Two new reports conclude that the wholesale industry is hardest hit by the tariffs imposed this year by the U.S. government.
Under the current tariff regime, midsized companies in the wholesale industry will pay $48.7 billion annually in import duties, 59.2% of the total tariff cost to U.S. firms with yearly revenue of between $10 million and $1 billion, according to a report by the JP Morgan Institute, a research arm of banking giant JP Morgan Chase & Co.
That’s more than twice the $18.7 billion tariff cost those midsized wholesalers and distributors faced before the Trump Administration announced tariff increases April 2, Chase says. However, it could have been worse: The report estimates that the tariffs President Donald Trump announced April 2 would have cost the wholesale industry $111.7 billion if they had not been reduced in subsequent negotiations.
Of course, current tariff rates could change at any time, as the administration continues to negotiate new trade deals.
The wholesale industry is especially hard hit by tariffs because it is the largest importing sector, Chase says. Midsized firms are more exposed than most because China, which has been hit by heavy tariffs, represents 20.9% of their imports, versus 17.7% for all U.S. firms, according to the Chase report, which is based on 2022 data.
The report says many wholesalers operate on thin margins and are likely to pass on price increases to customers. However, the report adds, “If they raise prices, they may offset some of the tariffs, but doing so could cost them sales.”
Smaller wholesalers also hit hard by tariffs
A separate report also suggests that smaller firms in the wholesale sector will be particularly impacted by tariffs.
A survey by online business network Alignable found that 44% of all small business owners said in June their sales were down due to tariffs, an increase from 26% in May and 25% in April. Wholesale was the most impacted industry, with 72% of those respondents reporting lower revenue in June due to tariffs, followed by restaurants (71%), retail (57%) and manufacturing (56%).
Massachusetts led the way, with 54% of small business owners reporting tariff-related sales declines, but more than 40% of respondents in eight other states said the same, showing the broad impact of the higher import fees.
The Chase report said the heaviest tariff impact on midsized firms happened along the East and West Coasts and in the Midwest.
Noting that tariff rates are changing rapidly, the Chase report concluded, “it can be risky for businesses to rely heavily on imports from one country without an available alternative. Business leaders may want to plan for multiple contingencies and identify possible substitutes for essential imported inputs early on, in cases where this is possible.”
Don Davis, former editor-in-chief of Internet Retailer magazine and Vertical Web Media, is a freelance writer based in Chicago. His experience in retail and distribution goes back to his childhood when he worked in the toy wholesale business founded by his father and two uncles and in their discount department stores located throughout the New York metropolitan area.