Specialty stores brace for price hikes due to Trump tariffs

MILWAUKEE (CBS 58) -- Delivery day at O'Malley's European Foods on Thursday meant Gerard Campbell unpacked a pallet stacked with boxes of potato chips, chocolates, tea and condiments. Campbell worries he'll soon be paying more -- and charging customers more -- for those items as a result of new tariffs announced this week by President Donald Trump.

The vast majority of Campbell's wares come from either his native Ireland or the United Kingdom. Under the sweeping new tariffs, a 20% tariff will be applied to items from the European Union and products from the United Kingdom will be slapped with a 10% tariff.

Other countries face even larger tariffs, such as 34% for China and 26% for both Japan and India.

"About 98% of our stuff is imported," Campbell said. "The only things we can't import are the meat products."

Campbell said within 24 hours of President Trump announcing the tariffs Wednesday, he began getting messages from some of the wholesalers who sell his imported items.

"We've already gotten several emails from our providers to say that we will be picking up the costs- not the providers, we as the buyer of the products," Campbell said. "And unfortunately, we will have to probably pass that along to our consumers that come in the door."

Campbell has done some back-of-the-napkin math based on his inventory, and he estimated the tariffs will add between $40,000 and $50,000 to his annual expenses. 

About 98% of the products O'Malley's Europeans Foods sells are imported from Ireland or the United Kingdom, and they're subject to new tariffs enacted by President Trump's emergency order.

Tailan Chi, an international business professor at UW-Milwaukee, said the tariffs will have a pretty universal effect on American consumers.

"Short-term, I think a vast majority of economists would say prices are going up," Chi said.

The Trump administration has maintained the new tariffs are reciprocal, aligning American tariffs with "monetary and non-monetary" duties other nations place on American exports.

Chi and other economists have said that's not what's happening. Instead, analysis of the new tariffs appears to show the new tariff rates are based on the trade deficit the U.S. has with those countries. The U.S. is at a trade deficit with another nation if Americans buy more goods from that place than the U.S. exports into that country.

Chi said trade deficits are complex. For instance, a lot of the most valuable U.S. exports revolve around expertise and services as opposed to raw goods. He said in a lot of cases, even steep tariffs on another country won't make it cheaper to produce those items in the U.S.

"Shirts or toys," he said as examples. "The cost difference is so large, even if you impose a 20% tariff, a 30% tariff, it's still cheaper to make them overseas."

Chi said companies would need to believe the tariffs will be in effect for decades in order to justify relocating their manufacturing operations. He questioned whether firms would wait instead to see if political blowback forces the Trump administration to back off the new tariffs. 

"Unless they are fairly certain that the tariffs will continue, they wouldn't make major moves," Chi said.

He added another possibility is the Trump administration is using the tariffs as a negotiating tactic to win small improvements in its trade deals.

Campbell said he is expecting short term pain as there's not much of an alternative for his business. To stay viable, he said he'll have to raise his prices to cancel out the increased costs of buying almost exclusively foreign products.

He's optimistic regular customers will understand and keep shopping as they always have in the two years since he bought the shop. However, Campbell added he's worried price increases could scare away newcomers.

"For the customer that comes in for the first time, they may get a little sticker shock when they see a candy bar's maybe three dollars apiece instead of the normal two bucks," he said. "There's definitely that give and take, so we hope those people will continue to support us as a small business."