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Trump tariffs will lead to abandoned freight at ports as cash-strapped businesses reject orders

Business
Updated:
Chris Washington
By Chris Washington
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Trump tariffs will lead to abandoned freight at ports as cash-strapped businesses reject orders
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Businesses both large and small tell WHNY News that the latest round of President Donald Trump’s tariffs, targeting countries all over the world and taking the trade levies up to the highest rates in a century, could result in freight being abandoned at ports as cash-strapped owners and CEOs reject incoming goods that could financially wipe them out.

Rick Muskat, president of the family-owned shoe retailer Deer Stags, which imports around two million shoes a year — with about 98% of their men’s and boy’s shoes made in China and sold in Macy’s, Kohl’s, JCPenney, and on Amazon — is among the business owners preparing to take on exponentially increased import duties, but says the financial pain and split of the pain between his firm and retailers will be difficult.

His once $50 pair of men’s shoes and $35 little boys’ shoes have already gone up $80 to $65, respectively, after recent trade war moves by the U.S., with Deer Stags set to pay more than a 104% new tariff on Chinese goods being stacked atop previous tariffs.

Prior to the tariff increases in 2025, his company was paying a 6% duty on their shoes.

“Then the tariffs were raised by 10% two times, bringing my tariffs up to 26%. Then last week Trump put on an additional 34% and now the 50% levied today. All of these tariffs bring my tariff total to 110% on my non-leather shoes. My leather shoes now have a tariff of 120%. How do you budget that?” Muskat said.

He estimates that the cost of freight orders subject to the new tariffs will rise from $60,000 to between $600,000 and $1 million.

“The cash flow burden is the immediate problem,” he said. “We don’t have the capital to grapple with this. There is only one pile of money and I will pay for this, but that means I’m not paying for something else. We are going to pay the duty because we have no choice.”

Muskat said he won’t reject the containers at the port which would force the supplier to take the freight back, but he has told one factory to pause shipping for a week or two, to see how things unfold. Conversations with retailers are ongoing.

Other U.S. importers are expected to abandon goods at ports, which can then either go back to the manufacturer or it can be auctioned or destroyed in the U.S.

On Wednesday, Trump added another change to the fluid situation, saying some countries other than China would receive a 90-day pause in the implementation of tariffs, but new tariffs on China would rise to 125%. According to one estimate, more than half of the $2 billion in daily import tariffs to be charged by the U.S. are to be on Chinese goods and the tariffs on those goods will reach over $1 billion per day.

“The major trend we see is shippers looking to not accept their freight,” said Joseph Esteves, CEO of Maine Pointe, a global supply chain consultant. “A lot of these companies are levered financially. They don’t have the working capital requirements and they don’t have the cash. So they simply cannot just take on this and hope to see what happens. They don’t have the liquidity to do that,” he said. Balance sheets and cash levels were more sensitive to major changes in costs, as consumer demand slowed, “before all this nonsense,” he said. “Every CEO we’re talking to seems to just be waiting. They’re just not accepting at this moment.”

Right now, many companies are telling their manufacturing facilities to delay shipment and not have freight loaded onto a vessel. If the goods arrive to port and they can’t pay the import tariffs, the goods sit at port and the company is billed with costly detention charges.

For many importers, ‘there are no factories in the United States’

Bruce Kaminstein, an angel Investor with New York Angels and founder and former CEO of cleaning products company Casabella, knows the challenges of manufacturing in China. Kaminstein was able to navigate the tariffs in the first trade war with China but he warns start-up companies do not have the coffers of big companies to withstand the capital crunch.

“Products will be left in containers because retailers won’t take them,” said Kaminstein.

For now, any freight on the water will not face the new tariffs. In updated guidance on the China tariffs released by U.S. Customs on Tuesday, an “on the water clause” explained the cargo coming into the ports today or in the coming weeks will not be subject to the tariffs, which won’t be tacked on to any goods arriving until May 27.

But Kaminstein says it takes years for manufacturing supply chains to be established.

“The average size houseware company, for example, is $20 million. They don’t have the capital to open up a factory. … There are no companies, no factories out there that make products for other brands,” he said. “That’s the real point here. If you have a great idea, where do you go to make the product? There are no factories here in the United States making products for other brands.”

Mary Rollman, KPMG US organizational strategist & partnership executive, said companies have more sophisticated and better analytics to value the cost of moving a supply chain today, but added it does take years to find and qualify a supplier.

“Companies need to evaluate the cost of restoring a supply chain,” Rollman said. “They will review the hard data on fixed costs, looking at the labor pool to see if there are enough workers to fill the demand. They also need to see if it is still cost-effective to keep manufacturing outside of the U.S. or move to other countries with fewer tariffs because it is still cheaper than coming back.”

The other option, she said, is staying in the country where manufacturing takes place currently and banking on a new administration in four years which might rescind the tariffs.

“We use components from all over,” Kaminstein said. “Very rarely are products just made in one place. We’re used to a global supply chain. At Casabella, we brought products in from all over the world, and we made products in the United States.”

The Small Business Administration told WHNY News in an email that Trump’s trade plan will ultimately support U.S. business owners.

In an email, an SBA spokesman wrote, “The SBA fully supports President Trump’s efforts to restore fair trade, which will bring back American jobs and revitalize American industry, empowering entrepreneurs with the level playing field to compete and win. Combined with SBA’s new manufacturing initiative, including our effort to cut $100 billion in red tape, this administration will unleash historic opportunity for small businesses and workers alike.”

Deer Stags’ “razor-thin margins” prohibited it from frontloading products, and consumers may ultimately have to pay. Muskat says difficult price talks with retailers are underway.

“We had one conversation with a retailer who agreed to split the increase but they did not think they could go up in price. Most of the retail community is still trying to figure out what to do,” he said. “It is so fluid. How do you plan? Hope is not a strategy, but most people are hoping Trump and Xi will talk. Both are talking tough but this will be damaging to both countries.”

“Tariffs on goods that consumers buy every day like clothes or that cannot be grown here like coffee or bananas just tripled or more,” said Josh Teitelbaum, senior counsel of Akin. “We should expect that will ripple through the economy.”

“It’s important to remember the new tariffs will be paid for by U.S. importers,” said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation. “While retailers will mitigate as best they can, they unfortunately won’t be able to absorb all of the increased costs. With some tariff rates near 50% and others more than 100%, many retailers will be forced to raise prices. We encourage the administration to quickly negotiate agreements with countries that we are engaged with trade.”

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Chris Washington
Chris Washingtonhttps://whnynews.com
Chris Washington brings over 25 years of experience in financial journalism to WHNY News. A Schenectady native, Chris has a keen eye for business trends impacting upstate New York. His insightful reporting has earned him numerous accolades. Chris holds a degree in Economics from Syracuse University.
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