Tariffs levied by the Trump administration are inevitably set to negatively impact consumers and small businesses alike, according to the head of California’s top retail lobbyist.
“I think consumers are really going to get sticker shock in the next few months—if these tariffs really become a reality, coupled with the insurance crisis in California, gas prices…and some of the rising costs on the consumer index,” said Rachel Michelin, president and CEO of the California Retailers Association during a briefing with the Port of Los Angeles on Wednesday. “We’re hitting a tipping point and consumers can only take so much.”
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Michelin said that the larger national brands within the association can pivot by importing goods earlier and can absorb some of those costs for a longer period. But smaller businesses don’t have that luxury.
“I worry about my smaller retailers. I know we all want to put Covid in the rear-view mirror, but some of those smaller retailers are still catching up from it,” Michelin said. “They’re finally getting…back to normal and now we’re hit with this.”
According to Michelin, the Department of Commerce has thus far given no guidance on how long it will take to have systems in place that will collect duties on small, low-value packages that used to enter the U.S. via the de minimis trade exemption.
The future of that trade exemption is still up in the air, with the Trump administration suspending it as part of its executive order against China. The administration reversed the suspension just days later, but businesses now are tasked with preparing for more uncertain scenarios.
Tying in with the concerns about both the China tariffs and the uncertain future of de minimis, Michelin also said that more retailers in the 400,000-member association are shifting production out of China.
While China once comprised 57 percent of the port’s throughput, that number is now 45 percent, and likely will continue to shift downward, according to Gene Seroka, the executive director of the Port of Los Angeles.
“For every retailer that is moving out of China to look for sourcing in other locations, the first conversation begins with the China cost plus the new tariff—that’s the cost out of ‘new country A,’” said Seroka. “It’s not so much finding and chasing that cheaper price, it’s trying to stay fluid with cargo that gets to the American consumer. All of this yields higher prices.”