How tariffs shrank one small business
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After Donald Trump was reelected in November, a small business called Lay-n-Go that makes cosmetic bags and drawstring carriers saw the China tariff writing on the wall, and moved production out of the country, but that wasn't enough to keep their profit margins from shrinking.
Why it matters: Many businesses face an existential crisis over tariffs, even the ones that prepared for the onslaught from the Trump administration.
- "It's exponentially worse than what we would've expected," says Adam Fazackerley, who cofounded the company with his wife Amy in 2010. "We're just making less money."
The big picture: After the trade war in Trump's first term, many companies started shifting supply chains away from China.
- Ahead of the president's second term, there was belief that more tariff disruption would be manageable. On earnings calls in November and December, CEOs expressed confidence that they could adjust.
- Then came "Liberation Day" with its global baseline tariffs and a levy that ended up at 145% on China.
Zoom in: Lay-n-Go got started in 2010, making its product in China. It approached several domestic manufacturers, but none were capable of producing their bags for a reasonable price.
- After the first rounds of Trump's tariffs in 2018 and 2019, it moved to Cambodia. That initial interruption really slowed down the company's momentum. It had to stand up a whole new supply chain, Fazackerley says.
- Then in 2020, a federal provision that held Cambodian tariffs at zero lapsed, and costs rose. Suddenly China, which has more sophisticated manufacturing capabilities, looked good again. Lay-n-Go moved back.
By 2022, the increased tariff costs had taken a toll. Lay-n-Go downsized, walking away from its partnerships with retailers Target and QVC and becoming a direct-to-consumer brand that sells only online.
- It was the only way to make their margins work with higher tariffs. "We've had to shrink the business to survive," Fazackerley says.
- Then came the election. When Trump won again in November 2024, Lay-n-Go put a new production order in with its Cambodia manufacturer.
- The company also just re-upped its Cambodian order, even with the additional costs of Trump's latest across-the-board tariffs.
"We are a ping pong ball right now. We are just trying to adjust to survive," Fazackerley says. "Consistency is a huge benefit for running a business. But the lack of consistency has been steady since 2018."
- It's not a good recipe for business growth. Even if the originally proposed reciprocal tax rate of 49% goes through in Cambodia, the company could survive, he says. But if all the China tariffs happen, it could not.
Yes, but: Trump said Sunday he had no plans to give small businesses any carveouts from tariffs, even as the U.S. Chamber of Commerce warns that many may not survive.
- "They're not going to need it," Trump told "Meet the Press."
For the record: "President Trump has been clear: If you're worried about tariffs, the solution is simple. Make your product in America," White House spokesperson Kush Desai said in a statement.
The bottom line: The businesses that rely on overseas manufacturing are seeing a bigger hit than they anticipated from Trump's tariffs.
