tariffs affect businesses across the spectrum, but small enterprises are particularly vulnerable because they lack substantial financial buffers, bargaining power with suppliers, and influence to seek tariff exemptions, according to experts.

"Small businesses are generally more exposed to shocks in trade policy than larger corporations," noted a business professor specializing in trade impacts.

Surveys of small business owners reveal declining sales expectations amid concerns over supply chain disruptions caused by tariffs.

With the U.S. importing $439 billion worth of goods from China last year, many businesses including Bivo find it difficult to source products elsewhere in the short term.

Fortunately for Bivo, the founders had imported about 50,000 bottles just before tariffs were first imposed, which helped sustain the business temporarily.

However, when tariffs surged to 145 percent, the company had to halt imports due to the prohibitive cost, despite commitments to purchase additional inventory from their Chinese supplier.

Facing these obstacles, Hamel, Ringer, and their six employees shifted into survival mode.

Ms. Hamel explored European markets but realized expanding sales there would require more time than available. During this difficult period, she remained cautiously optimistic about the company’s future.

She did secure a partnership with a German outdoor retailer and identified a warehouse in the Netherlands to facilitate European distribution.

Meanwhile, Mr. Ringer traveled to China to negotiate better payment terms with their supplier, who extended the payment deadline but did not reduce prices, providing some financial relief.

During his visit, Mr. Ringer observed a warehouse filled with goods delayed by customers trying to avoid the steep tariffs.

Following the temporary tariff reduction announced in May, Bivo decided to import a smaller shipment of 7,624 bottles, incurring $24,436 in duties — a significant increase from pre-tariff costs.

Despite these costs, the company does not plan to raise retail prices, which range from $34 to $54. Their purchase cost per bottle, before tariffs, is roughly $8, and wholesalers buy at about $20.

Critics argue that tariffs hinder entrepreneurs like Hamel and Ringer, who invested heavily in their business concept developed in 2019, using personal savings and their home as collateral.

Supporters contend that tariffs counteract unfair advantages gained by Chinese manufacturers through subsidies, urging American companies to relocate production domestically.

Bivo considered manufacturing in the U.S. but found production costs would rise to at least $50 per bottle, making it unfeasible without substantial government assistance.

"The current tariff policy appears designed to penalize China but ends up burdening U.S. businesses without fostering domestic manufacturing," Mr. Ringer concluded.