The overwhelming majority of Colorado businesses surveyed for a new state report on tariffs said the effects of the import taxes have been negative, with the financial impacts followed by the uncertainty created by changing trade policies cited as the biggest challenges.
The findings released on Nov. 21 are a follow-up to a report issued in September by the Colorado Office of State Planning and Budgeting. The latest look at the impacts of tariffs on Colorado businesses found that 86% of the businesses view the tariffs levied this year as challenges and only 14% see them as beneficial.
State agencies interviewed farmers and ranchers as well as businesses across several sectors: aerospace, construction, technology, retail, bioscience, energy and manufacturing. The report was coordinated among the Colorado Office of Economic Development and International Trade, or OEDIT; the Colorado Department of Agriculture; and the Colorado Department of Labor and Employment.
In July, Gov. Jared Polis signed an executive order requiring certain state agencies to analyze the impacts of U.S. trade policy changes. The previous report said the effective tariff rate in Colorado has increased sevenfold since last year.
The information from several recent interviews shows that businesses across Colorado are facing tough decisions, said Eve Lieberman, OEDIT executive director. She said business owners are considering whether to raise prices, take less salary, cut employees or whether they can even keep their doors open.
“I talked to a company where the CEO was going to take one third of his salary and is also implementing a hiring freeze. He can’t even think about making future investments,” Lieberman said. “In some cases, especially with manufacturers, businesses are incurring costs as high as $2 million.”
Navigating through the changes in the import levies and adjusting supply chains have consumed hours of work. Lieberman said benefits that people see as possible are related to the potential of spurring more domestic manufacturing and building new business ecosystems.
Adding the layer of tariffs
Tariffs layered on top of higher costs for supplies and equipment and years of low prices for many commodities are fueling fears of more farm and ranch bankruptcies and foreclosures, said Kate Greenberg, Colorado agriculture commissioner.
“This is the time of year that producers are looking to the next growing season (and asking) ‘What are operating loans looking like. What are my markets going to be. Where do I have any certainty?’ The uncertainty that’s come with the tariff chaos out there has been incredibly difficult for that future planning,” Greenberg said.
Farmers and ranchers had trouble getting help with their loans during the government shutdown, she said. Companies that support ag producers, including transportation companies, are dealing with tariff-related issues as well.
The beef industry has lately been a bright spot for U.S. agriculture. The prices ranchers are getting for their beef have risen as drought and other factors have reduced supply, resulting in some of the nation’s lowest herd sizes in decades.
The prices shoppers pay for beef at the grocery store have also shot up, which led the Trump administration to boost beef imports from Argentina to try to lower costs for consumers. While Argentina’s imports aren’t expected to have a significant effect on U.S. beef prices, several ag organizations criticized the increases, saying they will undercut U.S. ranchers.
Colorado potato producers, ranked second nationally, are talking to Japan about opening up trade. The Colorado beef industry is negotiating with Japan and South Korea to help make up for any reduced exports to China.
However, there are concerns that the higher tariffs could lead to loss of overseas markets, as happened with China’s clampdown on buying U.S.-produced soybeans.
“We’re already seeing in places where it’s potentially just easier and cheaper to do business with other countries,” Greenberg said.
Those other countries might not have the same standards for quality and environmental stewardship, she added.
Besides tracking the impacts of tariffs, the state report recommends ways to help sustain businesses dealing with higher costs and uncertainty about their future. Lieberman said one goal is to raise awareness about existing financial programs and loans for small businesses and to help companies explore financing options, such as bank loans.
Another plan is to leverage the business expertise of partners, including the World Trade Center in Denver.
Greenberg and Lieberman said it’s important to maintain relationships with key trading partners, such as Mexico and Canada. The two recently led a delegation of female entrepreneurs and ranchers to Mexico City.
“That was to reinvest in our partnership, our friendship with Mexico, to look at specific business opportunities that we’re capitalizing on now for Colorado business owners,” Greenberg said. “And it was to say we’re going to get through this together and when we come out on the other side, Mexico is going to remain one of our critical trading partners, just like Canada.”