Small businesses are at the forefront of opposition to President Trump’s sweeping tariffs. The Supreme Court is scheduled to hear their challenge on November 5th.
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President Donald Trump said after his South Korean summit with President Xi Jinping that China would buy U.S. soybeans and curb fentanyl exports.
WASHINGTON — The sine waves on David Levi’s T-shirt illustrate the physics behind the STEM kit he created to teach kids how to build electronic musical instruments from scratch.
But the oscillating line could also represent President Donald Trump’s tariffs jumping up and down, creating higher costs and uncertainty for small business owners like Levi.
Levi, an electrical engineer who founded MicroKits in 2020, had to raise prices, delay production and pause plans for the launch of his new product, Banan-a-Synth, which allows kids to turn a bunch of bananas into a kind of keyboard.
And if President Trump’s tariffs on nearly all imports remain high for some time, including many of the electronic components he uses to make the kits in Charlottesville, Virginia, Levi said he may have to move production overseas.
This may be necessary to allow Levi’s to sell the kits at competitive prices and to increase cost predictability. President Trump is setting rates by circumventing laws that require a more detailed process for imposing tariffs in limited circumstances.
“There’s no way to plan whether interest rates will change again next month,” he told USA TODAY.
Companies aren’t accepting President Trump’s tariffs
The move of American companies offshore is the opposite of what President Trump promised when he imposed tariffs on almost all products imported into the United States.
President Trump said the situation is an emergency because persistent trade deficits are hollowing out the nation’s manufacturing base. He has also used tariffs as a way to encourage China, Mexico and Canada to do more to stem the flow of illegal drugs into the United States.
But companies aren’t buying into his strategy.
Mr. Levi is one of several small business owners challenging President Trump’s tariffs, an issue the Supreme Court is scheduled to take up on Nov. 5.
Other companies alleged to have overstepped Trump’s authority include a Vermont company that makes women’s cycling equipment, two Illinois-based companies that sell educational toys, and a New York City-based wine importer.
“These tariffs threaten the very existence of small businesses like mine, making it difficult to survive, let alone grow,” Victor Owen Schwartz, who founded a wine and spirits import business with his mother nearly 40 years ago, said of his decision to become president. “I was shocked that people with far more power and resources didn’t act more proactively.”
U.S. Chamber of Commerce opposes President Trump’s tariffs
Although Fortune 500 companies have not filed suit like Mr. Schwartz, major business groups have spoken out against the tariffs.
In a filing supporting the challenge, the U.S. Chamber of Commerce and Consumer Technology Association told the Supreme Court that the question of whether the tariffs are legal is “of paramount importance to the business community.”
Trump’s tariffs would create greater uncertainty for the trade economy than the disruption caused by the coronavirus pandemic, the groups wrote, and unless blocked by the courts, would allow the president to assert “unprecedented authority to upend the domestic economy through taxation.”
“A Blessing to America’s Factory Workers”
Drew Greenblatt, CEO of Marlin Steel Wire Products, is a rare businessman defending tariffs.
Mr. Greenblatt said the import fees would level the playing field for companies like his that rely on U.S. steel to make metal baskets and other wire products at factories in Baltimore, Michigan and Indiana.
Greenblatt competes with companies that source steel from China, which subsidizes the steel industry.
But after Canada’s tariffs were imposed, Marlin Steel took $1.3 million in jobs away from Canadian companies using Chinese steel. The order funds six 24-hour shifts, he said.
“Tariffs are a leveling tactic because there are a lot of people who aren’t playing fair,” he says. “This is a blessing to American factory workers.”
Greenblatt said he’s not naive enough to think that all the manufacturing jobs that went overseas because of tariffs will come back. But if only 10 or 20 percent did, “our factories would double or triple in size,” he said.
Economists say tariffs do more harm than good
Michael Strain, an economist at the American Enterprise Institute, a conservative think tank that promotes free enterprise, said there’s no question that tariffs are helping some companies.
But overall, U.S. manufacturing is in even worse shape, he said.
Domestic manufacturers import many materials and equipment needed to manufacture finished products, he said. And the high costs from those “intermediate goods” are greater than the benefits of import protection.
That was proven during the Trump administration’s trade wars, Strain said. Fed economists estimated that the U.S. lost five times as many manufacturing jobs as it gained.
A group of economists, including Strain and former Federal Reserve Chairman Ben Bernanke, told the Supreme Court that the decline in domestic manufacturing jobs has nothing to do with the trade deficit.
“In fact, the United States is producing no less today than in the past,” economists said in a filing in support of companies challenging the tariffs. “In return, fewer people are needed to produce the same product and it costs less compared to other products.”
Small businesses may be hit hardest
More than 700 small businesses signed a separate brief telling the court their decision “will determine the survival of many small and micro businesses across the country.”
Kathy Abel, CEO of Wild Lie, an Idaho company that makes outdoor apparel for women made in China, said she used her home to raise money for her business.
“So every time the tariff goes up, you risk losing your home,” she says. “In addition to everything else, the family home is also at risk.”
Jess Knepstad, chief venture officer for a Montana-based company that designs and sells coffee storage and brewing equipment, said she didn’t realize how nerve-wracking the tariffs were until a lower court ruled in May that President Trump didn’t have the authority to impose sweeping tariffs.
“I remember sitting on my balcony at 8 o’clock at night and hearing the verdict and really crying,” he said. “I had no idea you were so stressed out.”
When asked what it was like to challenge for president of the United States from a small workshop in Charlottesville, MicroKits founder Levi said, “It feels like becoming a citizen.”
“As a citizen, you can go to court and say, ‘I don’t know if the government can do this. Let’s figure it out,'” he says.
Whatever the judge decides, Levi wants the judge to rule quickly.
“The key is that we want to have enough certainty to move the business forward,” he said.
