WASHINGTON (CN) — For the past 15 years, Mike Brey has owned and operated a small business called Wing Tote that caters to hobbyists who need a more specialized means of storing their remote-control cars and other toys. Now he is considering closing up shop.
The bags, which are made in China, appear next to golf bags and ski gloves, CD cases, and clothes made of reptile leather on the nearly 200-page list of goods hit by a tariff announced in May.
Historically, such products were subject to a 17.6% tariff for sewn-finished goods. With this year’s addition of a 25% tariff, however, Brey said he faces a 42.6% charge on the total cost of each shipment of tote bags entering the country.
Brey said he, like many business owners, “flat misunderstood” how new tariffs would impact his company — anticipating the tariff would increase to 25% total.
At the time Brey was cautiously optimistic. “I thought even if I had to weather that storm for a few shipments, or a year or two, I could easily do it,” Brey said.
The true scale of the tariff, however, has brought Wing Tote to its breaking point.
“I think it is a potential miscalculation that many small business owners have made or could easily have made,” Brey said. “If you are a much bigger company, there is an accounting person [whose] job is only to read the tariff code and map out what the impact is going to be.”
Jennifer Kelly, deputy press secretary for the Small Business Administration, said the office is committed to providing as much help as possible to merchandisers.
When asked what steps the agency is taking today, Kelly mentioned a hotline by which callers can request information on government assistance to resolve or pursue international trade opportunities.
In addition to this hotline, which predates the burgeoning U.S.-China trade war, the Office of U.S. Trade Representative operates a similar hotline with information on how to apply for exclusion from tariffs.
Brey called this option inadequate.
“You’re talking about a relatively sudden 25% in additional costs — another $10,000 on $35,000 in product,” Brey said. “There is no hotline in the world that is going to be able to tell me how to absorb those costs.”
As for the possibility of an exclusion, Brey said his importer informed him Wing Tote would likely be ineligible.
Amie Ahanchian — a managing director at the global accounting firm KPMG — said over email that a USTR exclusion can buy companies some time to seek an alternative manufacturer outside of China.
KPMG associate Sean Miner noted that companies must demonstrate they are undergoing significant financial strain, though the exact rate for granted exclusion applications is “difficult to pinpoint” given the number under review.