With all the talk of tariffs on everything from groceries to cars, we thought it was a great time to explain what a tariff is and what it means for everyone worldwide.
In response, Walmart, Lowes, and many other companies said they are raising all their prices up to 10% on everything in their stores in preparation for the tariff in January when Trump is sworn into office.
But with that response, many Americans are confused why they’re paying the price for a tariff against China, Mexico, or Canada. Especially when Trump promised on the campaign that he would lower grocery prices and the main reason Republicans and Democrats alike voted for him was to lower prices, not raise them.
For those who took business economics in college, it was painfully obvious from these comments that many people didn’t google what a tariff was before voting.
So, what is a terrif? A teriff is a tax put on imports or goods coming into a country by its government. Usually this is done to hurt the economy of the country it’s imposed against.
For example, after Russia invaded Ukraine for no reason, many countries worldwide imposed tariffs against Russian goods. This causes companies worldwide to start looking elsewhere for the goods they used to buy from companies in Russia. Thus, it harms the economy in Russia from those sellers losing business.
Usually it also means those countries respond with a tariff against the offensive country and its a two way street of tariffs. But when it comes to Russian goods, there were tons of suppliers that were ready and waiting to open their factories to replace Russian goods except for a few product types like vodka and wheat.
When it comes to Canada, Mexico, and especially China, many major companies have so much invested after building their supply chains with those countries, that setting up supply chains from other countries so quickly would send them into bankruptcy.
That’s why companies are forced to continue buying from Canada, Mexico, and China no matter what tariffs Trump imposes.
So why are consumers paying the price when Trump insisted that foreign manufacturers will pay the price? Well, although Trump wrote the Art of the Deal, he doesn’t know the first thing about how business works.
When a foreign company ships their products to the United States, they pay an import fee which includes any tariffs imposed on their country of origin. So, let’s say it cost you $1.50 to manufacture a pin in Canada. With the new tariff, that manufacturer would now have to pay 38 cents to export it to the US.
But they’re not going to just take 25% less profit so now for a buyer in the US, they charge that US company $1.88 per pin. But that company in America can’t take a loss either so they need to pass that cost onto their customers too. And now the consumer’s price goes up too.
That’s why companies like Walmart and Lowe’s are charging more already in preparation for the higher cost in the future.
Companies like ours here at Powered By Rainbows are changing our operations too. While our company only has about 200 SKUs, even we are making massive moves in preparation for the tariffs.
While all of our products are assembled in the US by either our staff or quality manufacturers across the country, some of their parts and materials come from China and Canada. So, right now we’re purchasing parts and materials in enough quantities to last us the next 4 years so hopefully we can keep our prices the same as they’ve always been no matter what other retailers do.
But that was a difficult business decision to make considering the financial risk of how much space and inventory we need to last 4 years under Trump’s tariffs. It does help us that WalMart said they are getting rid of almost all their LGBTQ pride items from their stores next year, in a new move to get rid of DEI initiatives as they want to refocus their company away from ‘woke culture’.
Our books used to be available on Walmart shelves but will soon be only on other major book retailers and our website. Not cool WalMart but it’s one less store LGBT stores have to compete with.
For small businesses and large ones, this is a tough time. Everyone’s going to blame them for higher prices when truly, it’s the man who promised to give them lower prices that actually baited and switched things as soon as he was elected. Mostly because Trump doesn’t understand the first thing about business.
But I’m glad half the country thought a woman as president was worse than this so while companies like ours try to keep our prices the same for a while thanks to our initial risk now in buying in bulk, other companies will be blamed for something they had nothing to do with.
Anyway, now you know and hopefully you can shop small this holiday season to help the small businesses in your town and ours online because it’s going to be a tough 4 years for us all.
Outro
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