'Conditions on the ground': Local business owners discuss upcoming Trump tariffs

On Feb. 1, President Donald Trump signed an executive order implementing a 25 percent additional tariff on imports from  Canada and Mexico and a 10 percent additional tariff on imports from China. The tariffs on China went into effect on Feb. 4 and the tariffs on Canada and Mexico will go into effect on March 4. 

In Chapel Hill and Carrboro, some local business owners are preparing to alter their business models or increase prices in anticipation of the tariffs. 

Gerald Cohen, Kenan Institute of Private Enterprise chief economist, said 40 percent of U.S. imports come from Canada, Mexico and China. He said a wide range of goods are imported, including automotive parts, oil, clothing, electricity and more. 

Tariffs cause the cost of production to increase for U.S. business owners, leading to an increase in prices to absolve the effects of the tariffs, Cohen said. He said the higher consumer prices also likely means less demand. 

Sonny Singh, Al’s Garage owner and operator, said he expects the tariffs to have a large impact on the entire automotive manufacturing and repair industry since most car parts are imported. 

An increase in automotive repair costs will cause people to stop maintaining their vehicles, which threatens public safety, he said. 

In addition to the tariffs imposed on Canada, Mexico and China, Trump restored a 25 percent tariff on steel and elevated the tariff on aluminum on Feb. 11.

“Lots of [car] parts are made of aluminum, like fenders and hoods,” Singh said. “Some of the parts are not aluminum, there might be plastic, so it’s not like [suppliers] are only concentrated on aluminum — they’re going to start raising their prices all across the board.”

Cohen also said the cost of aluminum foil, takeout containers and produce will impact local restaurants on Franklin Street. 

Jack Warren, the general manager of VooDoo Wing Co., said he expects the tariffs to have a trickle-down effect on the restaurant’s prices, as some of their materials are imported. 

“If my food suppliers or my dry goods suppliers — which are normally one in the same — are having to raise their prices, then obviously we are going to have to follow,” he said. 

Singh also said he anticipates an increase in cost and a consequential increase in prices, especially since Al’s Garage orders automotive parts from its suppliers on a need-basis. He said he plans to allow customers to bring their own parts once the inevitable price increases come into play.

Cohen said raising prices is a probable reaction, but the question of how much prices will increase and whether consumers are willing to bear those price increases remain.

He also said that some Chapel Hill residents are UNC researchers whose wages are impacted by federal funding cuts, and they may want to limit their spending at businesses and restaurants. Local business owners may be caught between needing to raise prices and wanting to retain their customers, Cohen said.

Although Warren expects changes in business costs, he said he has not made any changes yet because his suppliers have not communicated any price changes. He said once his suppliers raise their prices, menu prices will increase but not dramatically. 

“I think what we’re all trying to figure out is what it’s actually going to look like when we get an invoice,” Warren said. 

Historically, business owners have reacted to similar tariff policies in strategic ways. Cohen said some business owners increased the prices of complementary goods to parallel the effect of tariffs on goods. For example, this meant raising the price of clothes dryers when washing machines were being directly impacted by the Trump administration’s 2018 tariffs, he said. 

According to a press release from The White House, the tariffs are a part of the Trump administration’s "Fair and Reciprocal Plan" on trade, which aims to correct imbalances in international trade, decrease illegal immigration and increase domestic production of goods. 

Cohen said, theoretically, tariffs can boost domestic production in North Carolina — specifically agricultural production. However, he said Trump’s legislation on immigration does not allow for foreign-born agriculture workers to serve as the labor force for domestic agricultural production, undoing the theoretical benefit of the tariffs. 

“Every business has a thing that it does individually, based on the way they see conditions on the ground,” Cohen said. 

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