A year after ‘Liberation Day,’ Trump’s tariffs are taking a toll on small businesses in Texas and nationwide

From Houston Public Media:

It’s been just over a year since President Donald Trump issued an executive order imposing steep tariffs on most of the United States’ major trading partners – an event he labeled “Liberation Day.” The Supreme Court has since decided the tariffs, collected under the International Emergency Economic Powers Act (IEEPA), were applied illegally. The U.S. Court of International Trade has ruled they must be paid back to the companies that collected them.

Despite promises it would do so, though, the administration has yet to issue any refunds, and Trump has said he plans to impose new tariffs to replace the ones the high court overturned.

Small business owners both in Texas and across the country say they’re suffering. According to an analysis of the latest U.S. Census Bureau trade data by the small business advocacy group We Pay the Tariffs, the emergency tariffs Trump imposed last year cost American businesses $151 billion in the year ending in February.

Luis Torres is the senior business economist for the Federal Reserve Bank of Dallas, which regularly surveys Texas business owners on the effects of tariffs.

“You can see those comments of how those costs, those tariffs … they’ve impacted them, costing increased selling prices, margin losses, also the uncertainty surrounding them,” Torres said.

How tariffs drive up prices

Houston-based Misfit Toys is a prime example. Located just off a busy highway in Houston’s Heights neighborhood, the store has built its customer base on the trade in vintage toys.

“I’d say 70%-80% of the products that come into the store are used items, previously owned. And that’s what people are looking for, older things,” said store owner Daniel Rivera. “But that’s never going to be enough to lure people into a retail setting, if we don’t also have some of the latest items that are hot.”

Rivera said that, to lure customers, Misfit Toys still relies on the sales of new toys tied into summer blockbuster movies, not to mention Christmas sales. Those new toys are largely produced in China. Since Trump’s tariffs took effect a year ago, Rivera says he hasn’t been able to afford to stock up for either season.

“The big box retailers will be fine,” Rivera said. “People go to Target, also for soap and, you know, drinks and food. And while they’re there, the kids will grab a toy. But here we will not be getting any of that summer action, any of that money. And we will certainly see that in Christmas.”

Rivera’s wife and business operations manager, Paulina Gamino, says Misfit Toys simply can’t afford to absorb the cost of the tariffs the way competitors like Target, Walmart and Amazon can. For what Gamino refers to as “mom-and-pop stores,” raising prices is the only alternative.

“And so now we’re talking about brand-new toys that maybe would have been $25. Now, it’s like $40, $45 for a brand-new toy. That’s such a huge jump and increase,” Gamino said.

To adapt, Gamino said, Misfit Toys is focusing even more on vintage toys. Layoffs in Houston’s tech sector are forcing unemployed workers to sell off their collections, which the store buys at a discount and resells.

“Our gross sales have gone up. We are able to employ more people, but our profits have gone down a lot,” Gamino said.

Not all businesses have that cushion of being able to resell collectables.

Kacie Wright manages Houghton Horns, a brass instrument specialty shop north of Fort Worth. The business sells student instruments made in China and professional-quality instruments made in Germany, the United Kingdom and Japan, along with cases and accessories made in India and Brazil.

“We’ve had to raise prices,” Wright said. “We’ve been paying [tariffs of] about 40%, and we absorbed some of that and raised prices about 20%, but then we also had to cut out accessories. They used to come with mouthpieces and cleaning kits, and now you just get the instrument and the case, so the customers are paying 20% more for less.”

Wright said the uncertainty of the ultimate price of the instruments, with tariffs included, is leading customers to hold off making purchases.

“If a customer wants to order a custom trombone from us, we can say, ‘Well, at current pricing, it might be $7,000, but then the tariffs could change tomorrow, and your price could end up being $6,000 or $9,000.’ And these instruments take three or four months to make,” Wright said. “So, if a customer wants to place an order now, we have no idea what price to charge them.”

Why small businesses have a harder time onshoring

A major argument Trump has made in favor of the tariffs is that they could encourage more businesses to move manufacturing back to the U.S. from overseas. But for many small businesses, the so-called onshoring of manufacturing isn’t an option.

Ryan Guay is the CEO of FLATED, based in Missoula, Montana. The company sells truck tops, truck camper shells and other automotive products made with a PVC drop-stitch inflatable fabric. FLATED has employees in California and Colorado, but it has outsourced its manufacturing to Vietnam.

“I think that there’s something that people aren’t talking about in this whole tariff conversation,” Guay said, “and that’s the fact that American businesses do rely on overseas manufacturing, and when those costs and with the tariffs go up unexpectedly, it makes it a lot easier for the factories in Asia, overseas, other places, to really simply cut out the American business and just sell directly to online in the States, or even directly to Amazon, so they can eat that tariff and just sell direct consumer, which is great value for some of the consumers out there, but it does affect small businesses like ours.”

Guay said he would love to be able to manufacture his products in the United States, but doing so would cost more than his business could afford.

“And not only [because] setting up the factories here … is obviously cost prohibitive, but also the fact that the materials are not produced here,” Guay said. “So, even if you were making the products here in the States, you would still be paying the tariffs on the raw goods to come in to actually produce that product.”

‘We’re not convinced it’s over’

The U.S. Department of the Treasury did not respond to a request for comment from Houston Public Media about when, or whether, the emergency tariffs would be refunded.

Asked if such refunds would make a difference, Guay said he doesn’t hold out much hope.

“A refund would be great, but we’re not betting on it, based on our experience last year of tariffs, ups, downs, not knowing, uncertainty, recent changes with the Supreme Court ruling, we’re just sort of running our business as planned and not knowing if there is a refund or not,” he said.

Misfit Toys’ Gamino put it more bluntly.

“I have no expectation that we will see this money. We are the last in the line, as a small mom-and-pop who’s not buying huge quantities,” Gamino said. “I would expect the large corporations probably to hop on that and get some of that money back, Walmart and things like that, but I just don’t see us getting any of that.”

Before the tariffs, Misfit Toys had been planning for a major expansion, lining up business deals with major wholesale toy distributors that manufacture in China. Rivera said that’s off the table for at least as long as Trump remains in the White House.

“Because it could be tomorrow that he just changes his mind again,” Rivera said, “and he pulls his hand into a hat and says, ‘Because of this, I can do it again. I can raise tariffs again.’ So, we’re not convinced it’s over.”

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