When President Trump raised tariffs against China to an astonishing 145 percent last week, he radically changed the cost of doing business for thousands of American companies.Michael Barbaro speaks to Beth Benike, a small-business owner who fears her business will not survive the tariffs.Guest: Beth Benike, the founder and C.E.O. of Busy BabyBackground reading: Small-business owners say tariffs will squeeze them, and their customers.Trump’s tariffs leave no safe harbor for American importers.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Jenn Ackerman for The New York Times Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.
Chapter 1: Who is Beth Benike and what is Busy Baby?
We're going to get to why this has been such a trying moment for you because of the terrorists. I want to start by having you tell us the story of your company. And just to begin, tell us the name of the company and then tell us the story of how you went about creating this company.
So my name is Beth Beneke and I am the CEO and founder of Busy Baby. I grew up in Southern Minnesota, the daughter of an entrepreneur. My dad has a small business. He's a welder. So I grew up in his business and I grew up wanting to have my own business as well.
Why? What was it about watching your dad have a business that made you want to...
It was the freedom. It was the being able to leave work and come to my softball games and choose the work he wants to do and turn away the work he doesn't want to do. Being in control of your own destiny.
But what he always told me is, you know, you really got to be passionate about what you're doing because when hard times hit, and they absolutely will, if you're not passionate about what you're doing, you're not going to make it. So when I finished, graduated high school, I wasn't passionate about anything other than not going to college. I tried it and wasn't a big fan.
And a recruiter called me out of the blue and I ended up joining the military. So I joined the army. I convinced my brother to join the military. So we served together in Europe. We deployed to the war in Iraq and we started in Kuwait before the war started.
and so like to bring that around now now my brother runs busy baby with me oh wow um and we always joke about 20 what's it been like almost 22 23 years ago when we were sitting in the desert you know throwing little rocks at a bigger rock waiting for something to happen um did we ever imagine we'd be schlepping baby products out the back of our cars at the state fair like just if you would have told us that in iraq we would have just laughed
Well, how did you end up getting from there to Busy Baby? What's the story of how you go from Army to entrepreneur?
Yeah, so after the Army, it took me a few years to readjust to civilian life. So I settled back in in Minnesota. I found a great corporate job, and I met my now husband, and we started a family. So I had taken the full three months of maternity leave that my company offered and went back to work. And when I went back to work, two of my stay-at-home mom friends took me out for lunch.
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Chapter 2: How did Beth develop her baby placemat product?
Yeah, I mean, I didn't even know it was called a prototype at the time or a minimum viable product, I now know is the term. The most important step was to find a professional who knew how to do that, because I certainly did not. So I found my product developers in Utah, and they held my hand all the way through the manufacturing process.
We did look for manufacturing in the U.S., and because we were at such a small scale, it wasn't a fit for us to be able to start in the U.S., so we started in China.
Just explain that. I mean, why did it feel impractical to start developing products here in the U.S.?
It comes down to... costs and volume. So it is very expensive to manufacture in the U.S. Obviously, the cost of labor is very high, but most of the raw material that we use in manufacturing, like for us, we use silicone, which comes from silica, which is not readily available and sourced in the U.S.,
So for us, to import the raw material was more expensive than importing the product in its finished packaged form.
Wow.
So that's one aspect of it. But so for the factories that do exist in the U.S., they typically have very high minimum order quantities. So you would have to start off with 10,000 or 20,000 units of... to make it worth their time to set up the line. I mean, there's a lot of work that goes into a manufacturing line, setting up the machinery.
Now you're tying it up so nothing else can get produced, getting the material ready. China was willing to do a minimum order quantity that first round of 1,000 units.
Which is a heck of a lot different than 30,000.
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Chapter 3: Why did Beth choose to manufacture in China instead of the U.S.?
I'm going to give you an offer. It'll be a little aggressive.
I mean, this is incredible. So suddenly you find yourself on the premier television show for small businesses trying to break out and basically have your idea validated by these ultra-rich, successful business people. As you can tell, I was a fan of the show.
So I'm going to offer you the $250,000, but I'd like 20%. Whoa.
10%?
No, I think 20% is good.
I think 20%- It was the most amazing experience. It was surreal. I would love to do this with you for 15. I can't go past 15.
Well- I just can't. For me, the bottom line would be 18.
I can't do it. I can't.
I just, I know what I've done and I know what I need to do.
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Chapter 4: What was Beth's experience appearing on Shark Tank?
And for those who don't have the mat, how much does this cost? What are you charging people?
We have a line of products that range from $10 to $30. But the Hero product, the one everybody knows from Shark Tank, that runs $30 retail.
So what does your business look like pretty much up until a week or so ago? Just how big has it gotten?
I mean, I think lifetime sales were over $15 million.
Wow.
There's my brother and I full-time, and then we have three other full-time employees. And then we just brought on two part-time employees to help us. I was just named, actually, less than a month ago. The SBA gave me a wonderful award.
Small Business Administration. Federal Small Business Administration.
Yep. Small Business Administration awarded me Small Business Person of the Year for Minnesota.
Mazel Tov. That's fantastic.
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Chapter 5: How has Busy Baby grown before the tariffs?
I mean, we expected the tariffs. Up until that point, we haven't ever paid tariffs. Our product falls into a category that hasn't had tariffs. We pay tax and duty, but we haven't had tariffs to date. So we knew that was going to be a new thing for us, and we budgeted expecting reasonable tariffs of 20 to 30 percent.
But you budgeted for those?
Yeah, we knew that was coming. An overwhelming number of people voted Donald Trump into office, and he talked nonstop that that was something that was going to happen. So we expected to have tariffs. Never in a million years would I expect that tariff would be 145%. Never.
Which is what it is right now.
Yeah. That's what it is today. Now let's just give it a couple hours. It might be something else this afternoon.
Well, in a word, what has it been like for you and your business for that 145% tariff to become your reality?
It's devastating. I cannot bring this product into the US now. I don't have that kind of money. And what that means then is if I can't bring in that product and I run out of what's in my warehouse now, then I no longer have revenue coming into my business. And what that means is I can no longer pay my employees. I can no longer pay my loans to which my house is leveraged against.
And in about six months, I could very, very possibly lose my home.
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Chapter 6: How does Beth finance her growing business and retail contracts?
We'll be right back.
Beth, walk us through the logistics of what it started to look like immediately after the tariffs go into place.
Yeah. I currently have two to three months worth of product in my warehouse. We just finished production of another two to three months of product. It was supposed to get on a ship two days ago.
From China to the U.S.?
From China to the U.S. And that was the day that tariffs jumped up to 54%. I have somewhere—give me a second. I want to pull out my numbers so I can tell you specifically— The effect. All right, we're going to do a little math. So for us, that meant instead of the $30,000 tariff we had budgeted for, it now was $85,000.
And how much is the product itself worth?
The product itself is worth $158,000. So suddenly you're faced with a potential $80,000 tariff on about $158,000 worth of goods.
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Chapter 7: What impact did the 145% tariffs have on Busy Baby?
Do I have that right?
Yeah, $85,000 for the 54%. And we don't have that, but we have good margins. We could survive that. And we thought, well, maybe we can do a GoFundMe. Because maybe right now in this political climate, people would be willing to give us $20 to help us get through this so that we don't have to raise our prices or go out of business. It wasn't devastating yet.
The next day, when it went up to 104%, that math is $164,000. Wow.
And at that point, the tariffs are going to cost more than the value of the goods, right?
Yep. So that no longer makes business sense for me. I would have to double the price of my products. People are not going to pay double the price of my products. And especially my people. I'm selling my products to new moms and dads. They're buying diapers and formulas and other things that are about to get a whole lot more expensive for them.
It's already hard enough to be a new parent and to buy all the things you need to buy that you're not used to buying. People are only going to buy what they need.
$229,000.
Just the tariff you would pay on $158,000 worth of product.
And we would have to come up with that in the 30 to 40 days it takes for the product to get to the U.S. ? And I can't get any more loans. I'm fully leveraged. I have my house on the line already. I can't get more loans. I can't come up with that kind of money.
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Chapter 8: What are the immediate logistical challenges after tariffs were imposed?
Basically, take your product from China, send it to Indonesia, Thailand, then import it to the U.S.
But you still have to make a change to it. You have to make a physical change to the product, the packaging. So we were thinking, well, we have some friends, personal friends that live in Australia. We could send it to Australia. We could then have them help coordinate repackaging and then import it from Australia. And with the 90-day pause, we'd only pay 10% tariff.
But that is country of origin fraud. So instead, I'm pivoting. I'm shifting gears. I'm going to try to find a way to sell it in another country. There are babies all over the planet. I unfortunately cannot sell it to Americans once I run out of what's in my warehouse right now, unless something changes, obviously. So I'm going to start looking for ways to sell it overseas.
Have you contemplated doing what these tariffs are fundamentally and explicitly designed to force you and everyone to do? And I'm guessing by your reaction that something about that isn't so practical. But what it's supposed to do is encourage you to start manufacturing in the United States.
Yep, that's what it's supposed to do. I have gone very deep down the research rabbit holes for my options for producing in the US. We did try to produce in the US initially. Once we got started and had market validation, we did work with a company in Minnesota to try to produce it here. There are some nuances to our type of manufacturing.
We have compression molding, which is a different kind of manufacturing machine than typical. We have the requirement to be a clean facility because our products go in baby's mouth. So it has to be a sterile facility. It can't just be any old factory. So now I have two options. I'm very fortunate that I have a 10,000 square foot commercial space in my building that's available for lease.
I could build my own factory in there. Like I own the building. I could build my own factory. So if we just like quickly look at that route, I got pricing for the machines that I need. I need eight different machines to make my products. The total of that, if I bought the machinery from China, would be just under $400,000. Wow.
Now, do I have to pay 145% tariff on top of that to get the machinery to be able to manufacture? Right now, probably. Yeah. So now we're doubling my cost to even set up manufacturing. But let's just say I don't. Then I have to find somebody with the expertise to set up the manufacturing and to run the manufacturing. But because this type of manufacturing doesn't really exist in the U.S.
right now, there's no expertise in the U.S. to set this up for me. Right. Now we have to talk about the cost of importing the raw material.
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