Tariffs are an economic hurricane for Florida businesses

Florida business owners are used to change. Things like hurricanes, demographic shifts, and even the annual migration of the snowbirds are a part of many Florida business plans. But what should Florida business owners expect from what economists have described as the “economic hurricane” of recent tariffs?

The ultimate rates of U.S.-imposed tariffs, and subsequent retaliatory tariffs, will only be known with time. But what should we expect from the new worldwide tariff of 10% on all imported goods? What about the additional tariffs levied on the U.S.’ three largest trading partners — Canada, Mexico and China?

Simply put, it doesn’t look good.

Tariffs are taxes. Just like any other tax, these tariffs will make goods more expensive. Florida businesses that rely on imports to provide goods and services will feel the pain. Florida is the eighth largest destination for imports in the United States. Consider that in 2023, Florida imported some $113 billion in goods. Imports include vehicles, cell phones, home appliances, furniture, clothing, jewelry, beer, wine, produce and much more. The tariffs mean Florida businesses will pay more for these same goods. Some will pay a lot more. Local restaurants that rely on imports to make authentic cuisines, coffee shops that import coffee and tea, or bars that import alcohol, will see their costs rise dramatically.

In terms of economic hurricanes, this isn’t even close to the eyewall.

Exporting businesses will hurt too. The retaliatory tariffs imposed by China (and other nations too) will bring economic pain to Florida’s exporting industries who generated nearly $70 billion in exports in 2023. Since U.S.-made goods will be more expensive for foreign companies to buy, they’ll buy less.

As costs inevitably rise, so too will production costs. What will happen to our state manufacturing businesses that import Chinese aluminum or steel? They will either have to eat the additional costs of the imports or find a domestic supplier. Either option raises input costs. If your business inputs include coffee, tea, avocadoes, spices or other goods simply not made domestically, you have our condolences.

So, what will businesses do? Pass the costs onto customers? Cut further into their margins? Go out of business?

These impacts will not only impact individual businesses, but also the companies who do business with those businesses. Shipping companies, advertising agencies, and retailers will all notice a drop in business. As businesses and people tighten their belts, restaurants that are used to seeing employees from nearby businesses will notice a decline in foot traffic at the same time they’re paying more for ingredients.

What about insurance? Individuals and businesses have witnessed their premiums skyrocket. Auto insurance premiums in Florida have risen by 42% since 2022. Homeowners’ and business insurance has witnessed similar — or greater — increases.

Of course, the recent tariffs cannot explain these increases — but they may well explain the next round of hikes. Recall that tariffs imposed by the United States and other countries increase the costs of goods. This has direct implications for what it will cost to replace businesses, homes, and goods impacted by hurricanes or other events.

Consider auto insurance. The United States imported $88 billion worth of auto parts in 2023. Over 60% of these parts came from Mexico, Canada, and China. This means replacing cars and their parts will cost insurers more money, which means increases in premiums.

Similarly, the United States imported nearly $10 billion worth of sawn wood, plywood, particle board and other wood products needed for construction from Canada in 2023. This makes homes and businesses more expensive to repair or replace. Guess what that means for insurance premiums?

All of this is to say nothing about “regime uncertainty,” the term economists use to discuss what happens when economic actors are unsure about the policies government will implement. As a result, many businesses will adopt a “wait-and-see” approach. This is terrible for economic growth.

Tariffs are indeed an economic hurricane, regardless of who imposes them. Regardless of politics, these policies are detrimental to Florida business.

We’d say put up storm shutters, but those will be more expensive, too.

Abigail R. Hall and Michael A. Coon are associate professors in economics at the University of Tampa.