Qld businesses struggling with low profitability, US tariff hike

Queensland fashion businesses already facing the toughest economic conditions since Covid have stopped shipping to the US as tariffs imposed by President Donald Trump force up the price of their goods for overseas customers.

Sam Moore from Pyra Technical Apparel. Picture: Nigel Hallett

Queensland fashion labels are struggling to absorb the costs associated with US President Donald Trump’s tariffs as a growing number of local businesses have been forced to halt shipments to US customers.

It comes as the state’s peak business body raised the alarm over “consistently weak profitability” in the sector, which had returned to its lowest levels since the peak of the Covid economic crisis.

The tariffs, which were brought in by Mr Trump in April, implemented a 10 per cent baseline tariff to all Australian goods and a hefty 125 per cent reciprocal tariff on goods from China, Hong Kong, and Macau.

Many Queensland labels design and ship from Australia, but manufacture overseas, with Beginning Boutique, Blue Bungalow, Sylkswim, Pyra Elements and Moolk among those affected.

Sylkswim’s Shani Grimmond said her business could not absorb the cost of subsidising prices for US customers. Picture, Portia Large.

Queensland influencer and Sylkswim business owner Shani Grimmond recently announced on her social media platforms that shipping to the brand’s US customers would be halted.

“These tariffs are imposed by the United States government and as they currently stand, will apply to all products across our catalogue. Our pieces, designed in and shipped from Australia, and are ethically manufactured in China, Bali and Turkey,” Ms Grimmond said in a post.

Ms Grimmond said her business was not in a position to “absorb” the costs and it would result in a 145 per cent hike on the total value passed down to customers.

“We are just not going to move forward with that,” Ms Grimmond said on Instagram.

“Just wanted to give you guys an update and be completely open and transparent, I know a lot of other businesses are going through the motions right now.”

Since Ms Grimmond’s announcement, Brisbane-based retailer Blue Bungalow, outdoor apparel retailer Pyra Elements, and maternity wear shop Moolk have all followed suit.

Blue Bungalow’s head of marketing Emma Filliponi said the US market was worth “seven figures” to the company and pausing trading had been a “big decision”.

“Its not feasible to expect the customer in the US to pay 145 per cent of the value of the goods,” Ms Filliponi said.

Blue Bungalow’s Emma Filliponi said US trade was worth seven figures to the company. Picture: Patrick Woods

Sam Moore, founder of Pyra, said the tariffs were “absolutely concerning” as the company shipped roughly 50 per cent of its orders to the US.

“Tariffs could be the tipping point between someone choosing to purchase or holding off. That’s a real challenge for small-to-medium Australian businesses trying to compete,” Mr Moore said.

Beginning Boutique Founder Sarah Timmerman said the impact of the tariffs was still being felt despite the label signing a lease for a US warehouse in early 2024 to improve shipping speed and offset costs for American customers.

A report released by the Australian Chamber of Commerce and Industry last July found 45 per cent of the small businesses surveyed considered leaving or closing their business in the 12 months prior.
Data from the Australian Bureau of Statistics showed Queensland had the second-highest rates of business failure that over the past four years, behind the Australian Capital Territory. The data showed that 36 per cent of businesses that existed in June 2019 were permanently closed down by June 2023.

Business Chamber Queensland chief executive Heidi Cooper said recent US tariff announcements have had very real and serious impacts on business performance and confidence in Queensland, which was adding to an already challenging business environment post-pandemic.

Pyra’s Sam Moore said the tariffs would be the difference between picking up a US buyer and not. Picture: Nigel Hallett

“In fact, in the December quarter our data found Queensland businesses experienced consistently weak profitability which returned to its lowest levels since the peak of the Covid economic crisis, while three in four businesses reported yet another increase in their operating costs,” she said.

“Whether businesses are directly or indirectly impacted, proposed tariffs create uncertainty at both a local and global level, contributing to compounding pressure on an already stretched and stressed business community.

“Add to this a series of severe weather events and the uncertainty around global export markets and we now have an operating environment in which businesses are hesitant to invest, expand and employ.”

Despite these challenges, Ms Cooper encouraged businesses to explore new export markets, particularly through Free Trade Agreements with key international partners.

Australian Retailers Association Fleur Brown said the flow-on effects of tariffs to small business is a headache they could do without.

“It’s been a tough few years for small business in Australia,” she said.

“Small business has battled slow consumer spending and skyrocketing business costs – from rent, wages, energy, insurance and huge increases in government regulation and compliance.

“Adding yet another layer of cost and complexity to this challenging environment is concerning.”

In that time period, the failure rates were even worse among new businesses at 49.4 per cent.

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Originally published as Qld businesses struggling with low profitability, US tariff hike