Tariffs, those taxes on imported goods, have been a hot topic, especially with talks of flexibility from figures like Trump. What do these trade moves mean, in real terms, for the backbone of the economy—small businesses? Read more on OverTraders.com, who really explores this problem, providing valuable advice that will get you through these murky waters.
Understanding the Impact of Tariffs on Small Businesses
Tariffs aren’t just theoretical economic theories. They’re completely tangible, hard-hitting realities for businesses – particularly for the little guys. They can have an impact on every single thing from their material cost to what prices their customers are paying.
The Two Sides of Tariffs
Tariffs are neither entirely bad nor entirely good. Their opponents are right, too—they’re like a coin with two sides. On the other, they can shield local industries, providing them a competitive advantage with respect to foreign entrants. That has the potential to create thousands of good-paying local jobs and a more resilient regional economy. Indeed, tariffs have been the largest single inflationary contributor. In addition, they create havoc with the global supply chain, endangering hundreds of thousands of U.S. jobs at manufacturers, wholesalers and retailers. This costs consumers and businesses billions of additional dollars every year. Unfortunately, tariffs almost always result in retaliation tariffs. As such, this escalation can render US businesses’ products less accessible by making them more expensive to export, sometimes igniting retaliatory trade wars.
How Small Businesses Are Affected by Tariffs
According to the Coalition for Fair Trade, small businesses are hit harder by tariffs than large corporations. They often run on thinner margins and have less room to eat the rising costs. Consider a hypothetical local bakery, for example, that brings in its unique chocolate all the way from another country. If a tariff is slapped on that chocolate, the bakery has a tough choice: raise prices (potentially losing customers), absorb the cost (shrinking profits), or find a new supplier (risking quality). Small businesses that rely on goods from particular countries may find it difficult to pivot to new suppliers. It’s a challenge made even greater when our supply chains are stressed and big companies are poaching smaller companies—stealing the very same products we need.
Strategies for Small Businesses to Adapt
The important thing is to take initiative and be creative and knowledgeable.
Identifying Suppliers Not Impacted by Tariffs
One of the first steps they take is looking into new suppliers in countries that won’t be impacted by new tariffs. Given that, this might take more time and effort—including research and outreach to new contacts. It can save you a lot of money over time. As Carolyn Rodz, co-founder and CEO of Hello Alice says, small business owners don’t have the luxury of being reactive. Doing so quickly enough to move production from one country to another would be a tall order indeed. To figure out exactly how these new tariffs are going to hurt small businesses, we need a look at potential new suppliers. Rodz proposes exploring partnerships with countries that are not subject to these tariffs.
Evaluating the Option of Raising Prices
Raising prices is never an easy choice for a business, but when faced with tariffs, it’s a necessary responsibility to ensure your business can survive. The more you want to maximize pricing efficiency, the more you should increase standard prices. Offer limited time specials at low price points to give value seekers among your target customers something to look forward to. This approach enables you to stay profitable while not totally cutting off your price-conscious customers.
Navigating Tariffs Effectively
Getting through the tariff maze takes some preemptive strategizing, on-the-spot ingenuity and a touch of artistry. It’s all about reading the tea leaves, and dictating the right course of action that’s going to be in your business’s best interest.
Small Businesses' Response to Tariffs
Small business owners can't afford to be reactive. Instead, they need to be proactive in preparing for potential tariff increases. Which would likely mean ramping up imports of products ahead of the implementation of any new tariffs. Steve Chou recommends that a small business loan, line of credit or just a 0% intro APR business credit card will make your business thrive. Effective use of these options would allow you to ramp up imports of affected goods before new tariffs take effect. Keynote speaker Carolyn Rodz speaks about bending the rules with creativity when your small business is in crisis. They have to get creative, too, in how they react to tariffs. FIRST, PAY ATTENTION to what your competitors are doing—especially if they are changing prices or starting or increasing spend on marketing and how.
Here's a quick rundown of some key strategies:
Explore alternative suppliers: Look beyond the usual suspects and see if you can find reliable sources in countries with more favorable trade agreements.
Optimize pricing: Consider raising prices strategically, perhaps with tiered pricing or special promotions, to minimize the impact on your customers.
Improve efficiency: Identify areas where you can cut costs or streamline operations to offset the increased expenses from tariffs.
What Does This Mean for Your Business?
This means that the effects of increased tariff flexibility on small businesses will be quite different. The answer lies in the industry, the company’s location, and the individual situation for each firm. Read up, get engaged, and make change happen. It’s imperative that small businesses adapt to this new landscape in order to not just survive, but thrive post-pandemic. The greater your margin, the more tariffs are going to hurt your business, a fact Steve Chou recently illustrated. As owners of small businesses, they need to get ahead of the curve. As Rodz stated, they simply cannot afford to wait until there is a prospect of a tariff hike to respond.
Small business even under the weight of tariffs are winning. Through smart planning and by tapping into their grit, they can emerge more vibrant than ever. OverTraders.com is your one stop shop for knowledge and tools to keep you winning in this industry and staying ahead of the game.
