President Donald Trump announced, retracted, nurtured and coordinated Dozens of tariffs Over the first few months of the presidency, business owners have been struggling with how and when to support them. Impact.
As customs situations arise, more Small business owners I’m worried about how import taxes will affect revenue. Not all companies feel an equal impact, but in the capacity to which tariffs are enforced, tariffs can affect businesses across the board.
“Most small businesses will get hurt quite badly, if not in person, due to ripple effects,” says Vidya Mani, an associate professor of business administration at the University of Virginia’s Darden Business School.
Even if a Small and Medium Enterprises Because we do not purchase customs items directly, a refrigerator assembled in the US may require parts, using chips made from raw materials and steel manufactured in Mexico from places such as Canada, China, Taiwan, India. It also does not include the equipment or tools used to assemble the refrigerator in the first place.
Confusing any of these supply points can raise the price of production and spikes, as seen during the pandemic. Due to customs duties in multiple countries and products, Some economists It predicts exponentially drastic changes in price and supply.
While you may not be able to control your global supply chain as a small business owner, there are steps you can take to protect your business. Price hiking And make your customers happy.
Talk to your supplier
Knowing who the supplier is and where they source their products is is one thing. Knowing the sauce behind the sauce is another thing. And your supply chain will come back.
Suppliers don’t always get stock directly from sources. They may buy it from wholesalers who buy it from brokers. Brokers source it from a variety of locations.
“When you lose visibility into that product, part of that supply chain is when you’re really bad shocked, when there’s disruption,” Mani said. “Learn the region and the type of pricing pressure you get so you can prepare for these shocks that come in.”
With the global economy, it’s key to really understand where your product comes from, beyond the first layer or two supply.
Talking about where suppliers source their products and how they can build resilience to tariffs and supply chain shocks can help strengthen your supply chain in the long term.
Know the whole supply chain
Knowing where suppliers source their products is important to understand how tariffs affect the supply chain, along with other impacts.
Over time, Mani predicts that suppliers will be able to focus on sourcing from regions and countries close to their customers, including products from Asia to the European Union to serve the United States.
“There’s no more global supply and global markets,” Mani said. “We’re getting more local hubs for small and medium-sized businesses.”
This means that the supply chain can become more susceptible to what mani brings to local shocks. disaster Or the shortage affects one region. Small businesses that rely on the region will likely see shortages and price hikes.
Knowing where your product comes from and how it will be affected by a particular area will allow you to create headwinds towards the supplies you rely on and adjust accordingly.
Operation makes it more efficient
How you manage yours Business Management It is important in mitigating price increases arising from customs duties. Every dollar you save can lead to a reduction in losses and reduce the price burden you need to push to your clients. The key to this is to see which products and services are your true makers of money.
“We’re going to focus on our mainland products and get supply for that and start to be as efficient as possible in our supply chain,” Mani said.
By focusing on the materials of some core products, you can save money in the long term by taking advantage of buying in bulk rather than trying to spread your capital in a huge portfolio.
Transport and storage also plays an important role, Mani says. Customs duties and consumables can change in a few days, so being able to buy and transport materials quickly can protect you from sudden price surges.
Finally, it looks strictly at your budget, and cut out discretionary spending in the near future.
“It’s very similar to how you look at a budget sitting at a kitchen table when inflation comes in,” Mani said.
Avoid the temptation to buy panic
While many companies are increasing their inventory before the tariff enforcement date, they hope to save money from future price increases, that is not a viable long-term solution. capital.
“We could have used it for all the dollars trapped in stock that’s not on sale, something else,” Mani said.
Instead of trying to store inventory, look to where capital can be used to invest in efficiency and long-term cost savings. This means replacing old equipment that uses more energy, investing in automation, or establishing new training for employees.
Think about it in the long term
The tariff situation is constantly evolving, but as for the length of the Trump administration, they will likely stay here, so plan accordingly.
The ongoing tariff situation will likely be cyclical, Mani said negotiations, retaliation and adjustments are likely to occur over the coming weeks. Therefore, businesses should avoid rash decisions.
“There’s retaliation right now, so it’s better to get through it and wait,” Mani said. “Then it’ll boil down after that.”
Some business owners do that Full of hope That tariff will push more production and production into the US. It takes time for things to change in that direction.
“Until these supply chains move, small businesses can’t do anything themselves,” Mani says. “They will face an increase in costs now.”
Furthermore, building more resilient business operations, Cash Reserve – Supporting business health in the long term as disruptions like pandemics, local disasters and other economic factors can come anytime.
“Companies need to prepare for normal business disruptions, not when an emergency occurs,” Mani said. “Continue to invest in strengthening your resilience.”
Become flexible
Small business owners have a clear advantage over businesses in handling tariffs: flexibility.
“Small businesses can move and operate much faster and faster under the same principles as large companies in terms of efficiency applied to the concept of small businesses,” Mani said. “You’re not stuck with the enormous plan of only one move. You have a lot of flexibility.”
Being flexible in being able to switch suppliers, change sources and adapt products and services on the spot can provide benefits in reducing the impact of tariffs. This is important to continue to recognize changes in price.
“Can you see the trends and move faster? That’s where I think it’s an opportunity for small businesses,” Mani added.
By ordering items on a smaller scale or patching different sources to fill stock, you can diversify your supply chain and balance costs in ways that large businesses can’t.
Build a business network
Networking with other businesses can help you save money and maintain it in addition to price changes. A robust business community can help members withstand sudden changes, especially when connecting with both consumer-oriented businesses and suppliers.
“If they come together, they can pool resources and create enough buffers in the supply chain so that the other can compensate when one goes down,” Mani said.
Companies combining networks can use discounts to purchase large quantities of supplies ahead of shortages and price changes. You can also share equipment, transportation and work space to save on these costs. These are types of mechanisms that can be built when combined with networking. ”
Conclusion
The tariff situation remains uncertain, but it will help build resilience in the supply chain and help business operations in the long term. Talk to your suppliers to get comprehensive ideas on how your supply chain searches for inventory and equipment. Additionally, it will focus on making operations more efficient and network with other SME owners. This will help you withstand tariffs and manage your inventory over the long term.
