It’s the literal definition of a small business: a small closet-sized room inside a Brampton On. home where John Melich watches his two 3D printers work around the clock, churning out tactical gear like handcuffs and baton holders made out of plastics, that get shipped to his primary customers in the U.S. But since the U.S. imposed the most recent bout of tariffs last week, his small company, Gear182.ca, has been barely pocketing a profit, showing us one example of a purchase by a U.S. customer where the tariffs were 50 per cent of his overall sale. “We realized that we were trying to ship a product that cost $100 -- and just the tariff alone was $50,” said Melich to CTV News on Saturday. “After including shipping prices and our Etsy fees, we’re literally going to lose money on each product.” The current U.S. tariffs mean the importer of Canadian-made products is generally responsible for paying the tariff to the U.S. government. But Melich says the way his sales and shipping are structured requires him to prepay the tariff before his products cross the border — leaving his business to absorb the cost rather than passing it along to his American customers. “[Websites] won’t let the packages cross the border unless the duty has been paid up front,” said Melich. “And a lot of selling platforms, like Etsy for example, has a policy that we have to prepay in that tariff before we ship it.” He says, right now, he’s able to take on the cost and is not willing to pass the additional fees to his customers. “The counter tariff is also going to affect us because our raw materials, like our roll of filament, that’s going to be tariffed while we import it,” added Melich. “The problem is when we export, we have to prepay that duty... otherwise it can’t even cross the border -- so we’re paying both sides of the border.” “If we’re keeping us as a primary market, it won’t be long until we fold.” Businesses avoiding passing tariffs off to customers The U.S. tariffs that were implemented last week add an additional 50 per cent tariff to targeted Canadian-made goods being shipped into the U.S. -- which, in practice, should be paid by the American importer to the U.S. government. “Right now, the United States has put a 50 per cent tariff -- that’s a tax on Canadian exports,” explained economics professor at McMaster University, Colin Mang, to CTV News Saturday. “This affects distillers, candle makers, cosmetics companies, honey producers, cabinetmakers, clothing makers and a range of other Canadian manufacturers -- and what that basically means is that anyone trying to export goods to the United States, their products, are going to face this extra 50 per cent tax, which American families then would have to pay.” While the counter-tariffs coming Sept. 8th are slated to add 15, 25 and 50 per cent tariffs to billions of dollars worth of American-manufactured goods that are being transported to Canada, it’s the Canadian importers that are expected to pay the additional fee, which would go towards the Canadian government. “In response to the American tariffs, the Canadian government has put our own tariffs on American goods coming into the country,” added Mang. “What this is going to mean for Canadian retailers and for Canadian manufacturers, they’re going to have to pay more to buy those products, and then also pass on that extra cost to Canadian families.” But when it comes to tariffs and counter-tariffs, economists and business experts agree it is in the companies’ interests on both sides of the border to come to agreements to find ways to absorb the costs, with the last resort of passing it off to the customer. “The idea here behind tariffs is, of course, to try and move production or to favor goods from within your own country,” said Pedro Antunes, chief economist at Signal49 Research to CTV News Saturday. “But for the consumer, as soon as you apply a tariff that’s a tax that the consumer will have to pay either with less choice or essentially with a higher price.” ”There’s a few choices here," said Antunes. “Businesses are either going to take a hit and absorb the costs, or perhaps negotiate with the importer in some way... or pass those costs off to the consumer.” Which options companies pick depends on the availability of the product they’re selling and the competition within the market, according to economics professor at Concordia University, Moshe Lander. “It’s based on something called elasticity,” said Lander to CTV News Saturday. “If I were to put a tax on insulin, who would pay it? The pharmaceutical company or the diabetic? It’s the diabetic because the pharmaceutical company is going to say to the diabetic: ‘pay it or die.’ So there’s really not a lot of bargaining power here on the side of the diabetic -- so the entire tax is going to fall on them.” “Now the opposite end.. let’s say that the government were to put a tax on President’s Choice Cola. Not Coke, not Pepsi, not anything else in this case. Then if President’s Choice were to try and pass the tax along to the consumer the same way that the pharmaceutical company did, the president’s choice cola drinker would say, ‘you even pass five cents of that stuff on to me, and I’m going to go buy something else,’” he added. Canadian businesses bracing for counter-tariffs Best Brand Appliance’s showroom in Vaughan, just outside Toronto, has showroom after showroom of American-made products shipped in from the U.S. The owner of the company says the counter-tariffs slated to come into play just over a week from now will hit them hard. “The products that we import from the United States, such as any of the Whirlpool brands, KitchenAid, G.E., Sub-Zero, Wolf... we’re putting a 25 per cent tariff on that product as Canada. So essentially what’s happening is the product is being risen by about that amount,” said the company’s owner, Sam Zahler over Zoom to CTV News Saturday. He adds that his business plans to absorb the extra costs of importing U.S.-made appliances for as long as possible -- and he isn’t the only business planning on doing that. “Our competition is amazing as well, they’re doing an awesome job with us, we’re going to do whatever we can to work together, even with our competition, to make it as easy as we can on our clients for as long as we can,” said Zahler. “People are really upset. Business owners are really, really upset because you need stability in business,” added Zahler. “Businesses I’m speaking to, whether it’s I know guys in lighting business, I know people in the roofing business -- everybody is really trying to not pass it on because you’re trying to retain your clients.” That also includes working with the American suppliers to find ‘creative’ ways to reduce the financial hit and avoid passing the extra fees off to the customer, including reducing promotional discounts offered by their suppliers. “Those brands coming from the States normally give us 20 per cent off on certain promotions or up to 20 per cent off, that might be brought down to maybe 10 per cent off,” said Zahler. “If we can hold off and we’ll make a little less money and the manufacturers make a little less money, and we can eat it and then absorb it until there’s a resolution, that’s what we’re hoping to do, like last time,” said Zahler, who adds companies are planning their finances only a few months — or one quarter — at a time, hoping the tariffs could eventually be reversed and that November’s U.S. midterm elections could put additional political pressure on the White House. All of that still has some customers trying to get ahead of the counter-tariffs and rushing to purchase goods before the Sept. 8th counter-tariffs kick in, just in case some companies decide to increase prices to mitigate the additional tariff fees. “You have to buy now because you don’t even know if the price is going to go up soon,” said Best Brand Appliance customer Mary Ching. “We don’t want to buy expensive appliances with the tariffs.”
