WA businesses scrambling as Trump tariffs raise costs, uncertainty

If you’re wondering what it’s like to run a business on the eve of the second trade war in seven years, meet Jerry Lopez, founder and chief technical officer at NoiseFigure Research in Renton.

Lopez’s company relies heavily on Chinese materials and equipment for the integrated circuits and systems it designs for the aerospace industry and other customers.

When President Donald Trump slapped tariffs on China during his first term in 2018, Lopez ended up paying an extra 25% for critical equipment he’d ordered before the tariffs went into effect.

So when a reelected Trump put an additional 10% tariff on many Chinese imports Feb. 1 — and threatened more if China retaliates — Lopez wasn’t taking any chances. He halted all orders for Chinese products and won’t restart them until the tariff situation gets clearer, even though that means ratcheting back this year’s plans for growth, research and development.

“Everything is on hold,” said Lopez of the orders he would have already placed by now, but were simply too risky. “You don’t know that, by the time they get to port … there’s a new tariff.” 

Lopez’s company is one of thousands of firms in Washington that are scrambling as trade tensions upend the global markets they depend on for supplies, customers or both.

Trump says his tariffs — essentially, taxes levied on American importers when tariffed goods arrive at U.S. ports — are needed to stop the flood of cheap, sometimes subsidized foreign goods that have decimated U.S. manufacturing.

But that means short-term pain for U.S. importers and their customers. While foreign exporters may absorb some of the costs of tariffs, much of the increase gets passed along to American consumers.

And beyond the new tariffs themselves — 10% on Chinese goods, 25% on aluminum and steel, and 25% tariffs, now suspended until March 1, on Mexican and most Canadian goods — is the fear of a wider trade war. 

China has already retaliated against U.S. goods. Trump has threatened tariffs on the European Union and on Thursday announced a plan for higher U.S. tariffs that would match other nations’ taxes on imports. Many trade experts say it all could quickly escalate, as happened after Trump’s first tariffs, some of which were continued by the Biden administration.

That has left many trade-dependent firms in the Seattle area scrambling for ways to get around higher import costs or the loss of overseas customers. 

International trade is not “a switch you can just turn on and off,” said Sam Cho, a Port of Seattle commissioner and director of strategic initiatives with the Seattle mayor’s office. “That level of uncertainty is really messing with people’s businesses.”

That uncertainty has serious implications for a regional economy that depends on billions of dollars in foreign goods and earns billions of dollars in foreign sales of aircraft, farm goods, seafood and other commodities. 

Tariffs announced so far already represent a $4.1 billion hit to the state, according to research firm Trade Partnership Worldwide, and a full-blown trade war could increase that substantially.

Hedging their bets

Trade disputes are nothing new, and companies have developed many workarounds, but most have limits and risks. 

For example, last year, many U.S. companies did what’s known as front-loading or forward buying — stocking up on imports on the chance that a Trump reelection would mean new tariffs. 

At the ports of Seattle and Tacoma, inbound container volumes for November and December were up 29% compared with the same period in 2023, according to the Northwest Seaport Alliance, which oversees marine cargo operations at both ports.

By contrast, November and December imports in 2023 were only around 2% larger than in 2022. 

Although the port can’t “specifically tie this larger increase to forward buying relating to potential tariffs … it is a significant increase over what we saw in 2023,” said alliance spokesperson Melanie Stambaugh Babst.

But forward buying can upset a global supply chain built for “just-in-time” deliveries. 

Some shippers saw cargo delays at the ports of Seattle and Tacoma in November and December “due to so many different people importing and exporting at higher-than-normal volumes in anticipation of the tariffs,” said Bryan Gonzalez, international logistics manager for Seattle-based agriculture exporting firm FC Bloxom & Co.

Forward buying is also expensive, which can limit its use, especially by smaller importers. 

That includes Tolt Technologies, a Duvall-based startup that designs eye-directed controls for powered wheelchairs. 

Shortly before the election, Tolt was able to order a two-year supply of custom-made USB cables from China, which arrived before the latest tariffs kicked in, CEO Tracy Beavers said. 

But that purchase, which is four times what Tolt would normally order, has meant less working capital for a small company that is still building its market. 

And Tolt couldn’t afford to forward buy another component — a sophisticated eye-tracking camera made in Europe. Although European imports may also see U.S. tariffs, the camera is expensive, and “I don’t have the capital to stock up on them,” Beavers said.

Front-loading also won’t work for items with a limited shelf life.

At Walla Walla Vintners, a midsize winemaker, owner Scott Haladay is bracing for higher costs on imported glass bottles from China and a possible increase on cork prices from Europe. 

Although bottles can be front-loaded, Haladay said, cork dries out so quickly that there’s little point in stocking up. “It’s effectively a perishable product.”

Rebuilding “is insanely expensive”

Exporting companies, meanwhile, face a murkier picture.

With the trade disputes still in the early stages, it’s not clear how many other countries will slap tariffs on U.S. goods or how high those tariffs will be. 

But after the losses suffered during the last round of Trump tariffs, many exporters say they can’t afford to wait and see how bad things get this time.

Washington’s farm exporters and shippers, for example, are still smarting from the last trade war. In 2018, cherry growers alone lost an estimated $60 million to $80 million in profit due to Chinese retaliatory tariffs, while tariffs from India decimated what had been a $120 million annual market for Washington apple growers.

But avoiding those losses isn’t easy. Selling farm products overseas depends on carefully nurtured relationships with importers that are easily severed by trade disputes and are very hard to rebuild once the dispute is resolved, said Apurva Jain, an associate professor and supply chain expert at the University of Washington Foster School of Business.

That was the painful lesson for Bloxom, the agriculture exporting firm, which lost some customers in China and India during Trump’s first round of tariffs. 

To avoid that outcome this time, Bloxom has laboriously arranged an alternative supply network: If retaliatory foreign tariffs make U.S. exports too costly, Bloxom will temporarily supply its foreign customers with products from Turkey, Egypt, Chile, New Zealand and other countries.  

It’s a complicated and costly hedge, says Bloxom’s Gonzalez. But trying to rebuild trade relationships after a trade war “is insanely expensive,” he said. “It is better for us to simply maintain the relationships by providing our alternative supplies.”

Still, not every company can afford those kinds of hedges. Smaller firms in particular may choose to leave the export market or not to get in at all. 

Building an export business is hard even in the best of times, says the port’s Cho, who has also worked in exporting. When prospects are clouded by a potential trade war, “it’s really tough to get people to even think about exporting.”

Striking a balance

All of this neatly captures the conundrum confronting businesspeople like Lopez. 

Lopez said NoiseFigure had been exporting some products but stopped after Trump’s first round of tariffs. 

With Trump’s new tariffs, Lopez is developing alternative suppliers outside of China. But given NoiseFigure’s complicated technologies and exacting standards, bringing on a new supplier can take six months or more. “It’s not just a phone call,” he says. 

Lopez says he supports Trump’s stated aim of “reshoring” — bringing back the manufacturing lost to unfair competition from places like China. But he also knows firsthand how difficult and drawn out that process will be. 

The reason he relies on Chinese products, Lopez said, is that they’re high quality and up to 10 times less expensive than U.S.-made alternatives — if those alternatives are even available. 

NoiseFigure is doing its small part by designing a sophisticated printed circuit board that can be manufactured in the United States and compete in global markets. 

But that is a five- to 10-year process, not something that can be forced overnight with tariffs, Lopez said.

To the contrary, by raising costs, Lopez said, tariffs make it harder for companies like his to invest in the research and development needed to revive domestic manufacturing.

The risk, Lopez said, is that “you’ll never bring it back.”