The Tariff Impact on Main Street
The following are real-life companies with real-life reports of what is happening to them as a result of the recently announced tariff policy of the United States. The newest reports we get will appear on the top going forward, as I intend to maintain this “running log” of mainstream American businesses, outside of public capital markets, decimated by the impact of this poorly constructed plan. There is a side of this issue that is pro-American workers, and it is not the one who wants to tax and regulate them out of business.
Name of company: Lamborghini/McLaren Newport Beach
Location: Newport Beach
Industry/Sector/Type of Business: Auto sales/service
Reaction to tariffs: No one is likely crying for the man selling cars that cost 10x+ the cost of the average new car in the USA, but here we are anyway. As I understand the point of a tariff, it’s to encourage the sale of an American equivalent product, but there are no American equivalents to Italian exotic sports cars. And the other point of a tariff is to encourage production to be moved to the USA, but no exotic manufacturer is going to build a factory in the USA just to sell a few hundred cars a year here. And besides, the regional production is a big part of the draw.
Impact to business from tariffs: Huge. Essentially all the parts we use in our service dept are imported, so the cost of servicing a car will increase overnight. The biggest and most immediate impact is that all our manufacturers stopped shipping cars to the USA. No one wants to bring a car into the country, pay a 25% tariff ($100-200k tariff for most of our cars) and then the winds shift next week and the tariffs are reversed/reduced. It’s also been very surprising to see clients with cars on order that were due to arrive in the coming months who are shocked and angered that these tariffs apply to their cars. I’ve heard things like “But I ordered the car and agreed to the price 2 years ago. You can’t change the price, I’ll sue you!”. There’s an overarching feeling of uncertainty, and no one likes uncertainty.
“What they may have to do”: In the short term, with hardly any new inventory to sell and none scheduled to arrive for the foreseeable future, we will sell more used cars. With increased demand for used cars and increased cost to service them before sale, the price of used cars will likely spike dramatically. It remains to be seen how the market will respond to the sudden price increase for pre-owned vehicles.
Though not a small business with the same format of business data, note the impact to a Pacific Northwest dockworker getting hit in the pocket by tariffs. This will happen to thousands of dockworkers in American ports – blue-collar workers, not investment bankers:
“I know your question was rhetorical, but I couldn’t resist a response. As dock worker in the PNW, I’m not holding my breath! Our shipping line at our terminal has said to expect only one ship a week for the rest of the year. Typically, we’d have at least two and preferably three per week. That will reduce overtime significantly, probably 15% reduction in take home pay. Up here we typically have a lot of soy and agricultural exports which obviously are going to get killed.”
Name of company: Scosche Ind. Inc.
Location: Oxnard, CA
Industry/Sector/Type of Business: Computer Electronic Accessories
Number of employees: 180
Annual revenue: $100 million
Impact to business from tariffs: Decimating profits and creating layoffs
“What they may have to do”: Employee layoffs
Name of company: name withheld
Location: Kingsport, Tennessee
Industry/Sector: Manufacturing
Number of employees: about 40
Annual revenue: $7M
Impact to business from tariffs: far too complex to say with certainty but under the current rules estimating about $700k without mitigation.
“What they may have to do”: I wish I could tell you. We are considering all options at this point. We will likely have to increase prices, which will almost certainly reduce growth and probably hiring. We have capital projects that are now on ice until we understand the rules and whether we have to spend capital to insource more things which would not normally be efficient but maybe we can manufacture it for 130% of what we can buy it instead of 155%. We will have to hire a consulting service to manage duty draw back which will probably cost us $50k/year completely non value adding. The biggest long term threat to us is we are a premium product in our industry and as such we depend on entry level products to create a feeder system/entry point into the market. 100% of those options just went up by 35% as well as all the consumables that are used during game play. This is an existential threat to our industry even apart from the direct cost element.
Name of company: name withheld
Location: San Diego, CA
Industry/Sector/Type of Business: Home Décor / Design / Tile and stone
Number of employees: 7
Annual revenue: Unknown
Impact to business from tariffs: Higher costs to import goods
“What they may have to do”: “We will be passing off the expenses to our customers”
Name of company: name withheld
Location: Cincinnati
Industry/Sector/Type of Business: Manufacturing
Number of employees: ~30
Annual revenue: ~7MM
Impact to business from tariffs: My very small soapbox of the last month or two... Old school manufacturer of specialty power tools. Pretty vertically integrated, and supply chain 95%+ domestic. In response to the inflation (esp. labor) of the last few years, we're moving a lot of component production offshore (largest contracts scheduled to go out today 4/7). It's been a big project. The recent turmoil will A) increase our domestic part costs - lots of steel/alum machining and casting - through metals market increases, which will B) accelerate our offshore move to prevent margin erosion. Stipulate that short term sell price increases (facing low/neg growth?) aren't a great option.
All pain for the company and direct stakeholders (may shrink 1-2 heads), and no MFG job pickups or more production in country for us. Sizable loss for domestic suppliers as a proportion of our supply chain spend.
Name of company: Lucatelli Coffee
Location: Jacksonville, FL
Industry/Sector/Type of Business: Coffee imports
Number of employees: 3
Annual revenue: $1.7 million
Impact to business from tariffs: A 50% increase in the cost of a a specialty coffee container, tightened credit terms, reduced orders, delayed projects, 4x increase in late payments
“What they may have to do”: Price increases are the only option for survival. Company has to delay product diversification plans, severely impeding long-term growth
Name of company: name withheld
Location: Torrance, CA
Industry/Sector/Type of Business: Manufacturing/import-export of component parts
Number of employees: 300
Annual revenue: $88 million
Impact to business from tariffs: 26% increase in cost, massive drain to cash, devastating to P&L and balance sheet, state of current “in motion” orders now questioned
“What they may have to do”: It very well could be existential threat for a 100-year old family business
Name of company: Sierra International Machinery
Location: Bakersfield, CA
Industry/Sector/Type of Business: Machinery and Recycled Materials
Number of employees: 140
Annual revenue: $80-100 million
Impact to business from tariffs: Massive cost imposition on European import tariff undermining deliveries, cash flow, margins, and operating cash flow. Italy has been friendly delivery partner and ally for generations. Additional 20% cost greater than operating margins. Existential threat.
“What they may have to do”: No option for U.S. factory replacement; 20 employees would have to be laid off; significant diminishment of other orders and business activity
Name of company: name withheld
Location: Lake Oswego, OR
Industry/Sector/Type of Business: Consumer Discretionary
Number of employees: 60
Annual revenue: $25 million
Impact to business from tariffs: 60% or higher increase in landed costs. A chilling effect on all aspects of the businesses.
“What they may have to do”: The current chaos has created a chilling effect and eliminates any future planning for us, our business customers, and our supply chain. Accordingly, we are all frozen and every option is on the table – from layoffs to possible closing down.