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Today, U.S. small businesses are expanding into international markets faster than ever before. The development of digital sales tools and platforms such as Google Ads, Google Market Finder, email marketing platforms, and social media have leveled the playing field for small businesses to compete and grow in both domestic and international markets.
But with this growth also comes new challenges that small businesses have to learn how to navigate. The uncertainty around trade agreements around the globe and escalating tariffs between the U.S. and China are hindering the growth American entrepreneurs are seeing in these markets.
This was the topic of discussion at an event October 30 in Washington, D.C. held by Google and the U.S. Chamber of Commerce, which featured a panel of four small business owners discussing how digital innovation has allowed them to grow internationally, while also discussing the challenges that come with international growth.
The U.S. Chamber sat down with these four small business owners to better understand the opportunities and challenges to selling internationally. Here are some of the key takeaways from that discussion:
1. U.S. small businesses are seeing growth in a variety of international markets, with many citing Canada, Europe and Australia as growth areas.
Currently, the top six export markets for U.S. businesses are Canada (43%), U.K. (15%), Mexico (14%), Australia (13%), Germany (12%) and France (12%), and small business owners are seeing growth in these markets, with particular focus on Canada, Australia, and Germany.
Marc Pichik, founder and CEO of Iowa-based Smart Retract, which makes sleek and compact retractable safety gates for children and pets, has been selling to Canada for over a decade and has seen steady growth in the market over time.
“We've been shipping to Canada the longest and so they would be our biggest [international market] share overall, but close behind would be the United Kingdom and then second to them would be France and Belgium,” Pichik said.
Choon Ng, founder and CEO of Michigan-based Rainbow Loom, the company behind a plastic tool that allows children to weave colorful rubber and plastic bracelets, is seeing growth in regions rather than countries and has expanded his business internationally through YouTube tutorials. He is finding that German-speaking and Russian-speaking markets are his biggest opportunities for growth.
Chad Price, founder and managing partner of Texas-based Kettlebell Kings, which carries lines of kettlebells and accessories, has sold to over 40 countries, and is seeing the biggest potential for growth in Australia. Wei-Shin Lai, founder and CEO of Pennsylvania-based SleepPhones, which sells comfortable headphones made for sleeping in, also cites Australia as an area of growth, though Germany is a growing market for her company as well.
2. Long-term trade agreements are needed for international market stability.
Canada and Mexico are the top two export destinations for U.S. small and medium-sized enterprises, more than 120,000 of which sell their goods and services to our North American neighbors. With many small businesses counting on Canada and Mexico for their export growth, business owners said USMCA would bring a much-needed stability for future expansion plans in those markets.
“I think [USMCA] will just help bring some stability, so that people can start focusing on IP issues and other bigger problems rather than getting stuck with nothing moving forward,” Pichik said.
But Canada and Mexico aren’t the only markets that need stability, China is another market where small businesses say an overarching international trade agreement is needed. The current trade war with China and the ongoing tariffs are hurting the bottom line for small businesses.
“The trade war with China has impacted us because speakers are only manufactured in China and that's pretty much what we source from there,” Lai said. “We've been able to keep prices the same, but we've been talking about potentially decreasing our MSRP.”
She went on to say, “The uncertainty really does impact us. I also feel like [the U.S.] need to be at the table for any international trade agreements – not necessarily bilateral type of agreements, but international agreements because they just have more power.”
3. IP protection is the biggest concern for small businesses in international markets.
Price has had to battle copyright issues in China, a cost that is affecting the growth of his business.
“This year alone we've probably spent close to $50,000 battling other Chinese companies trying to steal our brand,” he said. “It feels like China is the Wild West a little bit in terms of regulations because the tariffs can happen at any time and then you have [China] basically not caring about any kind of international laws or regulations in terms of IP.”
“It definitely drains the budget, but it also drains morale when it comes to expansion because do you really want to do this 10 more times in 10 different countries?” Price went on to say.
And while small businesses recognize the intention behind tariffs is for stronger IP protections, business owners are questioning whether there is another way.
“I know, the trade war is to provide leverage so that we can have stronger IP protection in China. But at the same time, like I feel like there are other ways to get IP protection done in China than to hold this trade war. I don't feel it's had much effect yet, but it's kind of just tariff tag back and forth.” Price said.