Despite efforts to reignite negotiations, the tariff-infused trade war with China continues to impact business. Companies are trying to mitigate costs by changing suppliers. With some products, such as paper, businesses were able to shift sourcing to Mexico.
But it’s not easy for most companies — especially in textiles, said Marwan Forzley, chief executive officer of global payments platform provider Veem. Here, Forzley shares insights into what’s at stake and its impact on business as well as some solutions to better weather the trade war.
WWD: How would you describe the current situation?
Marwan Forzley: Rising tariff costs in the ongoing trade war with China are affecting businesses across the U.S. Many businesses are concerned their products will be affected, including retailers.
Veem has been getting questions from clients about moving suppliers, but finding new suppliers isn’t easy — it’s challenging and time-consuming and it’s virtually impossible to shift sourcing overnight without risking quality, production schedules or both.
We advised our customers at the beginning of the trade war that they may need to potentially stock up on their goods to insulate their prices. We’ve seen many do just that, but afterward we’ve watched a large decrease in the size of payments to China — with a 50 percent drop in payment size in the last year — but the payment volume has increased. Business owners are hesitant to purchase large amounts of goods with the new costs, which forces them to buy smaller amounts of goods more often, losing out on many of the benefits of purchasing from China.
Veem unveiled a program designed to help companies affected by the U.S.-China trade war. The Veem Tariff Relief program offers users up to $1,000 in rebates to cover the cost of tariffs. The fact that Veem is offering this to clients is an indication of how challenging tariffs have become for many businesses. The issue is the uncertainty it creates for a segment of the market that are not resourced to deal with the impact of something like tariffs. They now have to figure out how to remain competitive in the market with potential cost fluctuations in their supply chain.
WWD: Who is impacted the most? Who is most vulnerable and why?
M.F.: Many of our smaller retail customers are very price sensitive. They’re competing in large markets and have worked to get their supply chain perfectly honed so they can compete on quality and price. A 25 percent tariff on goods they import will dramatically affect their profits. They have to make the choice to let the tariff eat into their profits, or pass the price increase onto their customers. Either one could cause a business to fail. We have several businesses that have come to us seeking help after the cost of their imported bags shot up virtually overnight. They had already sent price lists for their goods to retailers and didn’t want to damage the relationships they had made by raising prices without warning. These are the businesses that most impacted by tariffs.
WWD: What is the impact of tariffs on fabrics?
M.F.: About 41 percent of apparel goods are imported into the U.S. from China. Tariffs on these Chinese goods will have devastating effects on retail and consumers. Prices are going to go up and any downturn in the market will be harder to recover from.
WWD: How can companies mitigate these costs?
M.F.: Veem was actually built specifically to help solve some of the pain points for businesses working in a global economy. There is difficulty and fees associated with traditional bank wire transfers, which can make sending payments internationally a major pain for small businesses that don’t have all the resources they need. Issues like tariffs that impact international business agreements are especially relevant to Veem’s customer base. Trade issues and other large-scale policies can have a major impact on entrepreneurs — but Veem is here to remind them that they can still have control over their business during turbulent times. So it’s important for businesses to remain open and adapt modern payment solutions like Veem.
WWD: Can you explain how the “Tariff Relief Program” works?
M.F.: The Veem Tariff Relief program offers users up to $1,000 in rebates to cover the cost of tariffs. This helps businesses when purchasing supplies or goods from overseas. Veem will pay tariffs dues accumulated after one year — up to $1,000 — as long as all goods are paid for through Veem. The $1,000 applies to tariff cost only, not the initial cost of goods.
WWD: Who is Veem Tariff Relief for? When will the tariffs be paid? What are some of the benefits?
M.F.: Anyone (new or current customers) can sign up for the Veem Tariff Relief Program. Tariffs will be paid out one year after sign up through the Veem Tariff Relief Program page. They simply need to sign up for Veem’s payment platform. And then begin sending and receiving payments through it. The platform works much like Venmo on the consumer side. If a business owner is required to pay extra due to tariffs, they can submit their invoice to Veem. This depends on needs and how the trade situation evolves over time.
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