There’s plenty of news stories like the above-linked Reuters piece with all kinds of dire warnings about rising prices for businesses and consumers alike when tariffs rise on Chinese imports. Not mentioned in any of them are the huge opportunities that this creates for other suppliers, including established companies and entrepreneurs right here in the U.S. So that’s the focus of this post.
Yeah, prices for products made in China are going to rise substantially. No surprise there, and it’s exactly what we want to happen when we slap tariffs on imports. The purpose is not to tax consumers but to provide incentive to make products domestically. If you’re a business owner, what do you do if your competitor suddenly finds it necessary to raise his prices? You start licking your chops because you know that you suddenly have a big competitive advantage and that you’re going to make a killing.
What do you do if you’re an aspiring entrepreneur? You see an opening to start a business and start supplying a product where cheap imports had previously shut you out of the market. Let’s look at the example cited in the article – Samsonite luggage that’s currently made in China and is now subject to a 25% tariff. Maybe you’re a company that makes thermo-formed parts for someone – perhaps interior parts for the auto industry. Here’s an opportunity to diversify and provide thermo-formed luggage “clam shells” for Samsonite, a customer that you didn’t have a chance with previously. Or maybe you’re a company that makes small casters for other applications, and now you have a chance to supply Samsonite with casters. Heck, maybe you’re an even smaller company that just makes little injection-molded parts. Now you have an opportunity to supply that caster-maker with the little polyurethane injection-molded wheels used in those casters.
Steven Smith, owner of Luggage & Leather Depot in Bethesda, Maryland, said a jump in tariffs to 25 percent “would absolutely kill our business.” He said his sales are off as much as 20 percent after he raised prices to reflect the higher costs.
The fact is that every retailer of Samsonite luggage (and other brands made in China) are faced with the same issue, and people still need to buy luggage somewhere. Those businesses that don’t adapt and gain a competitive advantage by finding new, cheaper sources, will likely be “killed.” The others, the ones who immediately start looking for new suppliers and different brands that won’t be subject to the tariffs on Chinese imports, will be the ones who thrive.
This same story applies to thousands of products currently sourced from China. The opportunities created for domestic manufacturers are suddenly almost limitless. It was easy for everyone to move their production to new suppliers in China. It won’t be that hard to now source them from somewhere else. Those with the drive and imagination to adapt will be big winners in this new post-China environment.