Trump tariffs hit Alabama businesses, big and small: ‘If I can’t pay it, I have to pass it on’
The message came late for Misty Smith – the Trump tariffs are here.
The owner of Live, Laugh & Love, a clothing boutique in Gadsden, got the message from her supplier – the Trump tariffs are here.
One day after President Donald Trump announced a sweeping set of tariffs on scores of countries, Alabama business owners began seeing the results.
“Every piece of clothing item, I have to pay $25 tariff charge per item, and then I have to pay $50 per item if it’s not clothing, shoes, handbags, things like that,” Smith said. “That’s on top of the price.”
Smith, who has operated her store for 11 years, said the charges will affect about 60% to 70% of her inventory.
“I can’t afford to buy U.S. products,” she said.
She’s trying to look for other suppliers, or rushing some orders to beat the tariffs. But she’s unsure how far the effect of tariffs will go, as some products made in America require some materials that are globally sourced.
“People don’t understand that issues like this affect small business owners differently than large corporations,” she said. “If I can’t pay it, I have to pass it on to the customers.”
John Dove, an economic professor at Troy University, said a tariff – what companies pay to governments to sell their goods in that nation – is a tax. And taxes are part of the cost of doing business; costs which businesses tend to pass on to consumers.
“If you impose a tax on a business or consumers, it makes things more expensive,” Dove said.
“For businesses, that increases the costs of doing business. When businesses face higher costs, that shows up in higher prices. In some capacity, these will lead to higher prices on consumer goods, reduced choice in fewer goods available, and typically, lower quality products.”
The Trump Administration has given several reasons for the tariffs, such as trade imbalances and a spur for companies to begin moving manufacturing to the U.S.
But Dove said anyone expecting a return of traditional manufacturing jobs, with long-term economic security and good benefits, may need to scale back those ambitions.
“When you look at U.S. manufacturing output since World War II, it hasn’t decreased, it’s increased each year,” he said.
“We’re the No. 2 largest producer of manufactured goods in the world. Much of the production process has become automated. If you return the manufacturing, it doesn’t necessarily translate into a lot of jobs because of our dependence on machines.”
The impact is filtering out to businesses large and small.
Alabama is home to several automakers based outside the U.S., and so the effect on Alabama’s auto companies may take time to sort out.
By late Wednesday, it appeared the 25% auto tariffs would not apply to parts manufactured under the terms of the U.S.-Mexico-Canada Agreement negotiated in the first Trump Administration.
Scott Posey, a spokesman for Hyundai’s Montgomery plant, said some confusion is in order.
“It appears that the tariffs will not apply to USMCA compliant parts which would provide us with some relief,” Posey said. “The other good news is our cars are American built.”
Robert Burns, the chief administrative officer at the plant, told WSFA “the bottom line is, we’re not going to stop building cars.”
NikkeiAsia reports that Toyota and Honda are signaling that they will leave their prices the same for the immediate future.
Hyundai CEO Jose Munoz also said the Korean automaker doesn’t have any immediate plans to raise prices, according to Reuters.
Toyota told Reuters in a statement that it is closely monitoring the situation and will work on reducing costs and maintaining operations as normal for the time being.
According to Edmonds.com, two models built in Alabama are among the ones that will be significantly impacted by the tariffs.
The Hyundai Santa Fe SUV, with a starting price of $35,775, is made in Montgomery. But some of its components may drive the price higher, as its transmission is produced in South Korea.
Roughly 50% of the standard Santa Fe’s parts originate outside North America. The hybrid version’s powertrain comes from South Korea, and 61% of its total vehicle parts are not covered by the U.S.-Mexico-Canada Agreement.
The Toyota Corolla Cross, made in Huntsville, has a starting price of $25,385. About 40% of its parts are sourced from outside the USMCA. More than half the parts of the hybrid are produced overseas.
Mazda has already seen some effect from the tariffs, though in a positive way. The Japanese automaker posted record numbers for the month of March, with sales jumping 16.1 percent compared to the same month a year ago. The CX-50, produced in Huntsville, also saw record sales.
Motor1.com speculated that the reason for the record sales was buyers rushing to secure a car before the tariffs hit.
Mercedes could relocate its GLC SUV to the U.S., which is currently made in Bremen, Germany, but that could cause political problems at home, according to The Wall Street Journal.
Earlier this year, Mazda reportedly was considering shifting some production to Alabama.
There are some sectors of Alabama’s economy that welcome the tariffs. Shrimpers in Bayou Le Batre, for example, say foreign-sourced shrimp has eaten into their profits, according to NBC News.
Mayor Henry Barnes estimates that the town’s overall tax revenue has dropped in recent years by roughly 30%.
“A lot of people look at a tariff as a punishment, but we’re not trying to punish them,” said Steve Bosarge, president of the Southern Shrimp Alliance, a trade association. “We just want to be at a level where we all can compete.”
Of course, a tariff being a tax means that the U.S. can expect revenue, approximately $600 billion according to Trump Administration estimates. However, Dove pointed out one problem with those estimates.
“That’s revenue that can, of course, be used to pay for public services or alleviate debt,” he said. “The thing to keep in mind is, that sounds like a lot, but that’s about one month’s worth of expenditures (for the U.S.). To create this many economic distortions and problems, it’s probably not worth raising revenue in that capacity.”
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