Small businesses under Trump’s tariffs: ‘I’m so angry that my own government has done this to me’

Summary

In this segment of the Business Leaders series, small business owners discuss the impact of President Trump's tariffs on their operations. Julie Robbins from EarthQuaker Devices in Akron, Ohio, shares how tariffs are disrupting their production and raising prices, forcing them to consider offshoring manufacturing. Meanwhile, Stew Leonard of Stew Leonard's Grocery Stores highlights how tariffs have affected the supply chain, particularly for imported goods like bananas, though they are also seeing some benefits from domestic seafood sourcing. The challenges of pricing adjustments and supply chain disruptions are felt across multiple industries, impacting consumer demand and business forecasting.

Takeaways

• 😀 EarthQuaker Devices, a guitar pedal manufacturer in Akron, Ohio, is struggling due to President Trump's tariffs, with rising prices and market disruption.
• 😀 The company sources over 900 components from 14 countries, and the tariffs have led to price increases and challenges in long-term planning.
• 😀 Due to tariffs, EarthQuaker Devices has had to raise prices, with a 23% increase required to maintain profit margins on some products.
• 😀 EarthQuaker Devices is forecasting a 15% decline in business for the year, with a nearly 30% drop in sales in April alone.
• 😀 The company has delayed or scrapped product launches due to market uncertainty caused by tariff-related disruptions.
• 😀 EarthQuaker Devices prioritizes manufacturing in Ohio despite the higher costs, aiming to create good jobs with benefits and support the local community.
• 😀 The company is now considering offshoring manufacturing for the first time because of the tariffs and competition from overseas manufacturers.
• 😀 Tariffs have caused disruptions in consumer demand, with consumers saving more and spending mainly on essentials such as housing, healthcare, and groceries.
• 😀 Stew Leonard’s Grocery Stores, which sources most of its products domestically, has had limited disruption from tariffs, especially on fresh foods like salmon and avocados.
• 😀 The CEO of Stew Leonard's, Stew Leonard, shared that they are splitting tariff costs with suppliers to avoid passing the full increase onto customers, especially for small suppliers.
• 😀 Stew Leonard emphasized the importance of water safety during the summer season, urging people to be vigilant around water to prevent drowning accidents.

Q & A

How has the tariff situation impacted EarthQuaker Devices' business?

The tariffs have led to significant price increases for EarthQuaker Devices' products, creating market disruptions and lowering consumer demand. These factors have made long-term planning difficult, and the company has had to delay or scrap product launches. Their prices are rising due to increased costs of imported components, and they are facing a decline in sales.

What is the main challenge EarthQuaker Devices faces with regard to price increases?

The primary challenge is the unpredictability of tariff changes. The tariffs are constantly fluctuating, making it difficult for EarthQuaker Devices to implement consistent price increases and maintain profit margins. For example, if Chinese tariffs remain, the company would need to raise prices by about 23% to maintain a profit.

How much has EarthQuaker Devices' sales decreased this year?

EarthQuaker Devices is down about 15% for the year, with April seeing a nearly 30% decline in sales. The company is struggling with low consumer sentiment and reduced demand.

Why has EarthQuaker Devices prioritized manufacturing in the U.S. despite higher costs?

The company has prioritized U.S. manufacturing to provide good jobs in Akron, Ohio. They wanted to contribute to the local economy, offering well-paid jobs with benefits, health care, and retirement planning. Despite cheaper manufacturing options overseas, they have remained committed to keeping jobs in Ohio.

What is EarthQuaker Devices' current consideration regarding offshoring manufacturing?

Due to the challenges posed by the tariffs, EarthQuaker Devices is now considering offshoring their manufacturing for the first time. Their competitors overseas are not facing the same tariff issues, making U.S. manufacturing less competitive.

What products at Stew Leonard's have been affected by tariffs?

Products like bananas and cherries have been affected by tariffs. While Stew Leonard’s has not raised prices for most items like salmon and certain fruits, products imported from countries outside the U.S. like bananas and cherries have seen price increases due to tariffs.

How has Stew Leonard's handled the rising costs from tariffs on imported products?

Stew Leonard's has worked with suppliers to split the tariff costs or absorb part of the price increase themselves to avoid passing on the full increase to customers. For smaller suppliers, they may absorb the cost to protect those businesses.

Has Stew Leonard's faced any supply chain disruptions due to tariffs?

No major disruptions have occurred for Stew Leonard’s due to tariffs, as they source much of their food from U.S.-based suppliers, and certain products like fresh foods from Mexico and Canada are tariff-free under the NAFTA act. However, some imported goods like bananas and cherries have been impacted.

How have Stew Leonard's and other businesses adapted to shifting consumer behavior during the tariff crisis?

Stew Leonard's, along with other businesses, has focused on adjusting prices to manage tariff impacts, particularly for imported goods. They also emphasized supporting smaller suppliers and maintaining product quality despite rising costs, all while balancing the impact on their customers.

What safety message does Stew Leonard emphasize at the end of the segment?

Stew Leonard emphasizes water safety, particularly during the summer season when drownings are a significant risk. He urges viewers to be vigilant around water, keep children supervised, and treat water safety with the same importance as having a designated driver for drinking.