US Tariffs Pose Significant Challenges for Small Businesses, Exacerbating Global Supply Chain Complexities
NEW YORK — The Trump administration's tariffs, aimed at encouraging domestic manufacturing, have instead created a daunting dilemma for small businesses like Leuz, a Brooklyn-based puzzle company. When Leuz received a shipment from China in March, they were slapped with a 20% tariff on their manufacturing costs, highlighting the difficulties of navigating the intricate global supply chain.
Experts argue that relocating production to the US is not a straightforward solution, particularly for companies with specialized products. The manufacturing process for a simple puzzle, for instance, involves a complex ecosystem of industries, including cardboard production, ink manufacturing, and plastic packaging. Many of these components are sourced from overseas, making it economically unfeasible to shift production entirely to the US.
"The term supply chain oversimplifies the issue," said an industry expert. "It's an entire ecosystem that exists, and it's not easy or even possible to move every component to the US because the system is so global."
Leuz has found that even if they could produce their puzzles in the US for a slightly higher cost, they would likely do so. However, the company's custom-made products, featuring hand-drawn designs and unique packaging, require specialized equipment and expertise that are not readily available in the US.
The tariffs have created uncertainty for Leuz and other small businesses, which may be forced to raise prices or absorb the additional costs. This could have a ripple effect throughout the industry, impacting not only manufacturers but also retailers, designers, and other stakeholders. According to industry estimates, the toy and game sector employs approximately 128,000 individuals in retail stores, compared to just 5,600 people in US-based manufacturing plants.
As the tariffs continue to pose a challenge for small businesses, experts warn that the consequences could be far-reaching. "When you make these products much more expensive, you are expecting declining consumer demand," said an industry insider. "And that ends up costing far more jobs in the retail and wholesale sector than you would ever gain back in manufacturing."
