When Rick Woldenberg, the chief executive of the Illinois-based educational toy company Learning Resources, got wind of the Chinese tariffs, he didn't just complain about them; he sued the U.S. government over them. His company relies heavily on manufacturing in China, and the steep tariffs, borne by U.S. importers, have sharply inflated his costs.
Woldenberg's firm had been paying approximately $2.5 million annually in import taxes. That number surged to more than $100 million in April, when tariffs were temporarily increased to 145%. The rate, which is currently 30 per cent, is still a significant burden. The result is that Learning Resources has already begun to move some of its production to Vietnam and to India, where a 10% set of U.S. tariffs exists — although those are also set to expire on July 9.
Businesses Adjust to Soaring Prices and Legal Fights
Learning Resources has already shifted about 16 per cent of its production to India and Vietnam. Woldenberg said that the switch would require extensive vetting of factories, staff training and a smooth process. But he worried about whether these new suppliers would be able to keep up with demand, especially with so many global companies doing the same thing.
The lawsuit—"Learning Resources et al v Donald Trump et al"—is still to be decided by the courts. While a U.S. District Court judge ruled in May that the tariffs were unlawful, the government has since appealed, and Learning Resources still must pay the tariffs for now.
Logistics consultant Les Brand, CEO of Supply Chain Logistics, who specialises in global supply chains, said investing in manufacturing was expensive and hard to move. It is like "swapping the tires of a moving car," he said, requiring extensive research, quality checks and training that add even more burden on businesses that already operate on thin margins.
Tariffs Impact Industries Across Borders
Canadian companies are also under the gun. U.S. tariffs of 25 per cent on Canadian goods and Canada's retaliatory tariffs are upending trade. One business hit is Cluck Cluck's, a Canadian fried chicken chain. Its chicken is locally sourced, but its fridges and pressure fryers are American-made. Without the fryers, which are needed to cook bone-in pieces, new stores will only carry boneless chicken, and existing stores will stop selling the bone-in variety once they run out of their current supply, the company said.
CEO Raza Hashim said it was a hard decision to get rid of the fryers, but the company is keeping space for them in its kitchens in hopes of bringing them back if the tariffs are reduced. He also cautioned that more expensive fridges could lead to a rise in food prices. Still, Cluck Clucks is forging ahead with its U.S. expansion, and it's even sourcing American chicken if customers line up at its Houston, Texas, outlet.
In Spain, olive oil exporter Oro del Desierto sends 8% of its production to the U.S. The current 10% tariffs on European imports are being imposed on U.S. consumers, on that export manager Rafael Alonso Barrau says is "unfair." If the tariffs persist, the company has plans to reduce exports to the U.S. and will create a greater focus on its 33 other international markets.
Les Brand thinks the tariff regime has been implemented too far and too fast. Slower execution, he contends, might have given companies time to make adjustments.
Rick Woldenberg hingegen bleibt skeptisch. "We've just got to make the best decision we can given the information that we have," he said, "and then wait and see what happens." "I hate to say 'hope for the best' because I don't believe that hope is a strategy.
