Tariffied! We check in on businesses

Summary

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

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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.

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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%."

Transcript

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[Waylon Wong]

This is the indicator from Planet Money. I'm Waylon Wong.

[Diane Woods]

I'm Diane Woods.

[Adrienne Ma]

And I'm Adrienne Ma.

[Waylon Wong]

After last week's tariff announcement, almost anyone involved in business is still processing the news. 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. And that's before we even start on retaliatory tariffs from from other countries.

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Yeah.

[Adrienne Ma]

And if you are an American business importing goods from another country, whether it's China, Switzerland, Nicaragua, I mean really, just throw a dart at the map. Chances are you are going to have to pay more tariffs.

[Diane Woods]

If you are on an island that is only penguins, you're going to be hit by these tariffs.

[Waylon Wong]

Penguins. That's true. Throw a dart at a penguin and that penguin will be tariffed.

[Diane Woods]

Now we have spoken to a lot of business people on our show ahead of these anticipated tariffs. So how are they reacting now that the big tariffs here today on the show? They tell us how they're feeling about the latest and largest wave of tariffs.

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[Adrienne Ma]

These tariffs are being felt by businesses and we're going to start off by revisiting with a couple of business owners that we talked to previously on the show.

[Waylon Wong]

I talked to Kimberly Vaccarella. She thought she was past the worst of the tariff drama. She is the founder and CEO of Bog Bag. It's an American company that makes these boxy tote bags you can take to the beach.

[Diane Woods]

And so we talked to Kimberly for an episode in December, and her bags are made in China.

[Waylon Wong]

And, you know, the additional 20% tariff on China that Trump had announced in March. Kimberly thought the tax would not go higher than that. And then Liberation Day happened. I caught up with her the day after.

[Kimberly Vaccarella]

No, I was with my husband, who also works with us here at Bog Bag. So we were watching it together in disbelief. I was nauseous and holding it in today. Still nauseous.

[Diane Woods]

That's strong.

[Waylon Wong]

I know. And making these bags in the US Isn't an option for Kimberly. She told us there just isn't the expertise or machinery domestically. So she's been looking for a factory in Southeast Asia, somewhere outside of China, and 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. That could wipe out a lot of the savings Kimberly was hoping to get by working with the factory outside of China.

[Adrienne Ma]

Right. Because the new tariff on China, when you add it together with the previously announced tariff, that's at least 54%, which is not far off from the Vietnam rate.

[Waylon Wong]

And these numbers could change again. Kimberly, of course, wants them to go lower.

[Kimberly Vaccarella]

And 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, and in.

[Waylon Wong]

The very short term, Mother's Day is coming up. That typically brings in 30% of bog bag sales for the year. Kimberly says these new tariffs could put a damper on that.

[Adrienne Ma]

So it looks like a lot of moms will be getting homemade gifts this year.

[Waylon Wong]

Little macaroni necklace. All right, next we're going to jump to Darian for another business owner that we've spoken to on the show before.

[Diane Woods]

Yeah. A few weeks ago, we heard from Daniel Harberger. He runs a dog toy and treat business. Woof. Daniel, we meet again.

[Daniel Harberger]

We meet again under interesting circumstances.

[Diane Woods]

I called him up the day after the big tariff announcement from President Trump. Daniel was frustrated.

[Daniel Harberger]

It is a gut punch to have to pivot so quickly with such meaningful tariff increases with very little heads up.

[Diane Woods]

He knew the tariffs were coming, but not of this magnitude.

[Waylon Wong]

And his whole strategy had been to diversify his supply chain. Right. Kind of like the bog Bag strategy, getting dog toys and treats made in China, Southeast Asia, Latin America.

[Diane Woods]

Yeah, Vietnam was actually his plan B too.

[Waylon Wong]

Probably a lot of people's Plan B.

[Diane Woods]

But with that enormous 46% tariff announced for Vietnam that you mentioned, Wayland, that country's looking unviable.

[Daniel Harberger]

That was definitely one of our backup options. And now we have to rely on plan C and plan D and plan E and just roll with the punches.

[Diane Woods]

Plan C, Costa Rica and Colombia.

[Waylon Wong]

Is it named after the countries?

[Diane Woods]

Yes.

[Waylon Wong]

Plan B is Ecuador.

[Diane Woods]

The Dominican Republic. Ecuador.

[Waylon Wong]

Literally.

[Daniel Harberger]

As we're talking on the phone, three of my team members are on plan to South America to come up with good alternative supply chain options. We've got to jump through some hoops and hold our breath and see what happens.

[Diane Woods]

Now, it's worth mentioning Daniel does have some production in the US but it's a lot more expensive here. He says there isn't the infrastructure for manufacturing that's affordable for the business. Overall. Daniel seemed like he just didn't want to be thinking about tariffs and alternative factories so much.

[Daniel Harberger]

The really frustrating thing about all of these tariffs is that they're just a massive distraction. We have to shift all of our attention to swapping countries and changing supply lines and figuring out what customers we're going to lose and what customers we're going to keep. That's the same work that almost every other company in the United States is going to have to face somehow.

[Diane Woods]

Now, thank you so much for sharing your insights. I hope we can meet again under circumstances that are perhaps less rocky.

[Daniel Harberger]

Yeah, well, hopefully we can do a. We'll do a pet segment one day about all the amazing things about four legged friends.

[Waylon Wong]

Okay, Adrian, what do you have?

[Adrienne Ma]

I have reached out to not one business owner, but actually somebody who works with a lot of small and medium sized business owners.

[Juan Pelorano]

My name is Juan Pelorano and I'm the CMO of Swap Commerce.

[Adrienne Ma]

So Juan's company, Swap, works with businesses, helping them with the E commerce part of their operations.

[Juan Pelorano]

About 80% of our brands are apparel.

[Adrienne Ma]

Brands and these businesses he works with are going to be affected by Trump targeting what are called de minimis goods, which I believe is Latin for eh. It's so tiny. Don't worry about it.

[Waylon Wong]

That's what Julius Caesar said about the eyes of Martians. Yes, that got him.

[Adrienne Ma]

Don't fact check me on that. Okay.

[Waylon Wong]

Just thinking about the Roman Empire.

[Diane Woods]

Don't worry about it.

[Adrienne Ma]

So under the current rules, a shipment of goods worth $800 or less is considered de minimis and therefore not actually subject to tariffs. This exception has been a huge reason why Chinese based companies like Temu and Shein have been able to sell their clothing in the US super duper cheap.

[Diane Woods]

Right? They don't have to pay import tax.

[Adrienne Ma]

That is a huge advantage. But along with all the tariffs that were rolled out last week, Trump also signed an order stating that in May this de minimis exception will be eliminated for goods coming from China and Hong.

[Waylon Wong]

K. I mean that is huge for Temu and Shein's business models.

[Adrienne Ma]

Totally. I mean they'll have to rethink how they sell to US Customers. But importantly, this change would also hit U S based companies that source goods from China. And Yuan says this is a huge deal.

[Juan Pelorano]

Any package that comes into the country you can say at a base level is going to get charged at least 30%.

[Adrienne Ma]

More recently, Juan's company swap surveyed about 100 US businesses asking how are these tariffs going to impact you? Many said they could actually threaten the survival of their very business. And that's why a little over half the businesses they asked said they're considering moving their supply chains to the US.

[Diane Woods]

In the words of Trump, if you don't want to pay the tariffs, move.

[Adrienne Ma]

Your factories to the US that is what he wants. Right. But Juan says he's kind of skeptical that this will happen en masse.

[Juan Pelorano]

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.

[Adrienne Ma]

Moving a supply chain from China to the US could take years. And Juan says this is especially because when it comes to things like clothing manufacturing, the US Is way behind Asia.

[Diane Woods]

And a lot of things just won't move to the US I'm thinking things like, I don't know, cinnamon or mess. Banana plantations, Vanilla beans. Yeah. What I'm very curious to know is how this plays out and what's the strategy long term.

[Waylon Wong]

This episode was produced by Cooper Katz McKim. It was engineered by Sina Lofredo and fact checked by Sierra Juarez. Kate Concannon is our editor and the indicator is a production of npr.

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