Tariff threats cause economic uncertainty
Businesses hitting pause on hiring, investment
By: Paul Davidson
USA Today
..... President Donald Trump last week [02/04/2025] delayed the 25% tariff he was set to impose on imports from Canada and Mexico, providing a 30-day reprove for American retailers and manufacturers. but the uncertainty generated by the threat, the 10% tariff he slapped on Chinese imports, and prospect of additional tariffs are already affecting the U.S. economy as companies pause hiring and investment.
.....
"The lingering threat of substantial new tariffs and possible retaliation from Canada and Mexico on U.S. exports will case many businesses small and large to hold back more on hiring and investing than they would have otherwise due to the elevated uncertainty," said Scott Anderson, chief U.S. economist of BMP Capitol Markets.
..... Two-thirds of American executives said they were more stressed heading into 2025 than they were a year earlier, according to an Online survey of 1,000 executives at companies with at least 10 employees. And 47% of the company leaders said economic uncertainty was their biggest worry. The poll was conducted November 25 to December 9, 2024, by Wakefield Research for Sentry, a business insurance company.
..... Forecasters say Trump's tariffs will take a toll on the economy even if they're not passed along to consumers through higher prices.
..... For Stephenson's of Elkhart, a 92-year-old family-owned clothing store in Indiana, the trade war is the pandemic and a recent port strike that jeopardize apparel shipments, said owner Danny Stephenson.
..... "It seems like the last five years we've had to come back form one thing after another," he said.
..... The store, which specializes in garments for weddings and special events, buys 50% to 60% of its products from manufacturers that source their products from China, Stephenson said.
.....
He hopes the makers will at least absorb half the tariff cost. He said business already has dealt with sharply rising utility bills and pandemic-related worker shortage that pushed up labor costs, both of which narrowed his profit margins.
..... Still, "in an inflationary environment, we're not really in a position" to raise prices, Stephenson said, noting he competes with big-box chain stores that receive volume discounts.
..... "At least initially, we would try to absorb it," he said.
..... To offset the higher costs, he said he likely would have to scale back price promotions and put off planned renovations of the downtown institution.
..... Across the economy, such delays could mean a softer job market and more slowly growing economy.
..... Even if Canada and Mexico reach a deal on border reinforcement, the risk of tarries for both countries is likely to hover until they join the U.S. in a review of their 5-year-old free trade deal in mid-2026, Goldman Sachs said in a research note.
..... Chinese officials said starting Monday, [02/10/2025] the country would hit the U.S. with retaliatory tariffs of 15% on coal and 10% on crude oil, farm equipment and some vehicles.
..... Moreover, additional tariffs on imports from China, the European Union and possible other countries are likely, according to Goldman Sachs and BMO Capitol Markets. Some would address national security concerns while others would be aimed at closing the U.S. trade gap with other nations, BMO wrote in a note to clients.
..... Looking at inflation, Oxford Economics estimates Canadian, Mexican and Chinese tariffs alone would raise the Federal reserve's preferred annual inflation measures to 3% by year's [2025] end - nearly a percentage point above where it would have been without the tariffs. Goldman and Moody's analytics expect a half-percentage-point bump to inflation this year. [2025]
.....
Oxford also expects the economic to grow just 1.4% this year, [2025] well below the 2.6% gain it had expected, if the tariffs on china, Canada and Mexico are imposed and remain in effect.
.....
Margaret's Boutique, a women's clothing shop in Decorah, Iowa, buys about 15% of its dresses, sportswear, jewelry, shoes and other items from Canada and 80% from china, said owner Kelli winchester.
..... Winchester said she likely can absorb the 10% fee on Chinese imports or make it up on other products. But a 25% duty on Canadian goods would have a deeper impact.
.....
"I can either raise my prices or take less money" in profits, Winchester said. Under the latter scenario, she said, "I'll have less money to buy clothing."
..... Brand-name goods have thinner profit margins, she said: "I have no choice but to pass (the tariff) along" to customers.
..... Her suppliers agreed not to pass on the tariff costs to her this year, [2025] she said, but she's worried she eventually could be hit by the higher fees or that shoppers coping with grocery price increases due to tariffs will spend less on clothing.
..... winchester planed to hire additional employees this month [02/2025] to handle the brisk summer business. She's holding off for now.
..... In some industries, the trade battle is inflamed by political tensions.
.....
Midwest Barrel Company of Louisville, Kentucky, sells barrels - after they're use to age pour on - to whiskey makers in 30 countries that distill their products into the containers for enhanced flavor, said company CEO Jessica Loseke.
..... Loseke fears the barrels could be socked with retaliatory tarries by China, Canada and Mexico. She's also conceder about a 50% tariffs by the European Union on U.S. whiskey that's set to take effect March 31 [2025] in retaliation for U.S. tariffs on EU imports during Trump's first term. Meanwhile, she noted, Canadian officials are pulling American bourbon and other alcohol form store shelves due to their ire over Trump's proposed tariffs there.
..... Both developments will likely slow U.S. bourbon sales in an already weak market, Loseke said. That would further dampen her sales, she said.
..... Loseke also has been affected more directly: A Canadian whiskey maker has suspended its barrel orders from the Midwest.
..... "They said they didn't want to do business with a company in a 'red' state" that helped elect Trump, Loseke said.
..... As a result of the turmoil, Loseke has shelved plans to replace two staffers who recently left the 22-employee company.
..... "What these tariffs do is they create a lot of uncertainty across the global market,' she said.