Sometimes, it can be difficult to personalize big numbers like $300 billion. That's the amount of new tariffs President Trump announced he intends to impose on goods from China beginning September 1. It will affect almost everything that Americans purchase that's made in China: iPhones, televisions, computers, baby products, and even household goods.
It's hard to make sense of it all, because most of us are busy living our lives and running our businesses, and it's hard to stop and think about how something that seems so abstract, like a tariff, will actually impact our business.
Tariffs have a real cost
After all, what's a tariff anyway? Well, the simplest version is that it's a tax, paid by importers, on goods manufactured in another country. That means that when Walmart buys clothing items or toys or baby products that are made in China, there's a tax. It means that when Apple imports iPhones assembled at the Foxconn factory in Shenzhen, China, there is a tax.
And who do you think pays those taxes? President Trump would have you believe that it's China or Chinese companies that pay them. As nice as that sounds, politically perhaps, it's simply not reality. So who does?
Jonathan Gold, the vice president for supply chain and customs policy at the National Retail Federation, told The Washington Post: "This is going to impact every American who goes shopping. It's U.S. companies and consumers who pay the tariffs, not the Chinese."
That's right, you're paying these tariffs. When our government imposes tariffs on products imported from other countries, those additional costs are eventually passed along to Americans. While companies do absorb some of the burden for as long as they can, at some point, they will take action to pass them along either in the form of higher prices or reduced expenses--which often means layoffs.
By the way, this isn't meant to be political--it's just math.
Tariffs really only work as an incentive to the affected country if there is a domestic alternative to whatever is being taxed. Steel tariffs, for example, are meant to favor American steel companies and discourage the importing of foreign products. In the case of most of these affected goods from China, that really isn't an option.
There is no domestic manufacturer of smartphones, for example. The same is true for baby products like cribs and strollers. That means that families and businesses that buy anything imported from China can expect to start paying more.
What it means for small businesses
As an entrepreneur, this will affect you in a variety of ways. If you're a retailer, your costs will go up just as you start to prepare for your business shopping season. If your business is located in prime shopping areas and you usually count on high traffic during back-to-school and the holidays, you can anticipate that your customers will have less disposable income after they buy affected goods.
Even if whatever you make or sell isn't directly taxed because it's not imported from China, a large amount of the products people buy are. If the prices go up on those items, it means that consumers will have less to spend with you. Again, that's just math.
Finally, if you're looking to upgrade your smartphone, laptop, or other electronic devices, there's a good chance that those, too, will be more expensive. If you planned to scale up your team in the next few months, you may be reconsidering as you wait to see the long-term effects of this trade war.
Some companies have started to move production out of China in order to avoid having to deal with the escalating trade conflict. Others have started looking for alternative sources, both domestically and abroad, for the goods they sell.
The bottom line is that $300 billion in tariffs is real money, and will have a real effect on you and your business, despite what the president or anyone else says.