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Impact of Billions of Dollars in Tariffs

Harsh Khurana - Founder, CEO @ Cultivate

August 12 2020

In our last blog we discussed where the money goes when we spend on e-commerce platforms without knowing where the goods are made or manufactured. Today, we’re going to dive deeper on how tariffs negatively impacted our small businesses more than they helped.

Since July 2018, the US has implemented import taxes on $550 billion worth of goods at various ranges from 7.5% to 25% particularly from China in hopes of erasing our trade deficit with China. While it may seem that easy for us to erase the trade deficit, it really is not, but why? Well, globalization has occurred at an exponential rate as we gain access to better transportation and infrastructure to move people and goods across borders with ease. That means our businesses import raw materials which they cannot always find domestically in order to produce goods we consume through physical and online shopping.

The tariffs imposed on these raw materials lead our small businesses and manufacturers to make drastic changes that impacted our economy poorly in a multitude of ways. First, they had to make decisions on what to do with their increased costs to maintain inventory - should they raise prices and pass those costs down to US consumers, should they let go of their hardworking staff and stop hiring, or should they completely outsource their manufacturing which would actually make our trade deficit worse? As a small business owner, you wear multiple hats and manage cash flow on a day-to-day basis that is heavily impacted by the smallest changes, let alone large tariffs.

The larger businesses with global supply chains have much more power in what they can do to alleviate themselves of these costs, including moving their supply chains to a different country and investing there, not bringing those jobs back home. This may not seem like a big deal, but small businesses make up 99.7% of US businesses and account for nearly 50% of US jobs; they hire at home.

What’s the answer?

The US is one of the most developed countries in the world and, per economists, developed countries only generate incremental growth from technological advancements. Technological advancement doesn’t mean a new iPhone application to send our friends memes or make funny videos. It means we should be focused on advancing our manufacturing technology which can lead to cheaper cost of production through innovation, more jobs, and less reliance on outsourcing. Technology doesn’t eliminate jobs, it just makes us more productive and moves us up the value chain in what we do best as Americans, innovate.

At Cultivate, our mission is to help these small businesses and manufacturers generate sales so they can continue to give back to our economy at a higher scale, as discussed in our mission statement. Use our shop page or our Chrome extension to see US made alternatives to goods you purchase regularly.