Todd Adams, who runs a stainless steel tubing supply company in California, told “Marketplace” on Monday about two threats he and other small businesses are facing right now: Potential shortages of materials and other goods, thanks to President Trump’s tariffs, and higher costs, also thanks to the tariffs.
It wasn’t too long ago that importers were facing similar challenges. Early in the pandemic, you might remember when supply chains were snarled.
Businesses and consumers also had to navigate shortages, which eventually led to higher prices.
Could some of the lessons importers learned during the pandemic be applied to tariffs?
Up until this week, Ken Giddon, the owner of Rothmans, a men’s clothing store in New York, would order 20 suits a week from one of his suppliers in China.
But on Monday? He bought 200.
Giddon said one reason was to get them in before tariffs on Chinese imports take effect. Another was to buy himself some time to find other vendors in different countries.
All the supply chain congestion that happened during the pandemic taught Giddon how important it is to have multiple suppliers, he said.
“The economic world always evolves. So if one road is blocked, another one will open up,” he said.
That said, the pandemic also taught retailers that having too much inventory can be a drag. Especially if the economy and consumer demand slow down.
“If we frontload today, and demand drops, let’s say, in the next two or three months, then we’re stuck with all this inventory that we then have to discount,” said Jason Miller, a professor of supply chain management at Michigan State University.
Loading up on inventory also requires businesses to shell out a lot of cash up front, said Nicole DeHoratius, a professor at Columbia Business School.
“Firms right now are trying to make the decision: ‘Do I want to tie up that capital by having excess inventory in my system? Or am I willing to endure shortages?’” she said.
And right now, many businesses don’t even want to make that decision.
“You know, let’s not change anything. Let’s just hold tight to see what happens with the dust settling,” said Ben Coates, the CEO of Revel Bikes in Colorado.
He said there are just too many unknowns.
“Do the tariffs stand? How do you manage them? Do we stay the course and not worry about it? Do we move supply from Taiwan to Vietnam because the tariffs are lower?” he said.
Coates said any lessons he learned during the pandemic don’t apply to those kind of questions.
