3 min read
News of the trade war and impending tariffs continue to make headlines daily. Find out how these tariffs could impact your business.
The Trump Administration imposed a 10% tariff last year on over 5,700 items imported from China – including food, tobacco products, construction materials, textiles, and more (here’s the full list). The tariff was raised to 25% in May, but negotiations between the U.S. and China are still ongoing. Proposed tariffs on items from Mexico were suspended in June. Announced just last week, a trade war started brewing between the U.S. and European Union, but no formal action has been taken – yet.
Uncertainty is a major theme in the news on import tariffs, but business owners across many industries are prepping for higher costs. 43% of U.S. small business owners say tariffs on goods from China are increasing their costs, according to a recent survey.
You may save money by changing to a supplier that isn’t subject to tariffs, but that might not be an option for you. Or if your new supplier is indirectly affected by tariffs, you could still be looking at inflated costs. Still, shopping around for a better deal could be worthwhile.
You might have to pass some of your new costs to your customers. Most small business owners surveyed in the same study (64%) said they plan to raise prices. If this tactic makes sense for you, proceed carefully. Do your market research to make sure you keep your product competitively priced and attractive to your customers.
Comb through your budget to find operational expenses you can cut, especially if you can’t raise prices enough to cover cost increases and stay competitive. Consider renegotiating deals with vendors or find other ways to streamline costs.
Keep an eye on prices for inventory items. Are costs going up? Is there an opportunity to purchase inventory at a good price? If so, you may want to buy more inventory now to save money down the road. Just make sure it’s inventory that you can move and that won’t sit on your shelves, tying up your cash.
If you can’t or don’t want to change vendors, you might be able to lock in your current costs now. Work with your vendors, particularly if you have a good relationship with them, to see how you can avoid the worst of the tariff impact.
One strategy to keep business flowing is to give your customers incentives to keep buying from you. Creating a loyalty program that offers discounts for repeat or bulk buying may also take some of the sting out of potential price increases.
If you have big projects on the horizon, want to do a bigger buy on inventory at current prices, or just need working capital to cover cash flow gaps, have a plan to tap into funding when you need it. Some lenders, like QuickBooks Capital, offer faster funding for short-term needs, which can offer more flexibility than a long-term bank loan.
The Federal Reserve announced in June it would keep interest rates steady for the time being, If you anticipate having to borrow soon, low rates can be a good incentive to make your move.
It may be challenging for you to cover all the options because the news is constantly changing. Mapping out a few different scenarios ahead of time can help you stay ahead without compromising your cash flow or profits. Flexible business funding options can also help you move forward during transitional periods.