There’s a lot of overreaction without thought. Assuming the tariffs stay at proclaimed levels (and there’s no guarantee they stay, go away, up, or down) some businesses will be devastatingly hurt and other’s not at all. Sellers, buyers, and advisors need to dig deep to see what’s really going on.
Here are some examples. A past client deals with consumer products and guess what? Many are made in Asia. He told me last week “we’re nose deep in tariffs” and can’t talk until next month.
His firm sells to Costco (and others) and Costco supposedly works on a 14% margin. A product they buy for $17 they would sell for ~$20. If it’s from China and the tariff is 50%, the consumer price is ~$30, If the tariff is 100%, the new price is ~$40. Would you pay $40 for what you used to pay $20 for. Now multiply this by 10, 20, 40 times if it’s a lawnmower, washing machine, etc. We don’t buy, companies slow production, people lose jobs.
Another client buys components for their manufacturing process. Each unit costs $200 and he says what comes from China is about $10. A 100% tariff doesn’t add too much to his cost and won’t affect what his customers or he buy.
Finally, a past client is a service business. His only “real” costs are people related; salaries, benefits, space to work from, etc. and every so often new computers. Tariffs don’t affect this business. And, if he sells to a client in Canada, it apparently doesn’t count against the trade deficit as it’s a pure service.
Sellers, buyers, and advisors need to do their homework as there’s no one tariff size fits all.
