What Tarrifs Can Mean for Your Business

Tariffs on Chinese Products Could Affect Small Businesses

With the US threatening to raise the tariff on approximately $200 billion worth of Chinese imported goods
to 25% (up from 10%), small American businesses could suffer the consequences and should therefore start preparing.

Businesses that sell goods or parts made in China have already been feeling the effects of the trade war.
Some companies have had to raise their prices to compensate for the higher cost of Chinese goods. Not surprisingly, this has caused their revenues to decrease, as consumers who weren’t willing to pay the higher prices
ultimately took their business elsewhere.  The problem is, most small businesses simply cannot absorb the costs coming from the first round of tariffs and have no choice but to raise their prices or consider laying off their employees.

Despite these issues, a survey conducted by Bank of America revealed that 59% of small businesses say tariffs won’t affect them and they aren’t worried.  This optimistic thinking may be realistic for some business owners, but for others whose products come from China, it’s a different story altogether. The effects of tariffs also vary by industry type, as tariffs tend to be most damaging to agriculture and wholesale products.

So what should small businesses do?

It is important to manage your company based on how the market is adjusting.  When your supply chain
starts charging higher prices for items you need to run your business, it is important to have a plan in place.  Here are some things you can do now to be prepared:

Manage cash flow — start by paying close attention to your expenses.  Come up with ways to reduce your costs to
compensate for the tariff-related price increases before raising your prices.

Analyze pricing structure — raising prices to stay profitable in the midst of tariff increases can have negative effects on your revenue if consumers decide to walk away for a less expensive product. Make sure you are effectively priced by analyzing the competitive landscape and taking the time to thoroughly understand your consumers’ buying habits and
price threshholds. You don’t want to alienate your them by pricing yourself out of the market.

Manage Inventory — do your best to ensure you aren’t sitting on a lot of slow-moving inventory.  If you are, develop
programs to get rid of it, which will help increase sales and ultimately reduce expenses.

Determine purchases — decide what you need to buy and make your purchases now before the tariffs affect industries like
technology, lumber and steel.  Once they do, prices for those products will escalate.

Don’t wait to obtain financing– interest rates are likely to go up with the impending tariff increase, so applying for funding now is a good idea.  There are types of financing that can help increase your cash flow, such as Accounts Receivable financing. This is helpful if your suppliers are negatively impacted by the tariff situation and take longer to pay their bills. ExpoCredit provides AR Financing, which turns your unpaid invoices into cash, so you can keep your business running smoothly without worrying about getting paid. For more information and to submit an application, visit www.expocredit.com.

Regardless of what type of business you run, don’t wait for the tariffs to impact you.  Being prepared now will help you weather whatever storm comes your way.

Sources: www.businessnewsdaily.com, www.nytimes.com

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