Some retailers are growing frustrated at the volatility of tariff rates and other federal changes as they try to turn a profit for their businesses. That includes retailers in downtown Sioux Falls.
The owner of Zandbroz Variety said as part of the gift giving industry, the store is seeing negative impacts of higher costs due to import taxes, or tariffs. Jeff Danz said tariffs are driving prices up…
“And then you couple that with the increasing cost of shipping the last couple of years, in particularly this year, you start looking at an invoice for merchandise and the tariffs and the freight are adding as much as 30-40% of the cost of that merchandise," Danz said. "And for a lot of merchandise there’s just not that much room to increase the price. So, what happens is the retailor, us, starts cutting our margins. And we can’t do that forever.”
Danz said that’s partially because handcrafted gifts aren’t in abundant supply here at home.
“Vietnam, India, even Mexico and there are a number of those countries that have, still have highly talented craftsmen that are making things by hand,” Danz said. “That doesn’t exist in this country.”
As a result, he’s told buyers not to purchase from overseas vendors that are increasing prices drastically.
“We’re trying to find alternative sources,” Danz said. “And we’re trying to buy more from American manufacturers and vendors.”
Proponents say that’s part of the goal of tariffs: strengthen the U.S. by bringing manufacturing and other industries back to American soil. Proponents say it might be a good thing companies are forced to look stateside for goods.
Danz doesn’t dispute there are some positives to working with U.S. vendors, but it’s not perfect from his business’s standpoint.
“During Covid we started to see a lot of young entrepreneurs designing and printing letter press cards and making products by hand. Craftsmanship,” Danz said. “But it’s not nearly on the level of what in the past we’ve been able to source from other countries.”
He said many U.S. craftsmen use raw materials from foreign nations, so the products he can purchase still might have some tariff costs. He added that, in his opinion, handmade gifts aren’t Trump’s targeted industry to reclaim but rather big manufacturing.
“The manufacturing that the Administration is talking about is traditional big manufacturing where you’re making toasters and air conditioners and bicycles and things like that,” Danz said.
He said those kinds of manufacturing concerns with cheap labor don’t impact his industry because those aren’t the types of products he’s selling.
“We’re for the most part through fair trade programs and handcrafted items. We’re still buying some of that where we find opportunities, where it’s still affordable. But a lot of that we’re foregoing and we’re trying to find things locally,” Danz said. “And yes, we have sourced more from people who make things in this country, and that’s good. But I still think it’s good that we have trade with the rest of the world and that they make and sell us things and that we make and sell them things.”
Danz adds with the holiday gift giving season on the horizon, it’s not certain whether his company will be in the red or the black this year. He said tariff uncertainty makes it hard to plan for the season. He pointed specifically to the volatility of tariffs on Chinese products.
He said Zandbroz Variety and other downtown Sioux Falls shops have had to stock up on toys to avoid potential prices spiking.
“Sometimes that’s difficult to do, to buy your holiday toy inventory in the spring or in the summer. And that’s what most of us have been doing," Danz said. "We’ve been fortunate that we have had the cash flow to accommodate that but not everybody did.”
He said now they’re beginning to see the available toy inventory reflect increased tariff prices. He speculates what consumers might do around Christmas time if Chinese tariffs continue.
“There may be a smaller selection of particular toys in the marketplace. That will be an interesting thing to see. People can adapt to that. And maybe there’ll be fewer toys for gifts,” Danz said. “Maybe there will be more books for gifts and encouraging reading. I don’t know. I don’t know, but that’s one thing to watch is what happens with the Christmas toy inventory.”
Danz added that one of the most frustrating things his store has encountered is what happens with packages from overseas when they do purchase internationally.
“We purchase from a lot of small, stationary lines. And some of them are in England and shipped from London, and they get stuck in customs. And what we’re experiencing is that, we have an order that’s sitting in customs, and it’s been there for six weeks because the vendor hasn’t responded to answer the questions that customs has about ‘Where was it manufactured?’ and that sort of thing," Danz said. "And they keep contacting us, and we tell them, ‘We don’t have that information; you have to talk to the vendor.’ And the vendor is not responding, so that product’s sitting there.”
He said package delays in customs isn’t a new thing this year. He blamed more recent challenges on an Executive Order President Trump signed earlier this summer that put an end to a decades-old customs exemption that made some international shipping easier.
That exemption—called de minimis—was introduced in 1938 and granted some international packages under a certain price threshold an exemption from paying certain duties, fees and other taxes like tariffs. That price threshold was $800 as of 2016.
President Trump said he ended the provision because the lower security measures applied to de minimis packages allowed overseas shippers to bring fentanyl and other synthetic opioids into the US. He also called the provision a “trade loophole.”
However, according to Danz it caused some disruptions in the shipping process.
“All of that ended and literally hundreds of thousands of packages sat in customs and had to be sorted out,” Danz said.
Despite the turmoil, Danz said tariff rates appear to be stable for the moment.
“It’s the unknown. Hopefully the unknown period of what to expect from tariffs and the impact on getting it out of customs is a lot clearer now because the vendors have a better idea," Danz said. "But for a while the people in customs were in confusion.”
But more change is coming: some new tariffs are set to begin Oct. 14 and are expected to have impacts on US trade relations, leaving local business owners like Danz to adapt. again.
