Alaska businesses are struggling to adjust to President Trump’s constantly changing tariff policies and deadlines.
The Trump administration paused most of its whopping “reciprocal tariffs” for 90 days in April with a goal of securing 90 trade deals during that time. But two days before they were supposed to go into effect, Trump signed an executive order to extend the deadline to Aug. 1.
That order says countries may be subject to revised rates, either higher or lower than what was initially announced.
Greg Wolf is president and CEO of the Alaska International Business Center. He spoke recently with Alaska Public Media’s Ava White about what a tariff is, and what impact the extension is having on Alaska businesses.
Greg Wolf: There are many types of tariffs, but the most common one is what we're experiencing now is an import tariff, and it's a tax paid by the importer.
It's very important to recognize it's paid by the importer, not the country who's shipping it to us.
Foreign countries do not pay tariffs. They never have. Not a single country has ever paid a tariff to another country. America doesn't pay any tariffs to anybody, and neither do our trading partners pay a tariff to us. As we Americans, it's a tax on us for all the products that we import from around the world which are substantial.
Ava White: Are there any cases where tariff costs don’t get passed on to the consumer?
GW: Well, we live in a capitalist system, so I would assume that some or all, typically.
I know the President asked Walmart to absorb it. Of course, they're not going to do that. They're trying to make money. They have an obligation to their shareholders and their employees, their customers, so they have to balance it.
The tariffs are usually passed on, some or all to the end consumer, which is me and you.
AW: What are you hearing from Alaska businesses as they're trying to adjust to the ever changing tariff news?
GW: This is causing uncertainty, confusion, not only with small companies, medium sized companies, but some of the largest corporations in the world. They don't know what will happen tomorrow, they're not even sure what'll happen this afternoon.
That sort of uncertainty is never a good thing. Businesses abhor uncertainty. Whether it's a good rule or bad rule, at least they have to know the rule, and then they can try to respond from that. If the goalpost keeps moving every hour, every day, every week, that creates a lot of confusion.
I just got a call from a small business owner in Alaska. She's importing a product from another country, and the tariff as it stands today, is making her life very difficult, and she's not sure if she can continue, if there's this added tariff in addition to what she's already paid, all of her other costs, [it’s a] small business here in Alaska, and she's trying to look for what can be done to mitigate the damage of that. So we’re going to meet in the next few days to discuss that.
Most American citizens, including Alaskan citizens, haven't felt the full impact of tariffs because they're changing every day, and they get delayed. They get postponed.
Traditionally, and I've been in this business for a long time, trade deals sometimes take years to agree on, because they are vital to both sides of the deal. And there are some critical industries which have traditionally been a sticking point, agriculture, automobiles. Then you move into steel and aluminum, and then these days, technology.
AW: Is it harder for businesses to plan for the uncertainty, and just like not know whether tariffs will happen, and if they do, how high they will be, rather than to just deal with high tariffs in the first place?
GW: For better, for worse, if it was just an announcement that they could count on for the next year or two, or or longer, then they can make sort of thoughtful decisions about how to proceed.
Are they going to pass along that extra cost to their consumer? Will the consumer stop buying from them because they have passed it along? If they eat the cost of the tariff, then are they profitable? Can they stay in business, or do they have to fire their employees?
There's a lot of trickle down from all of this.
You might not care about tariffs at all, let's say you don't. But say you own a restaurant, some of the food items, particularly fruits and vegetables, they're going to cost more. So are you going to raise the prices on your menu? But let's just set aside that part. If my customer has a business and they're paying a higher tariff, let's say they're buying an iPhone, they used to cost $1,000 and now cost $1,500. That's $500 less that they could have spent at your restaurant.
There's a lot of trickle down that perhaps a lot of people hadn't really taken into account. It's a complicated issue. Usually this is like, say, done over time. It's done thoughtfully and target[ed]. We're in unchartered territory right now.
AW: Did companies rush to order and change suppliers, etc, and now they're stuck with decisions that maybe they didn't need to make?
GW: I don't think so. I mean, they did the best they could with the information they had, which was not much, and there was almost no certainty. So there was a rush. People ordered forward so they knew they were going to need X amount of product six months from now.
Again, we Americans have yet to feel the impact, really in a serious way of what these tariffs could possibly mean, should they ever occur to the extent that they've been threatened.
AW: If everything's uncertain, what are you watching for leading up to August 1 in terms of what might change or what actually might go into effect?
GW: I have a different perspective than the American consumer. I am an American consumer, so of course, it does affect me, but my companies that I represent, I represent 120 companies in Alaska. Almost all of them are exporters, so some might be impacted by an import tariff when they import, say, some inputs to what they're making here.
What I'm worried about, and what my companies are worried about, is the retaliatory tariffs on the other side, because that affects their sales. I work with a number of seafood companies. We're actively involved, like, for example, in the China market right now, if Alaska seafood is facing a retaliatory tariff by the Chinese, say, 27% which I think in some categories it is, and Canada or Russia doesn't have that. And that makes it difficult to make sales when you’re already 27% higher walking into the room.
And there's another interesting aspect, and a lot of people haven't thought about it, Alaska does have a weakness in our economic system, and that is that we don't do any final production here. It's called primary processing. We freeze it, we put [it in] a 40 foot container, and then we often send it to China. They do the final process, and they turn it into steaks and filets and whatever you want, they will sometimes do the consumer packaging, and then they ship it back to America or to other markets around the world.
So let’s say it's conceivable, not necessarily going to happen, but it could happen, is that we ship a product to China or to other countries. They put a tariff on that product, then that product is shipped back even to the United States, even to Alaska. And there's another tariff, we're tariffing their product.
It doesn’t always work that way, but it can work that way. So that would mean our products have the risk of being tariffed twice, once on the other side and once on our side.
AW: Are companies taking this Aug. 1 deadline seriously?
GW: I'm sure they do, and I'm sure some of the countries [are,] who have been given a deadline by our administration to come to us and make a deal. I don't know if maybe the deadline gets extended again. There's really no certainty as to what's going to be true and not true in terms of this.
