Tariffs and Small Business...It’s About to Get Real!

I started Rothmans Men’s Clothing in 1986 on Union Square. As a NYC retailer, I have certainly seen my share of challenges. Among other things, we have made it through the 2008 Financial Crisis, Superstorm Sandy, COVID, and looting. We get knocked down, but we just keep getting back up.

The rollout of tariffs is going to be one more challenge. At Rothmans, we just received our first tariff surcharge on an incoming clothing order from China. Yes, we buy from beautiful luxury brands like Canali, Corneliani, and Santoni from Italy, but our opening-price, more affordable options are imported from faraway places with more efficient and lower-cost factories. We like outfitting ALL men regardless of their budget, so we carefully curate, and often help design, lower-cost alternatives. It is not only a good business, but a very satisfying one.

So in the case of the surcharge mentioned above, a father/son duo designs really cool menswear and has it made in China. In April, the new tariffs implemented a 147 percent duty as the goods crossed the border. As of last week, the tariff was down to 30 percent. The brand offered to “split” the difference with us, originally hitting Rothmans with a 75 percent tariff surcharge on our invoice, and then a 15 percent surcharge when it was reduced. Either way, there is a surcharge.

I am not an economist, but in any of these scenarios, prices are going up.

My conservative friends will say it is a short-term problem that will correct itself over time as unencumbered American capitalism, now with an even playing field, will build and re-start factories. This is the beginning of a new dawn of American manufacturing. Our rusted-out industrial cities will come back to life and we will see a re-emergence of American prosperity. The money collected by tariffs will ultimately make income taxes unnecessary, leading to a spending boom.

My liberal friends will say that tariffs are a regressive tax that impacts low-income people in a much more hurtful way. Also, it takes years, and significant investment, to get abandoned factories back up and running, There is also the question of whether we have the workforce that is interested in doing factory work to fuel the American re-industrialization.

You can pick your side. Here is what I know as a small business owner:

A tariff is an import tax. It is not “paid by China.” It is paid by my supplier, passed on to me, then passed on to the consumer. I will definitely consider posting the tariff surcharge on some items to explain the sudden jump in price. People should know the truth. It is not that we are just getting greedy and raising our prices. So far, we have eaten the increases, and not raised prices, but that cannot last forever.

Prices are sticky on the upside. I would be very surprised, no matter the resolution of our trade wars, to see price drops after increases.

This is going to put a lot of people out of business. At Rothmans, we have close to 100 suppliers from all over the world. Tariffs will hurt us, but we will survive. We have enough diversity in our supply chain. Small businesses, no matter which industry, might be tied to only one country. If it is China, they are in trouble.

Whether or not you are in favor of tariffs, the roll-out strategy has been far too haphazard. As a small business owner, I am always looking to the future. Uncertainty is the enemy of projections. Projections are the beating heart of investment in your business. Most of my business-owner colleagues have slowed their roll, waiting for some clarity. Deals are at a standstill. The on-again, off-again, 90-day-reprieve game is an unfortunate policy. We need clarity, whether it takes a form that we like or not.

In summary, I am by nature an optimist. It is probably what it takes to survive for over 30 years as a NYC retailer.

Our country will get through this. To me, the takeaway is that we need to stay engaged in politics. Make an effort to truly understand the issues, and how they affect you. Do not fall for catchy phrases and pithy slogans. Challenge our elected officials, and hold them to much higher standards. America is a better, and more prosperous, place when we stay involved.

Ken Giddon is Co-President of Rothmans with stores in NYC, Scarsdale, and Bronxville.