Donald Trump's discussion of imposing new tariffs on goods from the United States' major trading partners has brought about months of uncertainty for business owners.
Recently, the president followed through on his threats by implementing a 25% tax on shipments from Mexico and Canada and raising existing tariffs on Chinese goods by 10%.
Despite this, uncertainties persist. Nicolas Palazzi, the founder of Brooklyn-based PM Spirits, pondered, "Is it for a day, is it a political flex, or will it last for four years?" The company, which imports and sells wine and spirits, relies on Mexico for about 20% of its products.
Trump's directives have put long-discussed threats into action, affecting imports from the top three US trade partners, responsible for over 40% of the approximately $3 trillion in yearly US imports.
Although Canadian "energy resources" will face a lower 10% rate, all other goods will be subject to the new tariffs. Trump claims the tariffs aim to hold Canada and Mexico accountable for commitments related to illegal immigration and drug trafficking.
The tariffs take effect on February 4th and will continue "until the crisis is alleviated," according to the orders.
Despite forewarning, the measures have the potential to significantly impact many businesses, particularly those in North America, as the three countries have grown economically interconnected over years of free trade agreements.
The escalating trade tensions could devastatingly affect various industries, notably the growing mezcal market in the US. Since 2003, tequila and mezcal consumption has tripled, and trade in spirits between the US and Mexico has increased by over 4,000% since the 1990s.
Worried about the impact on his suppliers, Palazzi shared that the tariffs could lead to increased prices and lowered sales, potentially jeopardizing the survival of many small Mexican-owned businesses.
Businesses like Palazzi's plan to adapt to the challenges caused by the tariffs. He stated, "Our strategy is to roll with the punches, wait and see, and adapt to whatever craziness is going to unfold."
Economists warn that the tariffs could push Mexico and Canada into recession. The looming threat of US tariffs and expected reprisals has been described as "existential" for many small businesses by industry representatives.
The imposition of tariffs by the US administration is perceived as a risky move that could negatively impact economic growth, raise prices, and lead to job losses. Despite this, Trump remains intent on using tariffs as a policy tool, downplaying concerns about potential harm to the US economy.
The alcohol industry, already grappling with pandemic-related challenges, inflation, and consumer cutbacks in dining out and drinking, faces additional hurdles from the tariffs. Smaller businesses, less equipped to absorb sudden cost increases, are expected to bear the brunt of the disruption.