Companies prepare for Trump’s promised tariffs on all imports. But who’ll end up paying is still a question.
The thinking was that tariffs on foreign-made goods would encourage more manufacturing within U.S. borders, which would create more factory jobs. Trump's tariffs are still just campaign promises, but companies are already trying to figure out how to adjust their operations should any new fees kick in.
Two days after the election, executives at shoe brand Steve Madden said they'll speed up a plan to cut Chinese production by 45% in the next year and move manufacturing to Cambodia, Vietnam, Mexico and Brazil. Executives at other companies — including Columbia Sportswear , Stanley Black & Decker , e.l.f. Beauty and more — say their costs will certainly go up. Philip Daniele, CEO of auto-parts retailer AutoZone, told Business Insider , "we will pass those tariff costs back to the consumer."
There's similar concerns in Colorado, said Jessica Cowden, marketing director for Manufacturer's Edge, a Lakewood-based organization that works with 150 to 250 Colorado manufacturing companies a year.
"Many are reporting that they are stocking up and increasing inventory on imported parts and products to get ahead of the tariffs," Cowden said. "Hopefully, that will save them money once the tariffs are imposed, but excess inventory presents its own challenges, including tying up cashflow. So, it is a balancing act."
Businesses have been through this before. Tariffs on Chinese imports during the first Trump administration had some local companies reshuffling supply lines by 2019. Some tariffs remained in place during the Biden administration. But while there was an initial decline in Colorado's import values right after Trump's tariffs went into effect, the pandemic changed everything as consumer demand increased for furniture and other household goods that are typically made overseas.
The value of imports to Colorado as of September was $12.9 billion as of September, according to U.S. Census data. That's near where it was for the full year 2019.
Tariffs are taxes because they're fees levied by governments. While the fees target those outside the U.S., it is the American consumer who often ends up getting the bill, said Alexandre Padilla, chair of the economics department at Metropolitan State University of Denver.
A classic example, Padilla said, are washing machines, which were slapped with Trump's tariffs in 2018. Whirlpool Corp. celebrated the tariffs because the Michigan company built washing machines in the U.S . But other tariffs on raw steel and aluminum that Whirlpool used to build the machines caused the company to increase prices for customers.
"The main argument that economists will make in general is that if the idea is to lower the price of goods and services for the lower-to-middle class," Padilla said, "certainly paying tariffs is not the solution to that."
Spillover effects aren't being considered, he said. High tariffs could start a trade war. After Trump's 2018 tariffs, China added a 25% tax on soybeans. Colorado corn farmers felt the pain because Midwest soybean farmers switched to growing corn, which drove down prices for local farmers and impacted families in those communities.
"It might be true that China lost more than the U.S. in the trade war but overall," Padilla said, "the people that pay the bill are still the consumers."
