The longer the US-China trade war continues, the more it will affect small businesses. And according to the latest survey from BizBuySell, it is proving to be true. Almost half or 43% of small business owners said the Chinese tariffs are increasing their costs.
Small Business Impact of Chinese Tariffs
For 64% of these owners, it means raising prices in order to stay afloat. The rest will take different measures to keep their business running without losing their customers. This includes cutting spending in other areas (27%), searching for cheaper vendors (25%), taking a hit to their bottom line (23%), lowering employee count (13%), and lowering wages (4%).
The survey questioned 1,700 small business owners to gauge their opinions across a range of topics. In addition to the tariffs, the best presidential candidate for small businesses in 2020, the unemployment rate, cashless payments and more are addressed in the survey.
There is no question small businesses will take a hit from the Chinese tariffs. But this will depend on just how much of their inventory comes from China.
In the survey, 57% of businesses say they import 1 to 25 percent of their inventory or materials. This was followed by 25% bringing in 26 to 50 percent, another 12% with 51 to 75 percent, and the remaining 6% with a whopping 76 to 100 percent.
Staying in Business
It goes without saying, how much you import will dictate the financial hit your small business will incur.
So how are owners going to overcome this predicament? Changing suppliers is a sure-fire way to avoid Chinese tariffs. And 65% of business owners are willing to find an alternative.
For U.S. suppliers, this will be a huge windfall as 54% say they will look for a U.S. based company. Another 14% will look for a foreign supplier and 32% don’t have any preference.
With these and other workarounds in place, 80% of owners say they can stay in business even if the 25% increase in tariffs lasts more than a year. However, 20% said no, and this is a considerable number of small businesses.
The China Tariffs to Date
Starting on August 23, 2018, President Trump and his administration put additional tariffs on $16 billion worth of products. By May 10, 2019 close to half of all the goods the United States imports from China was subject to an additional 25% tariffs.
These tariffs have come in four different stages or lists, with the first two affecting around $50 billion of the imports the US brings in from China. The third list affects $200 billion worth of goods and it went into effect on September 24, 2018.
The last or fourth list is still not in place, and it will include items not hit by the first three lists.
As far as amounts, the first two lists have been hit with 25% tariffs, and the third list started at 10% and increased to 25% on May 10, 2019.
Additional Survey Results
On the topic of the 2020 presidential elections, small business owners still see Donald Trump as their candidate of choice at 44%.
With less than double-digit rates, Joe Biden was the next candidate at a meager 9%. This was followed by Bernie Sanders at 4%, Elizabeth Warner 3%, Pete Buttigieg at 2%, Kamala Harris at 2% and the remaining candidates at 1% or less.
Sam business owners 28% say they are not sure which candidate will serve the small business segment well. And another 6% have other candidates in mind.
When it comes to cashless payment systems, the adoption rate is still low. Almost two thirds or 64% say they don’t have any plans to have a cashless business model. And only 17% of businesses are now cashless, with 3% saying they will do so within the next 2 years. Another 8% want to adopt the technology, they are not sure when they will make it happen.
On the issue of hiring, the tight labor market is proving to be a challenge for many small business owners. Compared to previous years, 26% find it very difficult to find new employees while 29% say it is somewhat difficult.
One in five or 20% say it is not difficult at all to find the help they need, and 26% are not looking to hire at the moment.