Every country around the world has tariffs on something, it is used to protect domestic companies and to ensure the economy of the country is not overrun by the biggest countries in the world. Most tariffs are aimed at specific industries and leave a wide open berth for the rest of the economy. It is good to have goods and services moving around the world, it makes everyone better and it makes everyone dependent on each other. President Trump seems to want to put broad across the board tariffs on everything. Invariably it means higher prices for anything that is imported. If you go to your favorite store and check out what is domestic and what is import, it turns out many things will be imported, for a variety of reasons.

In an article by Daisuke Wakabayashi, Alexandra Stevenson, Danielle Kay and Eli Tan of the New York Times News Service, the tariffs that President Trump imposed will have significant effect on small businesses and raise prices for consumers.

For decades, American firms have designed products in the US and turned to Chinese factories to produce the goods efficiently and inexpensively. It is how Apple works, it outsources the work to Chinese firms and also how many small businesses work.

The New York Times has heard from nearly 100 companies that import from China about how the tariffs would affect them. Several themes emerged, American businesses, not Chinese suppliers were shouldering the costs of tariffs. Many companies said they would have to raise prices to offset the extra cost of tariffs.

Another theme is a feeling of business paralysis: they were afraid to make plans amid the unpredictable stream of new tariffs, fear of moving productions out of China since no country seemed immune. Most of the goods would not come from the US because the goods were inferior, more expensive and fewer options. Also to do so would be to reinvent their supply chains requiring time and expense they cannot afford.

A 10% tariff imposed on China is whether the components that are assembled in the US or finished products from China that are imported to the US. The tariff is either in a bill when they receive the item or added to shipment costs. Either way the money is coming from the US business.

Some companies have increased their inventory, but then there is a cost to holding extra inventory. If a company has been a customer for years, there may be a little wiggle room, but someone has to pay for the inventory. Often times while there may be other options, because of how the businesses in China has evolved, the best machinery, the best expertise to produce quality goods at a good price is located in China.

Linking to dividend paying stocks, large companies have or should have many options. They should be able to adopt the latest technology using AI to determine the best routes forward. Medium sized companies are next and small business because of fewer people tend to be last. The effects of tariffs will hurt small businesses first because they have less options to deal with the tariffs. Raising prices no matter what size of company is tough, but larger companies tend to do it better because there are fewer options not to deal with them. Those fewer options are good reasons to invest in them.

There are more questions than answers, till the next time – to raising questions.