Small retailers ‘vacation from hell’ seek clarity on Trump tariffs

When Matt Kubancik, a small business owner in Louisville, Kentucky, cast his ballot for Donald Trump in November, he was hoping that the Republican nominee’s return to the White House would provide a spark to the economy and lead to reduced prices for gas and groceries.

Instead, the first half-year of Trump’s second term in the White House has been more like a “vacation from hell,” Kubancik said. Guardian Baseball, the baseball goods company he co-founded in 2018, mostly relies on manufacturers in China, which is locked in a full-blown trade war with the U.S. 

It didn’t take long for Kubancik to regret his vote. After 20 years as a Republican, Kubancik changed his registration to Democrat last month.

“I’ve been a registered lifelong Republican. I’ve supported independent candidates and Democratic candidates in the state of Kentucky before, but this made it enough to switch parties,” Kubancik said in an interview. “I don’t feel the country is headed down the right path.”

While the stock market has bounced back from a brutal start to the year, thanks largely to the Trump administration pausing its most extreme tariffs announced in April, small retailers that rely on imports to stay afloat are stuck in no-man’s land. Tariffs from China are still at a historically high rate of 30%, coming down at least temporarily from Trump’s prior announcement of 145% after the two countries reached a 90-day truce on May 12.

The big concern is what happens when that three-month agreement expires in August. Both countries have already accused each other of violating the preliminary trade agreement.

Guardian Baseball sells its products on Amazon and in brick-and-mortar stores like Walmart. Even at a rate of 30% for goods from China, its costs are significantly higher than they were before Trump took office. Some small businesses have stopped ordering more inventory or are hitting pause on new product development while they wait to see how the situation evolves. Others have been forced to raise prices because they can no longer afford to digest higher import costs.

The struggles faced by businesses like Guardian Baseball don’t necessarily show up in the data.

According to a survey of 270 business leaders released on Monday from Chief Executive Group, less than 30% of CEOs forecast either a mild or severe recession over the next six months. That’s down from 46% who said the same in May and 62% in April.

And a quarterly report published Tuesday from the National Federation of Independent Business showed that optimism increased slightly in May from April, though “uncertainty is still high among small business owners,” NFIB Chief Economist Bill Dunkelberg said in the release.

U.S. and Chinese officials late Tuesday concluded two days of trade talks in London. Under the preliminary agreement, the U.S. would apply 55% tariffs on Chinese goods, Trump said in a post on Truth Social. The full details of the agreement have yet to be released. Trump said the deal is subject to approval by his administration and China President Xi Jinping.

“President Xi and I are going to work closely to open up China to American Trade,” Trump wrote in a post. “This would be a great WIN for both countries!!!”

Commerce Secretary Howard Lutnick told CNBC’s “Money Movers” on Wednesday that U.S. tariffs on Chinese imports won’t change from their current levels, even as a trade deal between Washington and Beijing has yet to be finalized.

The White House didn’t respond to a request for comment.

Like Kubancik, Alfred Mai says his business has mostly been in wait-and-see mode during the trade dispute, despite the 90-day pause announced in May.

Mai, co-founder of card game company ASM Games, said he grew increasingly worried last month as he thought about the “huge” inventory order he needed to place in time for the crucial holiday shopping period. He told his manufacturing partners to expedite production and speed shipments to the U.S. as fast as possible.

“I have no idea what the situation will look like after the 90-day pause, so I would rather take a gut punch now than to potentially be wiped out in the future by a massive tariff increase,” Mai said in an email.

The order is slated to arrive just as the short-term agreement between the U.S. and China ends. But if rates increase before his shipment makes it stateside, Mai said he may not be able to afford the tax needed to take ownership of his “vital holiday inventory.”

Prices are going up regardless. With a tariff on China of 30%, Mai said he’ll likely have to raise prices by 10% to 20% and hope that consumers are willing to pay.

At Down Under Bedding, which is based just south of Toronto in Canada, Tony Sagar says “everything’s on hold.”

Sagar’s company sources some of its goose down pillows and duvets from China and is considering discontinuing some of its lower-margin items because it can no longer to afford to compete with cheaper rivals.

“We’ve basically stopped any kind of importing or planning,” Sagar said in an interview.

Last month, Sagar said he was forced to refund a customer who purchased a $150 duvet but refused to pay $277 in additional tariff charges. He ran into the same issue last week after a shopper ordered a $595 duvet that came with a tariff bill of almost $1,200. Sagar said he now contacts “every single U.S. customer” after they place an order to make sure they’re willing to pay extra duties.

In addition to the China levy, the Trump administration placed a 25% tariff on goods from Canada.

“Any time I hear that ding from Shopify, I have to worry about where the order is coming from,” Sagar said.

Greg Shugar, who operates multiple apparel businesses, said the problem with trying to plan for the future is that policy decisions are “all about Trump’s ego.”

“If we understood the true motivation behind the administration we’d know where to go or what to do,” said Shugar, co-owner of women’s clothing company Carrie Amber Intimates and men’s accessory maker Beau Ties Vermont.

Shugar said Trump’s shifting position on tariffs has left him paralyzed on whether or not to move production out of China.

Last month, he joined a group of other small business owners at an event organized by the National Retail Federation, with a plan to bring their concerns to the White House. The group met with a representative from the Trump administration for about 30 minutes.

Shugar said he left feeling more pessimistic about the tariff situation than before he walked in the door.

“We’re not going to eat a 30% tariff and neither is the consumer,” Shugar said. “So there’s actually no winners, there’s only losers with these tariffs.”

After Walmart warned last month that it will have to raise prices, Trump told the retail giant to “eat the tariffs.”

Kubancik of Guardian Baseball said his company “got a big break” last year when it signed a deal with Walmart to put its products in 3,000 stores.

Now he’s delaying inventory orders from China and taking a more conservative approach to coming up with new products, because the company can’t afford to take on added risk.

“It felt like we finally made it as a brand,” Kubancik said. “And now it feels like a plane nosediving.”

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