Washington — If the latest round of President Donald Trump's proposed tariffs on China is enacted, it may be the end of the line for plastic home goods company Madesmart Housewares.
Devee McNally, founder and CEO of the 29-year-old Minnesota company, says 25 percent tariffs will be a huge financial blow, adding $5 million to the $20 million the firm spends annually manufacturing and importing its kitchen products, boxes and other products from China.
"The overall impact would wipe out our entire profits, virtually putting Madesmart out of business," she said.
The company designs and markets products under its own brand, but since 2004 has contracted out all of its production to molding factories in China.
In some ways, that's the outsourcing business model the Trump administration wants to change with tariffs. It argues that by raising costs for Chinese goods, it can boost manufacturing and jobs in the United States.
But Madesmart executives say it's not that simple. Tariffs will hurt firms like theirs.
"It sounds good in theory, but there are so many U.S. companies that are relying on the less expensive manufacturing that can be done overseas that it is going to put a lot of these smaller organizations out of business," said Jason Seifert, chief financial and operations officer.
Given the on and off nature of the trade talks, it's not clear if this latest round of tariffs on $300 billion in Chinese imports will be enacted, or if Beijing and Washington will reach a settlement.
But the St. Paul-based company was not taking any chances. It pleaded its case for exemptions in a June 14 letter to the Office of the U.S. Trade Representative, as part of USTR's formal review.
It told government investigators it had previously tried and failed to build a profitable business manufacturing its plastic home products in the United States.
It owned an injection molding factory in Wisconsin until 2004 but closed it because it couldn't make money manufacturing against large competitors and those already buying from China. The company was near bankruptcy at that time, Seifert said.