Trump Tariffs | Should small business be scared

So big news today is that US corporations are circling up and headed to Washington, paying lobbyists, all that kind of stuff, in order to try to shape the upcoming tariff policies that are promised by the new Trump administration. And just like anything else, when there's money involved, the money people, you know, are sending money to the government to try to influence and change those policies. So how is this going to affect kind of small business and medium-sized business? So that's the stuff I talk about. So real quick, I mean, in terms of what tariffs are, they're basically a tax assessed on US companies or US importers when they bring in certain goods from certain countries. So say an iPhone comes from China or a truck comes from Germany, there is a tax that gets levied at the port when those things show up. On US shores that those companies have to pay. So companies I'm involved in who are importers, we pay, you know, duty on things and customs, custom taxes on things when they show up at the port. And those could be 5% of the value of that stuff, or it could be 50% of that stuff, and it could be even higher depending on what the tax policy and the tariff policy is. And politicians for hundreds of years have used tariffs as a way to both generate revenue for the government but then also, you know, in the form of taxes. But then they also go about and use tariffs as a way to shape economies and protect industries. So a classic example, you know, is, and this happened a few years ago, the Chinese started to subsidize heavily their steel industry. So the US imposed steel tariffs on imports of Chinese steel because they felt like the Chinese were trying to dominate the market and wipe out all the competition by subsidizing their industry. So we had huge years of steel tariffs that, you know, hit the US economy and caused steel when it came in from China to be much more expensive. And the idea there is that domestic steel manufacturers in this case would be protected for a period of time from unfair competition until the other government, the other country, stopped doing whatever they were doing. And all that seems great, but in the end, somebody's got to pay for those taxes and it ends up translating into higher prices for consumers for various reasons that economists have gone into. So as a long-term kind of wealth generation strategy for countries, tariffs are generally a bad idea. You generally want them there temporarily if you need to, as, as a way to make sure trade stays fair. But in general, they create higher prices, more cost of goods, and less efficiency in the economy. So economists tend not to like them, and small business people don't like them either. That is, unless you're one of the industries that benefits in the short term from those sort of things, those sort of tariffs. Because what you see in practice is, let's say something is tariffed at the border, the domestic competitors tend to have an approach that they raise their prices to be just slightly cheaper than the competitor. So in the end, the consumer is the one that takes most of the pain here. So back to today, the problem with where everybody's talking about tariffs right now is there's not many details on Trump's ideas, right? You know, he was speaking during the campaign to people in rallies who thought that the foreign countries often were paying for the tariffs. They didn't realize American companies would be paying them on their behalf and having to raise prices to pay those things. And now we're here looking into an inauguration in January and then the new administration coming in February. And, you know, frankly, we don't know what the details of this are. There's been some rough numbers thrown out, you know, 10% blanket on certain countries, 100% on other countries if they do certain things. It's very much still at the campaign rhetoric and not at the actual policy and stuff-in-writing kind of level. And if you go talk to people who, you know, espouse to a master plan from this campaign rhetoric, they'll tell you that these tariff threats were put forth by the incoming administration as a way to change the attitudes of other countries. Uh, and in practice, they'll— they won't be put in to the same extent. Uh, but there's a reality here where when tariffs come in, they have a habit of staying. And a great example is the tariff on trucks. And if you notice, a lot of trucks seem to be assembled in the United States. And by trucks, we mean vehicles that weigh over a certain amount. Toyotas are made here in San Antonio. And you're like, why are Toyotas made here in San Antonio? Well, that is to avoid the tariffs that happen on pickup trucks. And you make Toyota Tundras in the United States and you don't have to pay the tariffs that have been associated and left over from a trade war that was nearly 70 years ago that we had with the Germans after World War II. So what happens is once tariffs get in place, the economy kind of resets itself around a new world order of those things, and then they don't go away. And here we are 70 years later with a bunch of factories in the United States making trucks probably more expensively than they would be made if they were made entirely overseas or in Japan. So where does it leave us here? If you're a small business owner or a small business person, the reality is if you import stuff, you're probably going to get stuck in the short term with some tariffs. So if you own a lot of inventory, this is a good time to own that inventory because highly likely it's going to get more expensive in the future. At the same time, like, there's a big gap between where we are right now and what will actually come forth as governmental policy. You know, the one thing that the lobbyists love in Washington is a big argument, and we're about to have one and a bunch of debate on what actual tariffs get put into place and what actually works, you know, in practice.