Hawaii Businesses Adversely Affected by Import Tariffs to Extent Considerable
Uncensored Retelling:
President Trump's tariffs have been a real headache for Hawaiian businesses, and nearly 70% of them have taken a substantial hit, while another 27% have felt a moderate pinch. According to a survey by the Chamber of Commerce Hawaii, which is still underway, these numbers paint a grim picture for the island's economy.
One affected business is Kalihi's Hawaiian Chip Co., where owner and manager Jimmy Chan has had to hike prices and anticipates another increase in July. This is due to a nearly 15% price spike on every clear polypropylene bag he buys from China, thanks to Trump's tariffs. Chan is also bracing for higher costs to bring in glass bottles for his "Raging Volcano" hot sauce.
The increased costs come at a difficult time, as Chan hopes to boost sales to tourists. Unfortunately, the tourism industry has already seen a drop in visitor arrivals, particularly from Canada, due to Canadians' anger over Trump's initial tariffs and ongoing threats about making Canada the 51st US state.
Jerry Gibson, president of the Hawai'i Hotel Alliance, noted, "It's become noticeable. It's not a good time to be losing business." Gibson also observed a 50% drop in government-related travel to Hawaii since Trump took office.
Hawaii's visitor industry is traditionally busy from June 15 through August 15, but things seem bleak this year. Gibson explained, "We're right on top of summer, but we're not getting a lot of reservations right now. It could be a function of wait and see."
Maui, in particular, has taken a blow from the drop in both Canadian and government travel while recovering from the August 2023 wildfires and struggling economically. Gibson stated, "For Maui, it's significant."
The Chamber of Commerce survey, with preliminary results from just 26 respondents as of Tuesday, shines a light on the widespread effect of the tariffs on island businesses. Sherry Menor-McNamara, CEO and president of the Chamber of Commerce Hawaii, said, "The anxiety that we're hearing every day has people holding off making decisions. It's across the board - not knowing how to proceed in these uncertain times."
Nearly 70% of the respondents reported they plan to cut back on business spending, which could ripple through Hawaii's economy. A decrease in tourism, as Gibson explained, has a "rainbow effect to restaurants to tourism activities to banks and everything else."
Chan, like many other businesses, is planning to reduce capital investments and expansions. He's also looking to cut back on marketing and advertising and reduce hiring and staffing. The surveys show that most businesses, or nearly 67%, are planning to go frugal with their finances.
To adapt, Chan has found cheaper bags to buy from Taiwan but must invest $1,000 for each of eight "plates" to emboss every new bag with his company logo and product descriptions. He also faces additional expenses and uncertainty regarding his plans to expand the company's retail sales operation.
"I'm trying to stay ahead," Chan said. "But the tariffs have just compounded the situation."
Despite the challenges, businesses like Chan prefer to know what to expect. However, with uncertainty over the tariffs and their costs, Chan admitted, "it's kind of hard to predict what will happen."
The tariffs have added to the broader global economic uncertainty under Trump, including stock market volatility. Business people in Hawaii, who once supported Trump, are now keeping quiet to see if the storm passes.
Empire Steak House co-owner Jack Sinanaj, who opened his ninth high-end restaurant in Hawaii just as Trump took office, was shocked by the high costs of doing business in the islands, especially due to their reliance on imported goods. Now, the tariffs on China have caused the price of each takeout bag he imports to more than double, from $1.25 to $2.75. There are also higher import costs for pricey wines and high-quality olive oil imported from Europe.
Despite the increased costs, Sinanaj hasn't passed them on to customers yet, hopeful that the summer tourism season will create a boom for his new restaurant. However, sales so far have been disappointing.
Leigh Tonai, CEO of Hawaiian Island Creations, fears that the tariffs could cause more harm to Hawaii businesses. "I would say that the full effects of the tariffs have yet to be felt," Tonai said. After Trump imposed a 145% tariff on China, Tonai stopped all shipments of clothing, apparel, bags, surfboards, bodyboards, and paddles from China.
With 17 stores, Hawaiian Island Creations has enough inventory to last through the summer. "We'll be OK for the next two to three months," Tonai said. However, after that, he expects inventory problems due to the long lead times for products from China and for "things that only China can offer."
Even if the standoff with China gets resolved soon, its aftermath will create new problems for Hawaii businesses that rely on Chinese imports. With so much inventory stacked up in China, a resolution to the tariff situation will lead to a sudden flood of goods arriving in Honolulu, causing logistical nightmares. "It'll be a nightmare with a backlog of inventory at the ports," Tonai said. "There's a lot of chaos right now, and it's going to get worse."
To participate in the Chamber of Commerce Hawaii tariff survey, visit surveymonkey.com/r/5DXRYRY. Non-members of the chamber can also take part in the survey.
- Jimmy Chan, owner of Kalihi's Hawaiian Chip Co., is anxiously looking forward to boosting sales from tourism, but the drop in visitor arrivals, particularly from Canada, is a concern due to the Canadians' anger over Trump's tariffs and ongoing threats.
- In an effort to save costs and adapt to the strain imposed by the tariffs, Jerry Gibson, president of the Hawai'i Hotel Alliance, notes a 50% drop in government-related travel to Hawaii since Trump took office, and nearly 67% of businesses, like Chan's, are planning to go frugal with their finances, reducing capital investments, marketing, staffing, and increasing costs for alternatives.
