When many of us think of trade wars, such as the high traffics with many goods between the USA and China, we think of politics. President Biden and President Trump have both threatened tariffs on China in the future. Of course tariffs have gone up and down over the decades as well. However, trade wars are not just about politics, they often directly impact smaller businesses.

Large businesses have a lot more resources and market share to absorb tariffs. However, for small companies, they can’t so easily “pass the cost” of higher tariffs to their customers. They MIGHT have to go out of business. Those that stay in business have to fight and be creative in how to manage the volatility of a trade war.

Liz Picarazzi, of CitiBin, makes metal trash enclosures to keep out rats and bears. Her company is very much affected by tariffs. Read Liz’s full diary of her businesses journey here.

The challenge in a nutshell: my company CITIBIN manufactures aluminum cabinets in China, and I’ve been given 2 months to prepare for my tariff to go from 11% to 28% on August 1. If Trump wins in November, my tariff could go to 60%.

Liz Picarazzi, CITIBIN

Liz says there are so many variables at play in consider how to deal with tariffs. Namely, what if she orders something and it arrives late. She’s planned pricing and paid for things, and then at the last minute her entire pricing structure could change.

For a few months my head has been spinning with the many questions above. I’ve been in a lot of fear, as I’ve never had to rebuild my whole supply chain because of an escalating trade war.

Liz Picarazzi, CITIBIN

What Small Businesses Need to Know

Tariffs are a hot topic in today’s global economy. They can have a significant impact on businesses of all sizes, including small businesses. In this blog post, we’ll discuss what tariffs are, how they work, and how small businesses can prepare for them.

What are Tariffs?

Tariffs are taxes imposed on imported goods and services. Governments use tariffs to protect domestic industries, generate revenue, or influence trade policies. When a country imposes a tariff on a specific product, it makes the imported item more expensive, discouraging its purchase and favoring domestically produced alternatives.

How Do Tariffs Work?

Let’s say the United States imposes a 25% tariff on imported steel. If a U.S. company wants to import $1,000 worth of steel from another country, they would have to pay an additional $250 in tariffs to the U.S. government. This extra cost is often passed on to consumers in the form of higher prices.

Tariffs can be levied on a wide range of products, from raw materials to finished goods. They can be applied uniformly across all trading partners or target specific countries. The impact of tariffs can ripple through supply chains, affecting businesses that may not directly import the taxed goods but rely on them for production.

How Can Small Businesses Prepare for Tariffs?

1. Stay informed

Keep track of tariff announcements and trade policy changes that may impact your industry. Follow news sources, trade associations, and government websites for updates.

2. Assess your supply chain

Evaluate your current suppliers and determine if they are subject to tariffs. Consider diversifying your supply chain to include domestic or alternative international sources less affected by tariffs.

3. Communicate with suppliers

Discuss tariffs with your suppliers and understand how they plan to handle the additional costs. Some suppliers may absorb the tariffs, while others may pass them on to you.

4. Review pricing strategies

Analyze how tariffs impact your costs and profitability. Consider adjusting prices to maintain margins, but be mindful of how price increases may affect customer demand.

5. Explore tariff exemptions

Some products may be eligible for tariff exemptions or exclusions. Research if your imports qualify and follow the necessary procedures to apply for relief.

6. Manage inventory carefully

Tariffs can disrupt supply chains and lead to shortages or delays. Carefully manage your inventory levels to ensure you have sufficient stock without overstocking and tying up cash flow.

7. Consider domestic sourcing

Investigate opportunities to source materials or products domestically. While domestic suppliers may have higher base costs, they can offer more stability and help avoid tariff-related uncertainties.

8. Engage with policymakers

Small businesses can collectively voice their concerns about tariffs to elected officials and policymakers. Participate in industry associations, attend town hall meetings, and write to your representatives to share your perspective.

Navigating the complexities of tariffs can be challenging for small businesses. However, by staying informed, assessing risks, and adapting strategies, small businesses can better position themselves to weather the impact of tariffs and maintain their competitiveness in the global marketplace.

Remember, tariffs are just one aspect of the ever-changing trade landscape. As a small business owner, it’s essential to remain agile, proactive, and informed to make the best decisions for your company’s long-term success.

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