Reportage
Customs dispute between USA and China
Geopolitics in the Fortune cookie factory
They are considered the backbone of the US economy: small businesses in the USA. But they in particular are being hit hard by Donald Trump’s customs policy – and are now hoping for an agreement with China.
If you want to buy happiness in San Francisco, you have to pay more. Colorful lanterns dangle over the small side street in San Francisco’s Chinatown. Kevin Chan’s family has been producing fortune cookies here for 63 years. Tourists come to his shop from all over the world. His small business has become a pawn in a trade war between the superpowers USA and China.
The small yellow boxes in which shop owner Chan sells the cookies individually are just one product that he gets from China and that has become more expensive because of tariffs. That’s why he had to increase his prices. He previously sold the fortune cookie in the box for one dollar. Now it’s $1.30. “Many customers ask: Do you sell gold?” he jokes. He actually doesn’t feel like joking.
Insecurity – a big problem
The cookies are individually baked, folded and packaged by hand in the small shop. Made in USA. But: He sources 80 percent of the material he needs for production and packaging from China. He can’t just turn around and buy products like the boxes for the cookies elsewhere, says Chan. Nowhere else can you get the same quality as cheaply as in China.
Kevin Chan at his fortune cookie shop in San Francisco.
He and his small business cannot buffer the back and forth of threatened tariffs and short-term deferrals. And he is not alone. More than 1,000 small businesses enliven San Francisco’s Chinatown. A problem for many traders: They cannot react flexibly to announced tariffs, says Donald Luu. He is president of the Chamber of Commerce in San Francisco’s Chinatown. Building up inventories so that you don’t have to pass on tariffs to customers, at least in the short term, doesn’t work for many small companies. The rental prices for storage rooms are too high and there is often too little capital available.
Small companies are particularly affected
Much of what is imported into the United States from China arrives on giant container ships at the ports of Los Angeles and Long Beach. From his office window, managing director Gene Seroka surveys the huge ships and cranes.
According to a recent analysis by the Federal Reserve Bank of Atlanta, 86 percent of companies that import goods by sea in the U.S. have fewer than 50 employees. Unlike large companies, they usually source their products from one distributor in one country. That makes them more vulnerable. At the same time, the products they import are usually less complex and easier to replace with alternatives from other countries.
Gene Seroka, executive director of the ports of Los Angeles and Long Beach.
Donald Trump had already threatened tariffs of up to 60 percent on Chinese products during the election campaign. This is also why companies that could afford it have been building up inventories for a long time so that they can sell their products to their customers at old prices despite tariffs, observes Seroka. But the warehouses are emptying. Then you will probably see that these companies also pass on the prices to consumers, says Seroka. Just like what’s already happening in the Chan family’s fortune cookie factory.
Companies are hesitant to invest
Uncertainty determines the port manager’s everyday life. At the moment, 90 percent of his job consists of talking to his business partners around the world about tariffs, says Seroka. When will the next customs announcement come? Do announced tariffs really come into effect?
America first – that is Donald Trump’s trade strategy. Protecting American companies, brands and therefore jobs in the USA is also a priority for Gene Seroka. He is not against tariffs per se. But you have to look closely. When it comes to international trade, there is no one solution.
A lot of goods from China arrive at the port of Los Angeles.
This is exactly a crucial difference between Donald Trump’s trade policy and that of his predecessors, says Sarah Beran. She advised the Biden administration on China on the National Security Council. The fact that China represents a serious threat to the American market and that a way must be found to create a level playing field – that was also the goal of previous governments.
However, the Biden administration has relied on international alliances with allies and partners, said Beran. The fact that the Trump administration is using tariffs as the only means of choice differs significantly from the trade policy of previous governments. She warns: At the moment, companies are holding back on making major investments in the USA because the situation is too volatile and too uncertain due to the customs conflict. It takes planning.
Kevin Chan also demands this in the fortune cookie factory. He hopes for an agreement with China. And on a long-term deal. Stability – that’s the only thing that counts for him as a businessman.
