September 03, 2019

Small business owners say they're squeezed by tariffs

Cheese shop, high-end bike company feel the pinch

SALEM — U.S. Rep. Seth Moulton got a first-hand look Tuesday at how trade wars are affecting a small local cheese shop just around the corner from his district office in Salem, and a small family-owned high-end carbon fiber bicycle manufacturer just over the bridge in Beverly.

Both businesses’ owners say they are getting squeezed by proposed or present tariffs.

For North Shore foodies, the Cheese Shop of Salem at 45 Lafayette St. is facing up to 100% tariffs on cheese, olives and other specialty food items coming from the European Union.

The tariffs have not gone into effect, and they are due to a long, ongoing dispute in the World Trade Organization regarding European Union subsidies to aircraft maker Airbus, with the United States maintaining these subsidies have threatened its U.S. rival – Boeing.

If levied, the Trump administration would cover $4 billion in imports from the European Union. Products such as cherries, whisky and coiled copper would be affected, along with cheese.

Moulton, who last week abandoned his presidential campaign, arranged the tour of businesses affected by the tariffs.

The Cheese Shop’s owner, Peter Endicott, and his cheese buyer and cheesemonger, Brie Hurd, said the worst-case scenario would be a 100% tariff on European cheeses, which would double their price and put them out of reach for most buyers.

Hurd said tariffs were proposed in April, and in July, the cheeses and other foods were added to the list. The shop’s margins are already razor thin, and the fact that they are being proposed on about half the shop’s selection right before the all-important holiday season is frightening to them.

“What I’m thinking about is the threat of all of our European cheeses and much of our European groceries coming in at twice the cost we currently have, and what that would mean for our already slim margins as a small business,” Hurd said.

Over at the former train roundhouse at 69 Federal St. where Beverly’s Parlee Cycles is located, and where custom bikes are assembled and hand-painted, its overseas production has been caught in the China trade war.

Parlee Cycles makes award-winning and sleek road, multi-surface and triathlon race and recreational bikes, and they employ more than 20 people. The tariffs have cost the company more than $100,000 since January due to increased costs on goods from China, where they make their stock bikes. It’s enough money to have prevented the company from hiring up to three more people, the owners said.

On Sept. 1, a new round of 15% tariffs on $112 billion worth of imports from China took effect, according to news reports. On this list of tariffs was bicycle parts and accessories.

“They’re on. They’re on,” Trump said Friday about the new tariffs that kicked in at 12:01 a.m. Sunday. Under the new schedule, 69% of the consumer goods Americans buy from China will face his import taxes, up from 29% now.

Cost for EU cheese could double

Moulton and his wife, Liz, are fans of the five-year-old cheese shop, but Moulton learned about the tariffs from a legislative intern in his office, Jacob Abrams, who also works seasonally at the shop that sells European and American gourmet cheeses, wine, craft beer and specialty food.

“I’ve been an outspoken critic of the president’s trade war, but Jacob said, I mean, this could literally put this shop out of business, and you know, here it is across the street from our office and one of the community’s favorite businesses. And, so it really hit home,” said Moulton, who recently bowed out of the race for the 2020 Democratic presidential nomination to fun for a fourth term.

“And, we also want to know from you where you need us to try and poke at people,” said Endicott, who said his cheese buyer has taken a lead in investigating the tariffs.

Endicott asked Moulton “who’s doing what in terms of preparation should these tariffs kick-in?”

Moulton did not have an answer, but said the shop’s advocacy against the tariffs was key.

“All politics is local,” said Moulton, who added that it was important to be able to explain to people in the community who may be supporters of President Donald Trump how his trade policies have hurt local businesses.

Hurd said she did not have “a clean and tidy answer” as to the industry’s response to the tariffs.

What Hurd is hearing is folks are scrambling to get through the fourth quarter which is all about holiday sales.

“The immediacy of the threat is what is scaring everyone,” Hurd said.

The problem is one cannot buy soft, perishable cheeses now to last through the rest of the year.

“We might see beloved French, English, Italian soft cheeses that are either going to be twice as much for Christmas, or they are not part of the selection,” Hurd said.

Endicott said they know the store sells a luxury item.

“Everything in here is an option. If we shut, nobody’s going to starve,” Endicott said. But at the other end of the equation, they are also supporting their seven full-time employees, and the artisans who make the cheese.

“On the other hand, if we don’t get the consumer dollar through to them, they go away, and then we are left with what? Industrial scale everything,” Endicott said.

Endicott said one of problems is the uncertainly created by the president, which makes it hard to plan his business.

“He loves chaos,” Endicott said. “Let’s throw it all up in the air and see what happens, and ‘I’m tough, I’ll survive,’” he said of the president’s attitude.

Parlee Cycles feels the bite of tariffs

Bob Parlee, Parlee Cycles founder and co-owner, and Isabel Parlee, co-owner and CEO, took Moulton on the tour of their headquarters and factory where they make custom bikes on the upper floor, then custom paint them down below.

However, they can’t do it all their production in United States.

“There is really not a single factory in the U.S. that can do this work, even at twice the price,” said Tom Rodi, Parlee’s sales and marketing director. It’s not just a matter of paying 20% more for domestic production, he said. The domestic capability is not there.

“We are a small business,” Isabel Parlee said. “We got plans. But the tariffs and the acrimony is making it very, very difficult, and we don’t have the ability to step sideways and go to Vietnam, or go to India or go anywhere.” Their factory in China is looking to start painting bikes in Thailand.The tariffs started at 10% at the end of last year, and then it rose to 25% in June. This has hampered the company’s ability to employ people and buy parts.

“It’s yet another example of how the president’s trade war has a massive impact on small business right here at home,” Moulton said. “They are the finest bikes in the world. They are made right here in Beverly, and this company is under threat, not from China, not from Russia, but from the president of the United States.”

“And how do the tariffs benefit me as a manufacturer?” said Bob Parlee. “I build a third of my bikes in the U.S. I’d build more here in the U.S. if I could ... I don’t benefit by the tariffs.”

Isabel Parlee said the tariffs impact their ability to market internationally as they are unable to afford to attend a major European trade show this year.

Bob Parlee said the uncertainty is the worst part. If they were to move the factory elsewhere, who is to say that country would not be hit with tariffs later on. The cost to set up domestic manufacturing is prohibitive. Isabel Parlee said the company has applied to the administration to be exempt from the tariffs but they have not heard “a peep,” she said, which is why they reached out to Moulton’s office.

By:  Ethan Forman
Source: The Salem News