The Journal. - How One Business Owner Is Getting Ahead of Trump's Tariffs

Episode Date: December 3, 2024

As President-elect Donald Trump lays out his plan for increasing tariffs on goods made in China and Mexico, some U.S. businesses are stockpiling. Small business owner Jason Junod explains what he thinks the impacts of the proposed tariffs will be, and why he hasn’t been able to go fully “Made in America.” Further Reading: -American Companies Are Stocking Up to Get Ahead of Trump’s China Tariffs  -Trump Fires Salvo on North American Trade Pact  Further Listening: -China, an Alabama Business and a 20-Year Battle  -Why China Is Risking a Trade War  Learn more about your ad choices. Visit megaphone.fm/adchoices

Jason Juno is the owner and founder of a skincare company called Bear Botanics. He sells scrubs and body brushes, and two of his products he imports from China. When did you start thinking about tariffs? I started really thinking about them probably over the summer when Trump was campaigning. And he loved talking about tariffs, particularly tariffs from China. The word tariff, properly used is a beautiful word. One of the most beautiful words I've ever heard. It's music to my ears. We're going to charge him, I'm telling you right now, putting a 200% tariff on which means they're unsellable. In other words, very simple. If you screw us, we screw you.

Thank you, sir. Trump believes tariffs will bring jobs and manufacturing back to the U.S. But American business owners are wondering what impact these tariffs could have on their bottom line. Like Jason. I said there's a real chance here of tariffs going up and yeah, we would be totally impacted. So on election night, Jason nervously watched the returns at a friend's place. It's election night in America. Voters are having their say, your say, and the countdown is on to the very first...

Once it was clear to Jason that Donald Trump was on track to win, he knew he had to do something. Right then. What did you do? I started messaging my suppliers. We got a short timeline here. There's not a lot of time for thinking. And I knew that it'd be morning in China and they would be responsive. And so I started messaging to place a big order. Welcome to The Journal, our show about money, business and power.

I'm Kate Leinbach. It's Tuesday, December 3rd. Coming up on the show, how one American business is getting ahead of Trump's tariffs. The sooner you start, the faster your down payment can grow, tax free. But remember, the contribution deadline is December 31st. Open your Questrade FHSA online today in just a few minutes. Bear Botanics isn't Jason Juno's first business. He's been an entrepreneur from a young age. I have been selling online since I was the age of 10, actually. Whoa, whoa, whoa, whoa, whoa. What were you doing at 10?

Oh, God. I was flipping iPod touches on eBay. I had figured out I could make some money doing that again at the age of 10. And it was, it was pretty good for a fifth grader until PayPal figured out I was 10 as well and shut me down. Jason says he also invented his own products to sell, like a travel pillow, which is now buried somewhere under his bed. My parents called them my schemes. I would call them my endeavors back in the day. Did you guys disagree on that at that age?

It was more like, why aren't you outside playing? And I'm like, I'm building an empire. I love that. How did you go from flipping iPods on eBay to deciding skincare was your product? I graduated college. I took a corporate job. And it was around this time that I used to get really bad eczema during the winter, mainly on my hands. And I was like, you know, I'm going to start trying some new products just for me. So I was looking and I came across a bunch of different scrubs from a bunch of different brands. And I was really excited. I'm like, this could really work for my eczema.

And so I think I bought like four or five, six different brands. And to be honest with you, I hated them. Jason looked at these scrubs and he saw a business opportunity. He began experimenting with natural ingredients to make his own products, and he roped in his friends to test them. We made 5,000 units in my apartment, and we had these tiny little walkways in between all the boxes that I had bought of the various ingredients and packaging. And I mean, it was mania.

Jason started selling his products on Amazon in 2020. After a couple of months, he moved production out of his apartment and into a warehouse. He hired a team. And then two years in, he was able to quit his corporate job. And how do you feel about this business that you've built? Pretty crazy. This was something I wanted, I think, since I was maybe the age of 10, if not earlier. And to look back and reflect how far we've come,

it's pretty cool. As Jason's business has grown, he's added more products, like body brushes. And people are into body scrub brushes? This is a thing? Yeah, dry brushing. Dry brushing. I'm not a dry brush.

So what's the- Maybe you should start, Kate. And if I may add, I would add a moisturizer after that and your skin's going to look never better. Jason had built Bare Botanics to be a made in America company. But there was a problem. He couldn't find a US supplier for the brushes. So actually looked for domestic suppliers. And it doesn't really exist for brushes especially. They're a low priced product

and the industry is based in China and there's tons of suppliers to pick from. So I just started looking online and I eventually found our brushes supplier. And how important are your body brushes for your business? The products serve an important piece in the company for bringing new customers in the door. They are popular and they serve as a gateway

to learning more about the brand and buying other products. On the campaign trail over the summer, Trump was talking about levying 60% tariffs on goods imported from China. That would mean paying an extra $60 on every $100 worth of goods. Jason began to worry about what that added cost would mean for the brushes he imports from China. As a seller on Amazon, it is brutally competitive.

This product retails for $9. We can raise the price by 50 cents or lower it by 50 cents and you will see a difference in sales. It makes that much of a difference. So to have a product that's now getting hit with a 60% tariff and to raise prices accordingly, that's really scary. And so in your mind, did you come up with a, what would you call it, like a break glass plan? Yeah, I knew it was gonna be close. And looking at our manufacturing lead times, it's about 30 to 45 days to get these products produced.

It's about 45 to 60 days to get them on a boat, shipped to America. So let's just call it three months. If I figure out who wins the election on election night, first week of November, and place an order right away, we're looking at about the first week of February that they could potentially get to me. So I think in the event Trump wins on election night, I need to order them right away. event Trump wins on election night, I need to order them right away. And so on election night, Jason was sitting at his friend's apartment watching CNN with a big bag of Chick-fil-A. You've got Chick-fil-A. Yeah. What's your order there? Oh gosh. Well, I eat a tremendous amount of food because I work out all the time. So here we go.

A Chick-fil-A Deluxe, large fry, a piece of chicken nuggets, no sauce, and a vanilla milkshake. Oh, wow. Okay. As the preliminary results were coming in,

Jason said it became clear to him that Trump was going to win. And I'm like, yeah, I'm done here. So I finished my Chick-fil-A and I think I left the repost at like 9.30. Jason left to send that message to his supplier in China. That's next. Sure, I could tell you winter's coming or that it brings cold, dry air,

but you already knew that. What you might not know is that Dove Deep Moisture Body Wash is made with millions of moisturizing micro-moisture droplets to keep your skin silky soft for 24 hours. Plus it's paraben and sulfate free. No matter how dry your skin feels, Dove has you covered. Buy Dove Body Wash today at your local retailer or visit Dove.ca to learn more and order online. I am so dreading groceries this week. Why? You can skip it. to learn more and order online. Uh, nope, you're on your own there. Could've skipped it, should've skipped it.

Skip to the good part and get groceries, meals, and more delivered right to your door on Skip. When Jason got home on election night, he put in an order for 20,000 body brushes. And how long will that order last you? home on election night, he put in an order for 20,000 body brushes. And how long will that order last you? I'd say about a year. And then you're going to have to buy brushes again from China

with these proposed tariffs. Correct. Are you worried about that? I'm less worried about buying because I've been paying tariffs this whole time. Typically, Chinese goods are subject to an average 15% tariff. The actual process of the tariff is not new to me or scary, but I'm more concerned on how the market will react. And what buying a year's worth of inventory means, for me at least, is it gives us the benefit of time. Across industries, US companies have been making preparations for these tariffs.

Some are stocking up like Jason is. Some are moving production out of China, like makers of Nerf guns and semiconductors. And some are trying to bring production into the US, like the company that makes Sharpies and Yankee candles. But Jason says he's stuck. I've tried to get these sourced domestically and the dry brush industry does not exist here.

I can't, if I physically want to, get these produced in America. I have to import them. And if you want to put a really high tariff in place, it almost feels like a punishment because I have no other choice. One of the aims of tariffs is to encourage domestic manufacturing. Might a 60% tariff do that?

Sure, if that domestic manufacturing exists. I'm telling you, the body brushes I have tried to source and it just doesn't happen in America right now. They may seem like an easy product. It's just a brush, you know, it's just a wooden brush with some bristles and an elastic strap. But you need highly specialized machines to do so and skilled labor. And so if that doesn't exist, my options are just to go to a different country. And that really doesn't solve the problem.

Well, it reduces the reliance of the world on Chinese manufacturing of scrub brushes. Yes, it does. But then when there's also a blanket tariff on the board of 10% to 20%, they've floated for any other country, and China is offering a consistent quality product at a consistent price, what's the point of switching

from a supplier that I've built integrity with over the course of the last several years and trust and have consistently delivered for me and my business? Are there other steps that you could take? We could try to get these made elsewhere. Maybe I find a hole-in-a-wall supplier in North America. There's options, but the path of least resistance is we stay with our supplier, we pay the damn tariff, and we raise prices, unfortunately.

And I don't want to be caught in the middle of a trade war. I'm not going to sacrifice the health of my business for some silly trade war. So we will see what happens. And if we have to raise prices, I don't want to raise prices, but we will. Last week, Trump said on his first day as president, he would enact new tariffs. He said he'd put 25% tariffs on goods from Mexico and Canada and add a new 10% tariff on Chinese goods. But Jason worries that the tariffs could go higher, like to the 60% level Trump campaigned on.

If so, Jason would have to raise the price of his brushes from $9 to $12. And so I fear hyperinflation with low-priced goods like these. Hyperinflation is a big word. That's a 33% hike from 9 to 12. is a big word. That's a 33% hike from 9 to 12. What's your sense of like how big a toll these potential tariffs could take on your company? If we had to stop selling these brushes and gloves,

we'll be okay at the end of the day. We are unique amongst Amazon brands in that we make most of our products ourselves by hand in Madison, Wisconsin. We're very insulated from importing and the logistics that come with that. That being said, our strategy is kind of blown up and we'd have to kind of go back to the drawing board. A spokesperson for the Chinese embassy said that trade cooperation with the US is mutually beneficial and that quote,

no one will win in a trade war. And you said you don't want to be in the middle of a trade war. Do you feel like you are? You and other small businesses? I do. I'm not a big corporation. I'm a small business owner from Madison, Wisconsin. I happen to make a really good body scrub and it turned into a little skincare empire that I'm at the top of. But I'm not some massive corporation and I'm not the little skincare empire that I'm at the top of, but I'm not some massive corporation, and I'm doing the best that I can

to maintain the health of the business. I didn't ask for this. I don't want to be in this. And here we are, talking to you about the potential impacts of a tariff on my business. And is the takeaway that we all need to be stocking up right now? I don't know.

You're supposed to say yes and then everybody buys your products. I don't know what to expect. It's uncertain, it's scary. And at the end of the day, I did what I could do as a business owner and I stocked up. It's not going to last forever, but it gives me a little bit of reprieve. Well, Jason, thanks so much. You're welcome.

Happy to be here. That's all for today, Tuesday, December 3rd. The Journal is a co-production of Spotify and The Wall Street Journal. Special thanks to Hannah Miao for her help with this episode. Thanks for listening. See you tomorrow.