Ink Spo ts
Tariffs on, and now off? Recession on the horizon? Prices stable or inflation kicking in again? What should small business owners be doing to plan for the coming 12 to 18 months? Your guess is as good as mine, and I don’t have a clue.
Let’s start with this basic fact – businesses hate uncertainty. Managers of businesses large and small need to be able to plan for anticipated costs of materials, labor and to expect an economy that will support a certain level of demand for their products or services. More concretely, managers need to be able to forecast the nearterm future for the business through the budget process.
In a stable, growing economy such as we experienced over the past two or three years, it was relatively easy to forecast personnel costs, production and materials costs and overhead. Sure, prices spiked in the summer of 2022 at an annualized rate of over 9% but began trending downward. Inflation and wage pressures from a strong labor market made planning complicated and made managers earn their keep to make sure the business remained profitable.
Even with these challenges, at least I had a sense that those in charge of the country’s monetary and fiscal policies had a plan and were working it. Sure, higher interest rates, and for us mailers, large postal rate increases, were hard to swallow, but the future course of these rates were pretty clear, at least in terms of what was driving them. Watching the CPI trend downward gave some indication that interest rates would moderate, and they did come down. Postal rate increase projections for the next three years are available also. Whether I liked these projections or not, being able to get this kind of information makes it easier to make a budget for a business and forecast the business’s prospects.
The past three months has blown up any hope that a business manager might be able to project future earnings and growth. Aside from the impact on the financial markets, which admittedly are pretty fickle, the impact on supply chains for businesses is the real concern I have. While newsprint paper from Canada seems to have avoided the tariff, being a commodity that’s covered by the USMCA agreement of 2020, the aluminum used to make printing plates is subject to tariffs. Cost projections on a variety of other goods used by businesses are just about impossible to make at this time.
What happens when there’s uncertainly? Businesses and households pull back on spending. What happens when spending declines? Recession.
All of this is because one man believes that tariffs are ‘beautiful’ and some sort of magic economic bullet. They are not. They are a tax, and a regressive tax that hits lower income families and small businesses harder than wealthy individuals and big businesses. And the rationale behind them – the question of trade deficits with other countries – is also specious. A tariff war benefits no business and no country.
No manufacturing business is going to invest in plants and production equipment in the United States because of these tariffs. It takes years to stand up new manufacturing, and a large expenditure of capital. Remember what I said about businesses liking certainly. There is nothing certain about these tariffs. They were imposed by one man, and when he’s out of office, they can just as easily go away. They can come and go, as they have the past several months, on a whim. No business is going to invest with that kind of outlook.
Sometimes the experts actually know what they’re talking about.
