Good morning. President Donald Trump placed his planned 25% levy on imports from Mexico and Canada on hold for 30 days, following negotiations on Monday. A 10% tariff on goods from China did, however, go into effect at midnight. In response, China’s finance ministry said it will impose a 15% tariff on imports of U.S. coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, large engine cars, and pick-up trucks. All of this has already led many U.S. small businesses to brace for higher costs.
Tariffs will not impact all businesses equally, Mark T. Williams, a master lecturer at Boston University’s Questrom School of Business, told me.
“Large businesses have greater latitude and leverage than small businesses in finding alternative sourcing of products and raw materials,” said Williams, a former bank examiner for the Federal Reserve. Consumers, on the other hand, have few alternatives and so many will simply buy fewer goods and services as tariffs push prices up, he said. “Tariffs tend to trigger retaliation from taxed countries, increasing the cost of goods, making consumers poorer,” he added.
Mitigating risk
Matt Totsch, CFO at Trim-Tex, a family-run manufacturing business based in Illinois, around since 1969, with about 250 employees, is highly concerned about tariffs.
“We are extremely disappointed by these broad-based tariffs placed on our neighbors to the north and south,” Totsch wrote in a LinkedIn post on Sunday.
I had a conversation with Totsch on Monday. In 2020, he was hired by Trim-Tex, which processes annually just over 20 million pounds of PVC (a synthetic plastic) for its drywall corner beads used to finish the outside corner of a wall where two pieces of drywall meet. The products are used in home construction.
Although 100% of Trim-Tex products are made in the U.S., and it sources raw materials from domestic suppliers, Totsch recognizes the broader impact these tariffs could have on American businesses, which will eventually affect the company, he said. For instance, Canada supplies about 30% of softwood lumber consumed in the U.S. each year.
“If the cost of lumber goes up as an input to a house being built, it’s going to drive demand down because it’s just going to be more expensive.” And if fewer homes are built, that means less drywall is needed. This would “potentially slow down the 80% of our business that serves the domestic market,” he said.
Totsch has already come up with some tariff mitigation strategies for Trim-Tex:
—As international sales make up 20% of their business, with key markets including Canada, the EU, Australia, Central America, and South America, the company has increased communication with clients. “Frequent dialogue will be key,” he said.
—Trim-Tex has strengthened its balance sheet and expanded its line of credit, for greater flexibility to support its international customers.
—The company is taking proactive steps with its trade partner in Canada to front-load inventory and shipments ahead of the tariffs.
—Currency risk is another major consideration. “We have worked with our bank to offer foreign customers strategies to mitigate this risk, including opportunities for currency hedging,” Totsch said.
—Trim-Tex is also working with an outside firm, which uses the company’s data to formulate forecasts and provide advice on decisions around staffing and inventory.
“There’s just no way to predict what these tariffs will do,” Totsch said. “But sometimes chaos can be a good opportunity. If you can find a way to leverage it, you can come out stronger.”
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Kazi Hasan was appointed CFO of OPAL Fuels Inc. (Nasdaq:OPAL), effective Feb. 3. Hasan succeeds Scott Contino, who has served as interim CFO. Before joining OPAL Fuels, Hasan served as a senior advisor at Fluence Energy and as EVP and CFO at Puget Sound Energy and Cleco. Prior to these roles, he spent more than two decades at AES in executive roles, including as global chief risk officer.
Matthew Pulisic was appointed CFO at Genelux Corporation (Nasdaq:GNLX), a late clinical-stage immuno-oncology company. Most recently, Pulisic served as VP of finance at Arrowhead Pharmaceuticals. He began his career at Amgen, a publicly traded commercial biotechnology company, eventually becoming finance director of Amgen Worldwide and head of capital finance.
Big Deal
E*TRADE from Morgan Stanley’s monthly analysis finds the three most-bought sectors on the platform in January were utilities (+13.68%), real estate (+11.94%), and consumer discretionary (+9.31%). The data is based on the net percentage buy/sell behavior of stocks on the platform that comprise the S&P 500 sectors.
“Some of the strength in utilities appeared to be driven by perceived energy demand for AI data centers, with the majority of buying in VST and CEG, while a big part of the push into consumer discretionary was fueled by enthusiasm over TSLA shares,” Chris Larkin, managing director of trading and investing at E*TRADE, said in a statement. “On the other side of the coin, the second-weakest sector of 2024, health care, was the only one to experience net selling in January.”
Going deeper
“Real AI Adoption Means Changing Human Behavior” is a new report in Wharton’s business journal. Wharton’s Scott Snyder and co-author Jason Hreha discuss five strategies to bridge the gap between leadership expectations around AI and meaningful transformation. To understand why organizational efforts often stall, “we need to examine the day-to-day behaviors and perceptions that ultimately determine whether AI is fully adopted—or quietly sidelined,” the authors write.
Overheard
“The time for hype is over. I believe that 2025 must be the year when we unlock AI from its confines within a few players. By 2026, a broad swath of society shouldn’t just be using AI—they should be building it.”
—Arvind Krishna, the chairman and CEO of IBM, writes in a new Fortune opinion piece.
