Good morning!
Here are today’s highlights:
President Trump’s tariffs are now sending manufacturers back to China.
The head of the SBA says small businesses are doing just fine.
John Oliver shames Buc-ee’s for using litigation to bully smaller businesses.
Looking for an electrician or a carpenter? They’re probably building a data center.
THE 21 HATS PODCAST
Side hustles have gone mainstream. More employees than ever are starting businesses of their own—sometimes to earn extra income, sometimes as insurance against layoffs, and sometimes because they dream of becoming entrepreneurs themselves. But what does that mean for the businesses they already work for? If you invest months in training an employee, isn’t it fair to expect that person to devote their best energy to helping your company grow? That’s not an immediate concern for Lena McGuire, who’s still a solopreneur. But as she prepares to hire and train her first employees, she worries about investing in people who ultimately may see her business as a stepping stone.
Sarah Segal isn’t as concerned, but she does want her employees to view their jobs as careers, not placeholders. And then there’s Channon Kennedy. While working full time at Silicon Valley Bank, Channon invented a woodworking tool, got it manufactured, landed national distribution, and traveled the country to trade shows—all, she says, without letting her day job suffer. And that’s what she expects from her employees with side hustles.
Meanwhile, both Lena and Sarah are wrestling with another challenge: finding the right home for their growing businesses. Lena needs a showroom but doesn’t want to sink money into leased space—and she can’t find a building to buy. “I’m missing out on growth,” she says. “I feel like I’m stalled.” Sarah has opened a second office in Silicon Valley, but she’s wondering whether it’s time to leave her quirky “starter” office in San Francisco for something that better reflects where her business is headed. Buying would be ideal, but that’s easier said than done in San Francisco these days.
Plus: Sarah recently did something she hadn’t done in almost a decade as a business owner—she turned on an out-of-office message and actually unplugged for a vacation. Spoiler alert: there was only one real crisis.
You can subscribe to the 21 Hats Podcast—brought to you by Grasshopper Bank—wherever you get podcasts.
THE TRADE WARS
Believe it or not, American manufacturers are heading back to China: “One of the most surprising outcomes from a whiplash year of tariffs may be that China has emerged in a position of relative strength, with significantly lower tariffs than last year. The Trump administration last week imposed a new tariff rate on Chinese exports of 12.5 percent, similar to rates for dozens of other countries, as it works to resurrect the tariffs struck down in February by the Supreme Court. Chinese exports are still subject to other duties, including from Mr. Trump’s first term, and more tariffs could be on the way. But many industry executives and analysts speculate that the Trump administration will keep future tariffs on China relatively restrained to try to stabilize a rocky relationship.”
“Chinese imports fell by nearly a third last year, while goods from Mexico, Vietnam, and Taiwan surged. But Mary E. Lovely, an economist at the Peterson Institute for International Economics, said that China had a large cost advantage, and that if its ultimate tariff differential with other countries ended up small, that shift of business out of China could reverse.”
“On a dusty piece of land south of Bangkok, a flashlight factory stands full of promise. Workers hunch over tables gluing components. But only half the land has been built. Parts of the factory stand empty, waiting for future production lines. The factory is owned by a Chinese manufacturer that makes flashlights for American customers. When President Trump’s tariffs on China hit 145 percent last year, companies embarked on a panicked search for cheaper alternatives in countries like Vietnam and Thailand, including this facility.”
“But since then, U.S. tariffs on China have come down sharply, leaving the leaders of some of those same companies with second thoughts. ‘Have we pulled back to China? Yes, we have,’ said Phil Laster, the chief operations officer of Alliance Consumer Group, a Texas-based company that sells flashlights made in the Thai factory to U.S. customers.”
“This has created a conundrum for executives like Mr. Laster, who would prefer to diversify his supply chain. But making flashlights in Thailand costs as much as 15 percent more than it does in China, as a result of higher costs for materials and transport. Mr. Laster is also under pressure from Chinese competitors that are selling flashlights on Amazon for less than it costs ACG to ship its products to the United States. ‘We don’t want to go back to China, but at the same time, we’ve got a business to run,’ he said.” READ MORE
