ATLANTA – President Donald Trump’s decision on Wednesday to pause a huge hike in tariffs on dozens of countries for 90 days gave the slumping stock market a bump.
But that surge was short-lived amid investors’ fears that tariffs remained historically high – 25% on imports from Canada and Mexico and 10% for nearly all other nations. Of even greater concern is that Trump has ratcheted up the tariff on Chinese imports to 145%, with China retaliating in kind in a full-blown trade war.
It’s the volatility of the economy that has business owners in Georgia and elsewhere most worried, said Chris Clark, president and CEO of the Georgia Chamber of Commerce.
“Businesses need and want consistency,” Clark said. “A lot of the anxiety right now in the Georgia business community comes from that uncertainty.”
“We don’t know what to charge our customers,” said Felipe Arroyave, president and CEO of Atlanta-based Spectrum International, a manufacturer of contact lenses. “We’re just in limbo.”
Throughout U.S. history, tariffs have been used to raise revenue for the federal government. In fact, until a federal income tax was established early in the last century, tariffs were the government’s primary source of revenue.
Tom Smith, an economics professor at Emory University’s Goizueta Business School, said tariffs essentially are a tax.
“These tariffs are not paid by other countries,” he said. “They are paid by our businesses and our consumers. … Georgia companies will have to pay the tax, and they will likely have to pass some of that on to consumers.”
While higher prices will be felt broadly throughout Georgia’s economy, the businesses likely to feel the most impact are those that rely heavily on imports or exports.
Joseph Cortes, executive director of the Georgia Craft Brewers Guild, said his industry imports aluminum primarily from Canada to produce beer cans and imports steel that goes into brewing equipment. The tariff on both is 25%.
“If these tariffs continue, we’re going to see a continued slowdown in growth and investment,” he said.
Cortes said it’s not simply a matter of raising prices to cover the cost of the tariffs because beer is not an essential product.
“This is a discretionary spending item,” he said. “The last thing our small breweries will do is raise prices.”
On the export side, poultry is one of Georgia’s top agricultural products, Mexico being the top market. The industry exports about 17% of the broilers produced in Georgia.
China was a key market for Georgia poultry in the past. But that’s no longer the case, a result both of high tariffs and non-tariff related steps China has taken including banning Georgia poultry following outbreaks of bird flu.
“Exports are an important part of the success of Georgia’s poultry industry,” according to a statement from the Gainesville-based Georgia Poultry Federation. “Georgia poultry can compete in any market in the world when the terms of trading are fair.”
While Georgia’s auto manufacturers are high on the list of industries that will be affected by the tariffs, confusion over how that will play out illustrates the complexities of enforcing the tariff hikes. Clark said cars produced in Georgia cross U.S. borders an average of seven times during the manufacturing process.
Ironically, the Georgia Ports Authority is enjoying a booming business with high tariffs looming. The Port of Savannah set a monthly record last month for containerized cargo traffic for the second month in a row, while the Port of Brunswick also broke its monthly record for autos and heavy equipment in March.
That success was due in part to customers front-loading orders in anticipation of the new tariffs, short-term gains that likely will go away once the tariffs set in.
Clark said large companies have the resources to make such adjustments in their orders.
“I worry about the small businesses,” he said. “They don’t have the capital to go out and buy everything. They’re going to take a hit.”
The president has stated the main goal of raising tariffs is to encourage manufacturers to move their overseas operations to the United States.
Smith said that’s a lofty goal but one that couldn’t begin to pay off in the short term because of the time it takes to acquire land, find workers, and build new plants.
“Those facilities couldn’t be open any time in the next year, or the next two or three years,” he said. “The idea of bringing manufacturing back to the United States is very impractical, at least in the short run.”
Clark sees a silver lining in the ramping up of tariffs. The Trump administration has announced that leaders of more than 70 counties have called to express an interest in negotiating tariff deals rather than retaliating against the U.S.
“If this administration is able to reduce existing tariffs, you could see new markets,” Clark said.
In its statement, the Georgia Poultry Federation also expressed reason for optimism.
“While we are monitoring these negotiations closely for impacts on our members, we support the administration’s goal of bringing balance and fairness to the international trading landscape,” the statement read.
For now, however, uncertainty remains the driving factor in how businesses are responding to the tariffs.
“A lot of business decisions, large and small, are on hold until we have a better understanding of what the tariffs set,” said Jeff Humphreys, director of the Selig Center for Economic Growth at the University of Georgia’s Terry College of Business. “I don’t think we’ll get a lot of new project announcements. … A lot of projects will be on hold.”
Clark said he’s advising Georgia Chamber members not to panic.
“I tell them to be calm, plan ahead, and don’t make rush decisions,” he said. “That’s really the best play now.”