The Indicator from Planet Money - Tariffied! We check in on businesses

Episode Date: April 7, 2025

Trump's wave of tariffs is here. Just about everyone in the world of business is still processing exactly what this means. It's a massive, widespread increase in taxes. Today on the show, we hear from business people we've had on the show who tell us what they're doing in response to the latest, and largest, wave of tariffs. Related episodes: Trump's contradictory trade policies (Apple / Spotify) How's ... everybody doing? (Apple / Spotify) How Shein became a fast-fashion behemoth (Apple / Spotify) For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org. Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter.See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. This is the indicator from Planet Money. I'm Waylon Wong. And Diane Woods. And I'm Adrienne Ma. After last week's tariff announcement, almost anyone involved in business is still processing the news. This is an extraordinarily steep and widespread increase in taxes.

And it's not clear if tariff rates are here to stay or are some kind of opening salvo in trade negotiations. And that's before we even start on retaliatory tariffs from other countries. Yeah. And if you are an American business importing goods from another country, whether it's China, Switzerland, Nicodagua, I mean, really just throw a dart at the map. Chances are you are going to have to pay more tariffs. If you are an island that is only penguins, you're going to be hit by these tariffs. Even the penguins, that's true. Throw a dart at a penguin and that penguin will be tariffed. Now, we have spoken to a lot of business people on our show ahead of these anticipated tariffs. So how are they reacting? now that the big tariffs are here. Today on the show, they tell us how they're feeling about the latest and largest wave of tariffs. So we're focusing on how these tariffs are being felt by businesses.

And we're going to start off by revisiting with a couple of business owners that we talked to previously on the show. I talked to Kimberly Vackerella. She thought she was past the worst of the tariff drama. She is the founder and CEO of Bog Bag. It's an American company that makes these boxy tote bags you can take to the beach. And so we talked to Kimberly for an episode in December, and her bags are made in China. And you know the additional 20% tariff on China that Trump had announced in March? Kimberly thought the tax would not go higher than that.

And then Liberation Day happened. I caught up with her the day after. No, I was with my husband, who also works with us here at Bogbag. So we were watching it together in disbelief. I was nauseous and holding it in today. still. Nauseous. That's strong. I know. And making these bags in the U.S. isn't an option for Kimberly. She told us there just isn't the expertise or machinery domestically. So she's been looking for a factory in Southeast Asia, somewhere outside of China. And she recently put in a test order with the manufacturer in Vietnam she's hoping to work with.

This new tariff announcement has thrown this math into disarray because Vietnam is getting a whopping 46% tariff that could wait. about a lot of the savings Kimberly was hoping to get by working with the factory outside of China. Right, because the new tariff on China, when you add it together with the previously announced tariff, that's at least 54%, which is not far off from the Vietnam rate. And these numbers could change again. Kimberly, of course, wants them to go lower. And we're hoping that this is all a bad joke or a power play. And then hopefully things will calm down. down, but we don't know. You know, it's very uncertain. And in the very short term, Mother's Day is coming up.

That typically brings in 30% of bog bag sales for the year. Kimberly says these new tariffs could put a damper on that. So it looks like a lot of moms will be getting homemade gifts this year. A little macaroni necklace. All right. Next, we're going to jump to Daryon for another business owner that we've spoken to on the show before. Yeah, a few weeks ago, we heard from Daniel Harberger. He runs a dog toy and treat business, woof.

Daniel, we meet again. We meet again under interesting circumstances. I called him up the day after the big tariff announcement from President Trump. Daniel was frustrated. It is a gut punch to have to pivot so quickly with such meaningful tariff increases with very little heads up. He knew the tariffs were coming, but not of this magnitude. And his whole strategy had been to diversify his supply chain, right? Kind of like the bog bag strategy, getting dog toys and treats made in China, Southeast Asia, Latin America.

Yeah. Vietnam was actually his plan B too. Probably a lot of people's plan B. But with that enormous 46% tariff announced for Vietnam that you mentioned, Whalen, that country is looking unviable. That was definitely one of our backup options. And now we have to rely on plan C and Plan D and Plan E and just roll with the punches. Plante C, Costa Rica and Colombia. Is it named after the countries? Yes.

Plan E is Ecuador. The Dominican Republic, Ecuador. Literally, as we're talking on the phone, three of my team members are on planes to South America to come up with good alternative supply chain options. We've got to jump through some hoops and hold our breath and see what happens. Now, it's worth mentioning Daniel does have some production in the U.S., but it's a lot more expensive here.

He says there isn't the infrastructure for manufacturing that's affordable for the business. Overall, Daniel seemed like he just didn't want to be thinking about tariffs and alternative factories so much. The really frustrating thing about all of these tariffs is that they're just a massive distraction. We have to shift all of our attention to swapping countries and changing supply lines and figuring out what customers we're going to lose and what customers we're going to keep. that's the same work that almost every other company in the United States is going to have to face somehow now. Thank you so much for sharing your insights. I hope we can meet again under circumstances that are perhaps less rocky. Yeah, well, hopefully we can do a pet segment one day about all the amazing things about four-legged friends.

Okay, AJ, and what do you have? I have reached out to not one business owner, but actually somebody who works with a lot of small and medium-sized business owners. My name is Juan Palarano, and I'm the CMO of Swap Commerce. So Juan's company Swap works with businesses, helping them with the e-commerce part of their operations. About 80% of our brands are apparel brands. And these businesses he works with are going to be affected by Trump targeting what are called de minimis goods, which I believe is Latin for, it's so tiny, don't worry about it. That's what Julius Caesar said about the height of March. Yes.

That got him. Don't fact check me on that, okay? Just thinking about the Roman Empire. Don't worry about it. So under the current rules, a shipment of goods worth $800 or less, it's considered de minimis, and therefore not actually subject to tariffs. This exception has been a huge reason why Chinese-based companies like Timo and Shian have been able to sell their clothing in the U.S. super duper cheap. They don't have to pay import tax. That is a huge advantage.

But along with all the... tariffs that were rolled out last week, Trump also signed an order stating that in May, this de minimis exception will be eliminated for goods coming from China and Hong Kong. I mean, that is huge for Timu and Shian's business models. Totally. I mean, they'll have to rethink how they sell to U.S. customers. But importantly, this change would also hit U.S.-based companies that source goods from China. And Juan says this is a huge deal.

Any package that comes into the country, you can say at a base level, is going to get a charge at least 30% more. Recently, Juan's company Swap surveyed about 100 U.S. businesses asking, how are these tariffs going to impact you? Many said they could actually threaten the survival of their very business. And that's why a little over half the businesses they asked said they're considering moving their supply chains to the U.S. In the words of Trump, if you don't want to pay the tariffs, move your factories to the U.S.

That is what he wants, right? But Juan says he's kind of skeptical that this. will happen en masse. While you might have the best intentions and potentially want to align yourself with the Trump administration and move things domestic, that's not something that you can do overnight. Moving a supply chain from China to the U.S. could take years. And Juan says this is especially because when it comes to things like clothing manufacturing, the U.S. is way behind Asia.

And a lot of things just won't move to the U.S. I'm thinking things like, I don't know, cinnamon or mess banana plantations. Vanilla beans. Yeah. So what I'm very curious to know is how this plays out and what's the strategy long term. This episode was produced by Cooper Katz-McKim. It was engineered by Cina LaFredo and fact-checked by Sierra Juarez. Kate Kinan is her editor and the Indicator is a production of NPR.