Mr. President: a letter from the little guy

Dear Mr. President,

My name is Derrick Mains, and I am a business owner and consultant that works with dozens of small business clients – many of which are affected by the current tariff war raging between the US and China.

I wanted to write this note from my (our) perspective as owners and operators of small businesses designing, developing, importing and selling products to the American Consumer.  

I like many business people are hopeful that your efforts in resolving the long-standing trade disparity will result in a more balanced playing field and more opportunities for American entrepreneurs, businesses and workers.

My peers and I am pleased with your actions in reducing the burdens on business and expanding our economy. Moreover, we are excited that for the first time in two decades an American President has the fortitude to fight a battle that your predecessors would not.

I feel obliged to write this letter to let you know that although I am pulling for you and your team to bring some resolution to this global challenge. I kindly submit an alternative perspective, one from the little guys from $1M-$50M in annual revenues — the backbone of the American economy.

Recently you have made statements that seemed rooted in Wall Street big business perspective – not the Main Street one my peers and I hold.

Mr. President although it is true that billions of dollars are pouring into the coffers of the country, please understand that those billions are not coming from the Chinese but from the already tightening profit margins of either the American Small Businessperson or they are or will be being passed on to the American Consumer.

As a temporary measure, the companies I work with are taking that burden on themselves. However, we cannot do that forever. Furthermore, you are correct we should and would like to “build in the U.S.A.” However, there are some reasons that the proposition is not possible today.

First, with rising wages both from an increased minimum wage and a burgeoning economic environment where labor costs are increasing, our margins have shrunk. Operators with 7% EBITDA in 2017 were faced with 3-4% in Q1 & Q2 of 2018. The added burden of shouldering the new tariffs have reduced profit margins and some of the businesses I work with are closing in on 0% EBITDA or concerned that losses are imminent. With such tight or even non-existent margins, how does a company doing $3M, $10M or even $20M spend $2-3M on tooling up American assembly?

Furthermore, the global supply chain of electronics, batteries and raw materials are in Asia. Even if I had the cash to make the CAPX investment to buy the land, tool up, hire the workers, I would still be forced to import 60% or more of the raw materials and electronics from Asia.

So even if I did have the capital or could get the capital, I would still be subject to the majority of the tariff and who would I hire to work there?

If I had a multi-billion dollar business, that could force relocation of its suppliers, that could obtain the credit facilities to build these factories and had resources to pay the premium on bringing in the labor it would still take years to relocate the global supply chain and to bring it into the level of compliance necessary for US regulators.

Sir, I, my friends and peers do not have the clout, the means or the credit facilities to play this game.

Therefore, I am stuck. Stuck and without a voice of small business perspective at the table.

Mr. President, I humbly ask for you to consider the effects of the war, on us, the small business owners.

We do need change, and I applaud you for your efforts, but Mr. President, there are ramifications of any war and defensive strategies at home that should be considered.

Mr. President, we are at war, you must be willing to dig in and fortify, build the ramparts.

We need corresponding investment in the American Supply chain, investments into the businesses here in the US that can and should be producing the materials we need to fuel our economy, things like PCB boards, batteries, plastic molding, wiring harnesses, motors, fasteners, solar panels and the like. We as the small manufacturing community that currently import all or some of our product from Asia - would love to see a program where low-cost Federal Loans (similar to the deferment mechanism of the student loan program) are available to us and those using this program could receive tariff relief in exchange for their participation of moving assembly stateside, all the while working towards the eventual goal of bringing more and more of the supply chain to our doorsteps.

Mr. President your advisors might tell you that that programs like SBA currently fill that gap. They do not. I have personally been a stakeholder in over 30 small businesses and none have every qualified for these programs. This is a Venture Capital need and Venture Capital Firms are focused on software and innovation with 10X returns, they are not focused on the retooling of an economy to save 25% on COG's.

Mr. President, I request that you consider the business owners that live here on Main Street – that sponsor the local little league team, that employ the local community, that print their business cards at the shop across the street. Mr. President, you have made considerable investment in our Military to both wage war and defend ourselves from our enemies. Yet, this is also war, and one that is only being addresses offensively.

Now is the time to take action to assist us, build the ramparts, fortify the business infrastructure, empower us, arm us with the resources we need to better control our country destiny. The result will be the America we all desire, one less beholden to global powers that do not have our best interests in mind.

Most Respectfully,

Derrick Mains