How a small US business navigated Trump’s tariffs

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0:17Chris Giles: Good morning from the Financial Times. Today is Wednesday, April 1st, and this is your FT News Briefing. U.S. stocks got a little pick-me-up yesterday, but the European Central Bank appears to have a bit of a mess on its hands. Plus, American businesses wondered if they'd survive U.S. President Donald Trump's tariffs. We spoke to a small company who sued the administration over the policy. I'm Mark Filippino, and here's the news you need to start your day.

0:52U.S.

0:53Chris Giles: stocks rallied yesterday after President Trump said that when it comes to Iran, quote, the hard part is done. The S &P 500 ended the day nearly 3 % higher. The Nasdaq composite jumped close to 4%. They had their biggest one-day gains in more than a month. While yesterday was good for U.S. equities, it's been a rough couple of weeks for another American asset class. Data from the New York Federal Reserve showed foreign central banks have slashed their holdings of treasuries. They're at their lowest level since 2012. One analyst told the FT that oil-importing countries like Turkey and India are looking to sell U.S.

1:30Chris Giles: government debt to afford the higher prices of dollar-denominated oil. The value of treasuries held at the New York Fed has dropped by$82 billion since the end of February.

1:47Chris Giles: The Middle East conflict created an energy shock around the world, and yesterday we got a glimpse of what it's doing to Europe. A preliminary estimate showed that eurozone inflation jumped to 2.5 % in March, a little more than half a percent higher than what we saw in February, and above the European Central Bank's 2 % target. So how should monetary policy makers respond? Chris Giles is the FT's economics commentator, and he joins me now to discuss this. Hey, Chris. Hey, Mark. So I have to assume that this is causing a bit of a headache for the ECB.

2:19Unnamed Small Business Owners: It's a real pain for the ECB because in Europe, which is a net energy importer, imports both oil and natural gas, higher prices just means less money for everything else. So it just means some form of lower growth, higher inflation. The only question is how bad is it going to get and how difficult is it going to get for an institution like the European Central Bank? And they've actually been pretty open with this.

2:48Chris Giles: Yeah, and actually, you were at a conference in Frankfurt last week where ECB President Christine Lagarde spoke. Today is March 25th, and wars are raging. She outlined a three-pronged strategy the central bank could use to approach energy shocks. Chris, can you highlight the scenarios that she talked about?

3:06Unnamed Small Business Owners: Yeah, absolutely. So all the scenarios are bad, but the best one is a short, sharp shock, so energy prices go up, and they quickly come down again. So that's the sort of war ends quickly scenario. If the energy shock is seen to be limited in size and short-lived, the classical prescription of looking through should apply. And in that scenario, then the ECB will do nothing, essentially. It will ignore it because it would be too late. There would be a bit of inflation in the short term, but it would come away again reasonably quickly. The second scenario, where energy price shock is a little bit longer and more persistent, they feel they'll have to raise interest rates a little bit to show they're not doing anything.

3:47Unnamed Small Business Owners: I think you can assume sort of two quarter point raises this year would be about reasonable and in line with that. And the third scenario, which is pretty horrible, is that there'll be a persistent long energy shock hitting Europe. If we expect inflation to deviate significantly and persistently from target, the response must be appropriately forceful or persistent. And I think we can mean that means taking interest rates back up to where they were roughly in 2023. So something hard, big interest rate rises up basically to about 4 % again from the current level of 2%.

4:23Chris Giles: So of the three scenarios that you mentioned, which one could we be entering?

4:28Unnamed Small Business Owners: At the moment, we're in two pretty much. So that's the scenario where you have oil prices going up to sort of$110 to$120 a barrel in Europe. which is pretty much where they've been this week, and then staying high, declining slowly this year. And that means some interest rate rises, but nothing too dramatic. Really, the interest rate rises are there to show that the ECB is on the case

4:55Chris Giles: and not asleep at the wheel. Chris Giles writes a newsletter on central banks. We'll have a link to that in the show notes. Thanks, Chris. Thanks, Mark.

5:08When U.S.

5:09Chris Giles: President Donald Trump announced a sweeping and aggressive set of tariffs last year, it ushered in a new era of uncertainty for businesses. As part of our series on tariffs, I visited one of those businesses, a small clothing company called Princess Awesome, which sued the Trump administration over the policy.

5:29Unnamed Small Business Owners: Hi. Welcome to my house. I'm Mark. Eva St.

5:32Chris Giles: Clair's house is on a quiet street in suburban Maryland, right outside of Washington, D.C. She and Rebecca Melsky started Princess Awesome over 10 years ago. They make quirky clothing for children and adults with things like dinosaurs and math formulas on them. Eva goes down to her basement where she stores samples of Princess Awesome's merchandise.

5:52Unnamed Small Business Owners: The basement flooded a couple weeks ago, so it's still kind of a wreck.

6:00Unnamed Small Business Owners: This is our pie print this year. Eva's wearing the dress right now.

6:04Chris Giles: Pie like the mathematical. Yeah, yeah. For pie day. Princess Awesome manufactures their clothes at factories around the world, so it was hit really hard by Trump's tariffs. The company had to pay a lot more to the U.S. government when they subsequently imported the garments. Eva says before Trump's so-called Liberation Day, their business was growing. They had great relationships with manufacturers in South America and in Asia.

6:27Unnamed Small Business Owners: And then April 2nd, 2025 hit, and all hell broke loose. It was a very bad day.

6:34Chris Giles: I sat down with Rebecca and Eva at Eva's dining room table, where they run Princess Awesome, to talk more about what this past year has been like for them. Eva told me after the tariff announcement, they got to work right away.

6:46Unnamed Small Business Owners: It was a very upsetting day. The only thing that kept us going, I think, was knowing that the president can be mercurial. And indeed, within a week, he had paused most of the tariffs. So we reorganized our entire production schedule to get things in within the three-month window where everything was paused. And we started to redevelop things that we were making in single countries where we didn't have a secondary supplier. And unfortunately, over the course of the year, we kept bouncing around with different tariffs going on and off of different countries, which meant that we did so much development of the same product at different factories.

7:28Unnamed Small Business Owners: It just felt like spinning our wheels, wasting time, wasting money. It's been a very stressful process. It feels like playing battleship. Right. You don't know if you're going to get hit. And one bad hit could sink us. And the other thing that we did after April 2nd, the very next day, was email our customers and explain, here's how tariffs work. It is not the country that pays the tariffs. It is us. And here's what these new tariff rates are going to mean for us. Because when you feel helpless, like doing something, communicating is the first step of doing something.

8:05Chris Giles: And what did your customers say in response? Did they communicate back with you?

8:08Unnamed Small Business Owners: Yes. And they shared our experience and our email with other people, which meant that within a couple of days, we'd been contacted by the Pacific Legal Foundation, who asked us, would you like to join the lawsuit that we're filing against the AIPA tariffs? And we said, absolutely. And when we sent the first email about how the tariffs were going to affect us, we explained that we were not going to raise prices, that we would absorb the cost because we hoped sincerely and believed that we would win our lawsuit and that the tariffs would be reversed. And it was not fair of us to pass those costs on to our customers when we weren't sure how long our extra costs would last.

8:47Chris Giles: How did you absorb the costs without passing them on to customers? We cut our salaries. We cut production.

8:52Unnamed Small Business Owners: And actually, the moment that we're experiencing the repercussions from that is right now. We are at our lowest inventory levels in 10 years.

9:01Chris Giles: So the Supreme Court did not rule on your specific lawsuit, but it did rule against the tariff. What have the days looked like since then? Because the Trump administration has imposed this 150 days for the Trade Act of 1974. There's obviously still the bilateral trade deals with certain countries that are in effect. How do you operate in this kind of uncertain time?

9:25Unnamed Small Business Owners: There is still a huge amount of uncertainty. Like we, it was absolutely a win at the Supreme Court, but we don't know what's coming with the tariffs. It's also a giant question mark if we're actually going to get refunds. It does feel like there's somewhat more certainty than there was a year ago, because at least from now until July 23rd, we know what to expect. It's not like tomorrow, you know, the president can decide that tariffs on Bangladesh are going to be 65 percent. Right. That was what we were living under last year. But another aspect is we don't know which of our factories will still be in business because this has affected them, too.

10:00Unnamed Small Business Owners: They've had to lay off people and close parts of their plants. Factories in India, especially while the six months of 50 percent tariffs went on, they just closed.

10:10Chris Giles: The Trump administration might look at your situation and say, this is the point of the tariffs, right, to make it so expensive to manufacture overseas that you bring it back to the U.S.

10:21Unnamed Small Business Owners: Yeah. How? How is that going to happen? First of all, no one knows how to make clothes here. So if we want somebody to run our factory for us, we would have to import that person from another country. And we would have to import all of the machinery that that person would be using to run that factory. We're a little company run by two people. We cannot afford to set up a factory. Also, I just want to point out that we did try this. We tried to manufacture in the United States. We produced in the United States for years. Exclusively. We produced exclusively for several years. The apparel manufacturing in the United States is not efficient by any stretch of the imagination.

10:57Unnamed Small Business Owners: And if the goal was for small businesses like us to bring manufacturing back to the United States, you could set up programs, government programs, to give us grants to help open up. If they want us to open our own factory, fine. But all of a sudden, out of nowhere, slapping us with an extra$30 ,000 tariff bill, How in the world is that supposed to help us if the goal is actually bring manufacturing back to the United States? Tariffs is absolutely not going to do it because it's going to put us out of business before we can do that.

11:29Chris Giles: Rebecca Melsky and Eva St. Clair are the co-founders of Princess Awesome. Thank you so much, Rebecca.

11:34Unnamed Small Business Owners: Thank you so much for having us.

11:35Chris Giles: Thanks so much, Eva.

11:36Unnamed Small Business Owners: Thank you.

11:37Chris Giles: Tomorrow on The Briefing, we're going to dive into the ways Trump's tariffs have reshaped geopolitics. The FT's chief foreign affairs columnist, Gideon Rockman, told me that tariffs have caused more leaders to call out the U.S. That's in part four of our series on tariffs. You can read more on all these stories for free when you click the links in our show notes, including a link to what we've run in our tariff series so far. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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