US small businesses with deep ties to China are scrambling to remain afloat by selling off inventory and cutting jobs as the trade war between the world’s two largest economies escalates, The Post has learned.
The Trump administration raised tariffs on goods from China to 145% last week, a move that pushed Beijing to raise taxes on US imports to 125%.
While big businesses caught in the crossfire have begun the process of moving some of their manufacturing out of China, the fate of smaller US companies has turned dire because they are tethered to the Mainland, according to several business leaders interviewed by The Post.
“In two months, I’ll probably shut down and sell off my inventory if nothing changes,” said Sari Wiaz, owner of Illinois-based Baby Paper, which makes its popular sensory toys in China.
Her 11-year-old company would need to cough up an extra $20,000 to cover tariff costs for the rest of the year, including the holiday season, she explained.
“That’s not feasible for us,” Wiaz said.
Katrina Marshall, president of Artistic Toys and Promotions, said her company is in the same fast-sinking boat.
Marshall was forced to pause an upcoming shipment in May because the company – which makes promotional plush toys and handles manufacturing for other toy companies, including Baby Paper – was facing an eye-popping $403,000 tariff bill.
On Friday, she gathered her 20-person staff to inform them of job cuts that are slated to be announced Monday.
“We don’t know where this will end,” said Marshall, referring to the trade war between Washington and Beijing.
She added that moving production to another country, an option she has explored previously, would take about a year.
Overall, the US toy industry relies on China for 80% of its production.
“There will be a migration away from China, but I don’t know that any other country will replace China in terms of the experience of its workers and its pricing,” Marshall said.
Even companies that have been preparing for tariffs – including luxury furniture maker RH and iconic wedding gown maker David’s Bridal – acknowledged that shifting production takes time that many businesses just don’t have.
“It’s not that we flip the switch overnight,” Kelly Cook, chief executive of the largest wedding dress company in the US, told The Post.
David’s Bridal has manufacturing facilities in at least five countries, including China, Myanmar, Vietnam, Sri Lanka and India.
The Conshohocken, Pa.-based company has a 50% stake in a joint venture that owns and operates its factories, Kelly said.
“Our strategy right now is that we are making a shift outside of China and we’ll need to pull production out of our China locations,” Kelly said.
She declined to say where the company is investing more resources.
“We are going to hedge and be very flexible and nimble,” Kelly said. “We have very in-depth, rigorous processes where we can train talented people by location in up to 60 days.”
The 75 year-old company – which filed for bankruptcy protection twice, most recently in 2023 – is among the minority of apparel companies that can give up on China.
“Apparel is tricky,” said Craig Johnson, president of Customer Growth Partners. “Most of the great sewers in the world are Chinese living in China. Most clothing companies have tried to pivot, but the question is who has had a material pivot.”
Businesses were put on notice about a potential trade war with China nearly a decade ago, when saber-rattling over tariffs began in President Trump’s first term.
China accounted for as much as 44% of US imports of apparel and accessories in 2018, but shrunk to 35% in 2022, according to S&P Global report.
Home furnishings is another industry highly dependent on China, with about 50% of the furniture that’s imported to the US coming from the country.
RH chief executive Gary Friedman – who infamously blurted out “oh sh-t” on an earnings call with analysts as shares plunged 40% after Trump made his “Liberation Day” announcement on April 2 – said his company plans to slash its dependence on China.
RH had “successfully resourced the majority of its China production to Vietnam,” RH disclosed in a statement last week, adding that “a meaningful amount” of its Chinese production had been moved to its own factory in North Carolina.
“This move is quite stunning,” Friedman said last week. “It’s going to force everyone to just play a different game.”
Discount retailer Five Below also joined the China exodus, asking vendors to stop shipping products headed for the US, Bloomberg reported on Friday.
The tariffs were expected to nearly double the cost for Five Below, up from as much as 50% based on Trump’s initial tariffs on China on April 2, according to Oppenheimer analyst Brian Nagel, who was cited by the outlet.
This story originally appeared on NYPost
