Growing St. Paul small business owner worries about Trump 'border tax'

Devee McNally, the founder in 1990 of St. Paul's MadeSmart, regrets that vote last November for President Donald Trump.

"I'm a businesswoman and I gave him credit for building a brand," said the owner of the design-distribution company that makes plastic organizers for home and office. "But I just pray this 'border tax' doesn't go through.

"This could put me out of business. My priority should be building my company. I thought my bumpy years were over."

In January, Trump embraced the so-called "border adjustment tax" contained in the House Republicans' tax bill, essentially a 20 percent tax on imports, as a way to protect American manufacturers and possibly finance the Mexican border wall and tax cuts that opponents say tilt toward the rich.

McNally, whose business has grown to 25 employees and $25 million in sales last year, is part of a business group, Americans for Affordable Products, opposing the Republican plan that was conceived as pro-business growth. Trump, who has reversed numerous stances that helped him win election with his sky-is-falling, anti-immigrant, anti-trade campaign, was dancing around the border tax last week.

As a candidate, Trump promised to label China a currency manipulator, pull out of the impending Pacific region multilateral trade agreement, quit the North American Free Trade Agreement and impose big import taxes, ostensibly to create U.S. jobs.

Many economists and business interests note that America has added millions of higher-value jobs in health, software, design, wind and solar energy and manufacturing automation as lower-cost countries did more of the basic manufacturing work, thanks to international trade. Blue-collar workers have lost jobs. Ironically, Trump's budget would cut many of the programs that have retrained displaced workers for other careers since the Great Recession of 2008-09.

Executives from Target to General Motors to small business people such as McNally oppose the border tax. Many experts say it would bring retaliatory trade-and-tariff wars that would do more damage to the American economy and workers.

"The sole reason we went to China is to get high-quality, low-cost goods," said McNally, who designs and imports dozens of plastic houseware products for major retailers. "If I absorb the 20 percent border tax contained in the Republican tax bill, I would be at a loss."

McNally closed a small factory she owned in Wisconsin "that wasn't working" to move production overseas in 2004. Her company today employs more who make an average salary of about $75,000 plus benefits. It's housed in St. Paul's Midway area on University Avenue.

"I compete against huge Rubbermaid and others on quality," McNally said. "We're a design company. That's it. Read the brand on products at any retail store. It's U.S. companies sourcing overseas to take advantage of lower cost [emerging-economy] production. I've invested $2.5 million in tooling in China. I'm out of debt. I had $4 million when I sold the Wisconsin plant. We've grown and I'm hiring. I'm profitable. Sales were up $1 million in the first quarter. I pay high taxes. It's working. I've never been better from a business standpoint."

The Republican House tax bill, crafted by Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady, embraces Trump's campaign-driven view that is designed to raise up to $2.4 trillion over a decade to be used largely for tax cuts designed to turbocharge the U.S. economy.

The Motor Equipment Manufacturers Association, representing 1,000 auto-industry suppliers, has warned that the border adjustment tax would raise car prices by up to $2,500 and kill American manufacturing jobs. A trade war would hurt American-manufactured auto-part exports as well.

"I never would have gone to China if there had been a way to stay in the U.S.," McNally said. "My investment in tooling in China fuels our growth here. I have 450 household items sold at MadeSmart online and at most major retailers."

Client retailers include Target, Wal-Mart, Lowes, T.J. Maxx and Bed Bath and Beyond.

Brady told CNBC recently that he believes the border tax will be included as part of the final tax plan.

And he has backers, including the American Made Coalition, a group of large manufacturers and others who argue that an import tax, used to some extent by other countries, won't start a trade war and that the total package also will lower taxes and boost the American economy and jobs.

McNally still feels threatened. She remembers her last brush with Trump. Her then-boyfriend was so impressed with Trump's 1980s-vintage biography that she and the boyfriend plunged into the residential rental business.

"I had to file bankruptcy," McNally recalled, though she does not blame Trump for the lack of execution.

The housewares business has worked out better so far.