The Hill

Trade war won’t kill small business — it’ll make it stronger

By June 2, 2019 No Comments

(This post originally appeared on The Hill)

Hunt around the internet, as I’ve been doing, and you’ll mostly find stories about how the current trade dispute with China is hurting small businesses:

  • It “hits the little guy,” stated the New York Times;
  • it’s “bad news for small businesses” Barron’s cautioned;
  • CBS News opined that it’s a “big problem for small business;” and
  • the Washington Post not only warned it “could be catastrophic” for small businesses but that our dogs’ puffy vests may get way more expensive. Oh, the humanity!

But catastrophic? I don’t think so. In the short term, there are challenges for some. But in the long term — provided negotiations with China go well — the result could be a very, very good thing for America’s small and medium-sized businesses.

The reality is that most small businesses in this country simply aren’t affected by the China tariffs. Don’t believe me? Then look at this survey conducted by Bank of America this past month of more than 1,500 small-business owners.

Fifty-nine percent of those respondents said they “don’t see any impact.” That data was backed up by the recent polling of 1,700 small-business owners from brokerage site BizBuySell. In that study, 57 percent of small-business owners said they weren’t affected by the China tariffs.

Why should they be? Most of the 30 million small businesses in this country sell pizzas, fix cars, repair roofs, balance books and mow lawns. These are not people who care about China.

Of course, many of these businesses serve bigger businesses or sell to the employees of big businesses, so a long-term dispute that impacts those companies’ profits could impact what they spend on their smaller suppliers.

To those suppliers I say: Don’t lose any sleep. Your customers are more likely to drop you because they’re unhappy with your service rather than because of a squabble with China.

But what about those small businesses that are affected? These small-business owners have demonstrated their ignorance because they’ve mostly relied on just one or two suppliers from one country (China) for their goods.

Or, as I’ve written before, they’re farmers who expected China to keep buying from them even though Donald Trump has been warning for years what he’ll do if and when he becomes president.

I feel bad for these guys because, through their own miscalculations, they are indeed suffering. Ultimately, business Darwinism will prevail. The dopiest ones will disappear and go back to their corporate jobs.The smart ones will survive, learn and grow. And they’ll ultimately benefit from this experience. Why?

Because if President Trump gets his way, I can stop hearing what I’ve been hearing from most of my small and medium-sized clients for the past three decades: that doing business with China has been patently unfair.

Trump has obviously heard those same complaints. He’s witnessed China’s behavior. Why else would he go to trade war with them? It’s not as if he doesn’t have other battles to fight.

It’s because he knows that something has to be done to right this significant and growing wrong for the long term and — luckily — he’s got a strong economy in which  to do it. Say what you will about our president, but he’s fighting a fight that needs to be fought.

So what can small businesses expect if he prevails?

  • a more-level playing field;
  • greater opportunities for small manufacturers to make stuff for the American market;
  • more access to China’s numerous consumers;
  • less illegal dumping of Chinese products that kill American suppliers;
  • a crackdown on the bribes, graft and corruption that has always plagued U.S. business dealings with China;
  • a reduction of cyber-espionage that steals our data and intellectual property; and
  • no more joint venture “partners” that are required when one wants to do business in or with China.

This experience (like the last recession and other significant economic and political events) will prove to be a valuable lesson for those small businesses that are facing challenges right now.

The smart ones will diversify. They will require multiple suppliers. They will not put all of their eggs in one basket.  They will minimize risks and opt to do business with friendlier, less-corrupt and autocratic countries. Better yet, more will likely do business at home.

Of course I sympathize with those small-business owners who are facing challenges as result of this trade war. But the smart ones will figure things out. In the BizBuySell study, many of the respondents who said they are affected planned to raise prices, cut costs, switch suppliers or start offering other products. And when the dispute is ultimately settled, they’ll be the better off from it.

Leave a Reply