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Run a small or mid-sized business? If so, you’re 45% more likely to prefer moving in with your in-laws than having to deal with tariffs.
According to a survey by DHL Express, 45% of the 8,500 small and mid-sized business (SME) owners surveyed said they would rather have their in-laws move in than have to worry about international trade barriers and business regulations.
When asked what they are most concerned about this year regarding the global economy, 47% said tariffs. Only 13% said Brexit was a problem and 7% said the new Nafta was top-of-mind.
Fifty-six percent said Trump’s tariffs had a “moderate” or “significant” impact on their business operating costs.
International trade barriers tend to be seen as protectionist policies. In theory, they are designed to protect local labor. Trump said that his trade policies against China and Europe, in particular, were designed to protect important manufacturing jobs like automotive and steel.
Free market thinkers hate tariffs because it usually forces companies to pay more for locally sourced materials rather than look abroad for the same, or similar materials, at a lower cost. Tariffs are meant to create an equilibrium between domestic and foreign prices for goods.
Tariffs hurt Republicans in November when dozens of new, farm district Democrats were sworn in for the first time. Although the focus on freshman Democrats tends to go towards women like Ilhan Omar, a House Representative for the Fifth District of Minneapolis, many of the newcomers came from agricultural districts whose voters got behind Democrats that criticized Trump’s trade war with China.
China has since lifted its restrictive tariffs on U.S. soybeans, for instance. But their tariff policy, designed to hurt Trump in the midterm elections, helped usher in a “Blue Wave” against the Republican majority.
DHL Express survey respondents said that changes to trade rules are more than a nuisance. Tariffs have caused some companies to look for new suppliers or, at the very least, reconfigure their sales estimates for the year because of tighter profit margins.
Beyond choosing to live with the in-laws, 31% said they would rather give up their smartphone for a month; 19% said they would rather get audited by the IRS and 15% said they would rather get 100 scathing business reviews.
Judging by the low response of the more serious headwinds — IRS audits and nasty reviews — tariffs are not as bad as people thought.
Since the third quarter of 2018, investors have been hearing companies cite tariffs as a potential squeeze on the bottom line.
“The earnings season is coming in healthier than people expected three weeks ago,” says Scott Clemons, chief investment strategist for Brown Brothers Harriman. “We are not seeing an earnings recession.”
One takeaway from the DHL Express survey regarding trade is Nafta 2.0, which Trump renamed the U.S. Mexico & Canada Agreement (USMCA).
Fifty-five percent of DHL’s respondents said both Canada and Mexico are a top priority for their business this year. But there is a chance that the USMCA experiences some near-term drama in Congress. House Speaker Nancy Pelosi said they will not sign the deal until Mexico complies with U.S. labor laws.
AFL-CIO President Richard Trumka says Democrats are in agreement with him that Mexico needs to remove various measures keeping its labor pool cheap, MarketWatch reported on Monday.
On the same day, Iowa Senator Chuck Grassley wrote in a WSJ op-ed that USMCA is dead-on-arrival unless Trump removes steel and aluminum tariffs against Mexican and Canadian companies.
U.S. Trade Representative Robert Lighthizer won better access in Canada for U.S. dairy, poultry, and eggs, a good deal for American farmers.
USMCA also contains stronger protections for intellectual property and safeguards against the protectionist impulses of legislators and bureaucrats. For instance, it bans governments from regulating that cloud and data services must be domiciled in any one of three countries.
Writing on the Fox News website on Tuesday, economist Peter Morici said the reason for steel and aluminum tariffs is to stop China from circumnavigating the globe with its subsidized steel and aluminum oversupply, shipping it to the U.S. via Mexico.
The new deal requires a 75% North American content required in autos in order to qualify for duty-free import status. It used to be 62.5%.
Similar rules of origina apply for textiles, chemicals, glass, and optical fiber in order to block a potential back door entry to China to duty-free trade with the U.S.
For the American autoworker unions, USMCA requires that 40% to 45% of the labor force in that industry earn $16 an hour. That’s a bonanza for Mexican auto workers and fits in line with new Mexican president Andres Manuel Lopez Obrador’s push to pay Mexicans more.
If USMCA is not signed, it will not only be a headwind for markets but will turn off a large portion of the electorate running SMEs.
One last takeaway from the German delivery giant: 30% of DHL’s survey respondents said they’ve seen a 34% to 100% increase in international e-commerce sales between 2018 and 2017. They estimated that growth is their e-commerce business will continue this year.
April 30, 2019 at 01:14PM
Forbes – Entrepreneurs