Summary of "Tariffied! We Check in on Businesses" – The Indicator from Planet Money
Release Date: April 7, 2025
Hosted by Waylon Wong, Diane Woods, and Adrienne Ma

Introduction

In the April 7, 2025 episode of The Indicator from Planet Money, hosts Waylon Wong, Diane Woods, and Adrienne Ma delve into the far-reaching impacts of the latest wave of tariffs announced by the U.S. government. This significant increase in import taxes has left businesses across various sectors grappling with uncertainty, adjusting supply chains, and contemplating long-term strategies to navigate the evolving economic landscape.

Impact of the New Tariffs

Waylon Wong opens the discussion by highlighting the unprecedented scale of the recent tariff hikes:

Waylon Wong (00:32): "This is an extraordinarily steep and widespread increase in taxes, and it's not clear if tariff rates are here to stay or are some kind of opening salvo in trade negotiations."

Adrienne Ma expands on the breadth of the impact, emphasizing that virtually any American business importing goods from abroad is affected:

Adrienne Ma (00:55): "Chances are you are going to have to pay more tariffs."

The tariffs are not limited to major economies; even businesses importing from smaller countries face increased costs. Diane Woods humorously notes:

Diane Woods (01:09): "If you are on an island that is only penguins, you're going to be hit by these tariffs."

Case Studies of Affected Businesses

Bog Bag – Kimberly Vaccarella

The episode revisits Kimberly Vaccarella, founder and CEO of Bog Bag, an American company producing beach tote bags. Originally manufactured in China, Bog Bag faced a 20% tariff increase announced by the Trump administration in March. Kimberly had anticipated this would be the extent of tariff-induced challenges. However, following the latest announcements, the situation has worsened dramatically.

Kimberly Vaccarella (03:24): "I was nauseous and holding it in today. Still nauseous."

Unable to shift production to the U.S. due to a lack of domestic expertise and machinery, Kimberly sought alternatives in Southeast Asia, particularly Vietnam. The new tariffs imposed a staggering 46% on Vietnamese imports, nullifying the cost savings she had hoped to achieve.

Waylon Wong (03:40): "She recently put in a test order with the manufacturer in Vietnam she's hoping to work with. This new tariff announcement has thrown this math into disarray because Vietnam is getting a whopping 46% tariff."

The compounded tariffs on China (totaling at least 54%) make the economic viability of sourcing from Vietnam questionable.

Kimberly Vaccarella (04:27): "We're hoping that this is all a bad joke and, or a power play and then hopefully things will calm down. But we don't know. You know, it's very uncertain."

The timing is particularly challenging as Mother's Day approaches, accounting for 30% of Bog Bag's annual sales. Increased costs may dampen sales during this crucial period.

Waylon Wong (04:41): "These new tariffs could put a damper on that."

Woof – Daniel Harberger

The hosts also reconnect with Daniel Harberger, owner of Woof, a business specializing in dog toys and treats. Daniel expresses his frustration over the abrupt and severe tariff escalation:

Daniel Harberger (05:11): "It is a gut punch to have to pivot so quickly with such meaningful tariff increases with very little heads up."

Woof had been diversifying its supply chain across China, Southeast Asia, and Latin America, with Vietnam as a backup option. The newly imposed 46% tariffs on Vietnam render this plan ineffective, forcing Daniel to consider additional alternatives.

Daniel Harberger (05:54): "Now we have to rely on plan C and plan D and plan E and just roll with the punches."

Woof's exploration of new supply chain options includes Costa Rica, Colombia, Ecuador, and the Dominican Republic. However, moving production domestically remains financially unviable due to higher costs and inadequate manufacturing infrastructure in the U.S.

Daniel Harberger (06:44): "The really frustrating thing about all of these tariffs is that they're just a massive distraction."

Implications on Supply Chain and Manufacturing

The dramatic increase in tariffs has forced businesses to reassess their supply chain strategies. The necessity to relocate manufacturing to countries outside of China introduces significant complexity and cost. The uncertainty surrounding future tariff policies further complicates long-term planning for businesses like Bog Bag and Woof.

Changes to De Minimis Rules

Adrienne Ma introduces insights from Juan Pelorano, CMO of Swap Commerce, regarding changes to the de minimis threshold—a rule that exempts shipments valued at $800 or less from tariffs. The Trump administration's recent order eliminates this exception for goods originating from China and Hong Kong, substantially affecting e-commerce companies.

Juan Pelorano (08:54): "Any package that comes into the country you can say at a base level is going to get charged at least 30%."

This adjustment threatens the business models of companies like Temu and Shein, which rely on low-cost imports facilitated by the de minimis exemption. Furthermore, U.S.-based companies sourcing from China will face increased costs, with over half of surveyed businesses considering relocating their supply chains domestically.

Juan Pelorano (09:54): "While you might have the best intentions and potentially want to align yourself with the Trump administration and move things domestic, that's not something that you can do overnight."

Challenges of Domestic Manufacturing

Shifting supply chains to the U.S. poses significant challenges, particularly in industries like apparel manufacturing, where the U.S. lacks competitive infrastructure compared to Asian counterparts. The time and investment required to transition are substantial, making immediate large-scale relocation unlikely.

Conclusion and Future Outlook

The episode concludes with reflections on the long-term strategies businesses must adopt in response to escalating tariffs. While some companies may explore alternative international partners, others might invest in domestic production despite higher costs. The overarching uncertainty surrounding trade policies underscores the need for flexibility and resilience in business planning.

Key Takeaways:

• Significant Tariff Increases: Recent tariffs are the steepest and most widespread, affecting a broad range of industries.
• Supply Chain Disruptions: Businesses face challenges in diversifying supply chains due to high tariffs on alternative manufacturing countries.
• Elimination of De Minimis: Removing the de minimis exemption for China and Hong Kong imposes additional costs on e-commerce and domestic businesses.
• Domestic Manufacturing Challenges: Moving production to the U.S. is often not feasible in the short term due to higher costs and inadequate infrastructure.
• Uncertain Future: The persistence and evolution of tariff policies remain unclear, adding to the complexity of business decision-making.

This episode highlights the intricate interplay between government trade policies and business operations, illustrating the tangible consequences of tariffs on small and medium-sized enterprises.

Notable Quotes:

• Kimberly Vaccarella (03:24): "I was nauseous and holding it in today. Still nauseous."
• Daniel Harberger (05:11): "It is a gut punch to have to pivot so quickly with such meaningful tariff increases with very little heads up."
• Juan Pelorano (08:54): "Any package that comes into the country you can say at a base level is going to get charged at least 30%."