Small businesses in Connecticut wrestle with uncertainty over Trump tariffs, economic policies

Luther Turmelle, The Hour, Norwalk, Conn.Hour

Feb. 6—Some small businesses in Connecticut are being whipsawed by the rapidly shifting policy landscape coming out of Washington in the first few weeks of President Donald Trump's administration.

Threats of tariffs being implemented against Mexico and China over the weekend were quickly postponed after the stock market tumbled on Monday. And a U.S. Postal Service ruling imposed on Tuesday to not accept packages from China and Hong Kong was rescinded a mere 24 hours later.

Experts say it all adds up to a difficult environment for small business people to operate in.

"I would not want to be a small business person at this time because the uncertainty is so insane," said Patrice Luoma, professor of entrepreneurship and strategy at Quinnipiac University. "You can't plan because things are changing daily, and yet businesses need to be able to plan to make sure they are going to have enough inventory or for sourcing materials and components if they are manufacturers; they don't have the slack in their operations, whether it's having enough people to handle these changes or whether it's having the financial wherewithal to ride this out."

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Adding to the uncertainty that small business owners are facing is that "they don't know how long these policies are going to drive prices higher," Luoma said.

"As a small business owner, your customers are already price sensitive, so you can't risk increasing your prices," she said.

Dave Tomczyk, an associate professor of entrepreneurship and strategy at Quinnipiac University, said small business owners find themselves in an unenviable position.

"The challenge here is that small businesses may only have one supplier or a small number of them," Tomczyk said. "They don't have the flexibility that a large business has. They also don't have good lobbying efforts to support them, which also means (Trump) is not going to hear their voices."

Amid a cascade of executive orders issued by Trump since his Jan. 20 inauguration, trade rulings have recently been coming out of Washington at a breakneck pace.

On Tuesday, the Postal Service stopped accepting packages coming out of China and Hong Kong, a move that was in reaction to a Feb. 1 executive order by President Trump that ended duty-free handling of many smaller parcels. Trump had ordered that starting Tuesday, all goods leaving China must follow the rules for higher-value shipments.

Prior to the change, parcels worth up to $800 apiece were not required to include detailed information on their contents and were not subject to tariffs.

But by Wednesday morning, a spokesman for the postal service said that it would now "continue accepting all international inbound mail and packages from China and Hong Kong" as it had previously.

"The USPS and Customs and Border Protection are working closely together to implement an efficient collection mechanism for the new China tariffs to ensure the least disruption to package delivery," the statement from the postal service read in part.

One small business story

Howard Aspinwall, owner of the Mellow Monkey Gifts and Decor, a Stratford store that sells gifts and home goods items from around the world, said if the Postal Service hadn't rethought its position on accepting goods from China and Hong Kong, other major shipping entities around the world might have followed suit.

"A long-tern ban at the U.S. Postal Service could have carried over to other supply chain providers like Fed Ex," Aspinwall said. "It would have a cascading effect."

One thing that is critical for small business owners is to communicate the difficulties they are facing with their customers, he said.

"I don't think customers truly understand the impact that tariffs work," Aspinwall said Wednesday. "Explaining it helps them to understand what the impact is on our business and ultimately on them. Being transparent about what is happening is important."

Luoma agreed that consumers need to understand the importance of tariffs and other trade related issues.

"Small businesses employ most of the people in the country," she said. "And if it results in layoffs, that's going to affect what the federal reserve does. But which economic indicators (Trump) will be most sensitive to, I don't know."

Aspinwall said although a large percentage of merchandise sold in the store is procured from domestic companies, the business also imports goods from overseas.

"The problem is that it's such a fluid situation," he said. "As I approach each existing and new supplier at wholesale markets, the first question I ask is, 'will you guarantee the current pricing if and when trade tariffs go into place?'"

The responses Aspinwall gets from suppliers vary, and he said it illustrates the complexities of running a retail business with the uncertainties of increased costs.

"By now, everyone should understand that trade tariffs ultimately become the burden of the consumer," he said. "That's because the fees are paid by the U.S. importer when the merchandise lands on our shores. The supplier passes that cost onto the retail buyer, who in turn needs to raise the price of the product sold."

Suppliers throughout multiple points of the supply chain may agree to negotiate with their manufacturers, Aspinwall said. Those suppliers may or may not agree to absorb part of the cost of the tariffs.

"And that same decision is potentially made at the retail level," he said. "The latter is a predicament for small businesses — if they try to absorb the cost increases, it becomes one additional cost in a time when the costs of goods and labor are already high. If they don't absorb it, there's the chance that the new pricing will exceed the customer's view of "perceived value" — the cost a customer perceives a product to be worth."

Aspinwall said if he had a chance to ask Trump about his strategy regarding tariffs and other areas impacting trade, he'd ask, "what's the end game?"

"Because small businesses and consumers are going to take a hit, from this," he said. "How are we going to ramp up production on the products that are now being made in China and how are we going to do it so it doesn't put us out business?"

Failing that, Aspinwall said he and other small business owners need to do they best they can to keep merchandise on their shelves.

"We really don't know what's coming," he said. "We try to negotiate with suppliers and get prices that are guaranteed not to change because of the tariffs. We still have to source products, so we also have to look for alternative suppliers in case the tariffs are too high."

Aspinwall said the potential endgame, if the current level of uncertainty continues, will not be a good one.

"Either you're going to see small businesses start failing early next year after the 2025 holiday season or the small business landscape you're going to see will become really homogenized, where all the (products) come from an Amazon warehouse," he said. "Both scenarios could very well lead to the demise of smaller retail businesses. They don't have the buying power or negotiating power of larger big box and online retailers; my fear is that this will end up benefiting large businesses and homogenize the retail landscape."

Tomczyk said that while some existing small businesses may fail, "people look for where there are market inefficiencies and test if there is a way to make profit."

"New small business creation may slow down." he said. "But it's not going to be eliminated."

Tony Sheridan, president and chief executive officer of the Eastern Connecticut Chamber of Commerce in New London, said he hasn't gotten any negative feedback from the organization's small business members.

"I think it's too soon to tell," Sheridan said. "There has been a lot of suggestions, and I use that term because they are implemented one day and then rescinded the next. I think we have to let the dust settle, see what remains in place and make our judgement then."