Adapting to Upcoming Tariffs: A Guide for Small Business in Today's Business Landscape

By Ahmed Mazhar - Sales & Marketing

In an era of shifting political alliances and trade policies, small businesses are increasingly facing the challenge of adapting to new tariffs. 

These import or export taxes can impact supply chains, operational costs, and overall profitability. 

However, with proactive strategies and the right tools, small businesses can navigate these changes and even turn challenges into opportunities.

Tariffs are taxes levied on goods traded between countries, either imported or exported. Governments use tariffs to protect local industries, manage trade balances, or react to geopolitical issues. While large corporations typically have the resources to absorb these costs, small businesses may face challenges such as:

• Higher Product Costs: Increased prices for imported goods or raw materials

• Supply Chain Disruptions: Changes in trade routes or supplier relationships due to new regulations

• Competitive Pressures: Struggles to keep pricing competitive as costs rise

• Broaden Your Supplier Base
  Relying on a single supplier or region exposes businesses to risks from tariff hikes. By diversifying suppliers or sourcing locally, small businesses can lessen their dependency on imports impacted by tariffs.
  Example: A boutique clothing store might collaborate with local textile manufacturers to lower costs while supporting regional industries.

• Improve Inventory Management
  Tariffs can lead to fluctuating supply costs. Small businesses can use real-time inventory management tools to track stock, forecast demand, and prevent over-ordering of items that may rise in price.
  Example: A home decor retailer could analyze sales patterns to avoid overstocking tariff-impacted products, freeing up budget for higher-demand items.

• Negotiate with Suppliers
  Start discussions with suppliers about sharing the responsibility for tariff-induced price increases. Some suppliers may be willing to absorb part of the additional costs to preserve long-term partnerships.

• Adjust Prices Strategically
  Small businesses may need to raise prices to cover rising costs, but it's essential to approach this carefully. Instead of blanket price hikes, clearly explain to customers why adjustments are necessary and highlight the value your products deliver.

• Take Advantage of Trade Agreements
  Stay informed about trade agreements that could benefit your business. These deals might reduce or eliminate tariffs on certain goods, presenting cost-saving opportunities.
  Example: A small electronics company might modify its supply chain to take advantage of favourable trade agreements with specific countries.

• Embrace Technology and Automation
  Investing in supply chain technology can mitigate tariff impacts by enhancing efficiency, minimizing waste, and discovering cost-saving solutions. AI tools can also offer valuable insights into market shifts and alternative sourcing options.

When a U.S.-based small furniture retailer faced increased tariffs on imported wood, they acted quickly:

• Diversified Suppliers: Sourced alternative materials domestically

• Streamlined Operations: Used inventory management software to optimize stock levels and reduce excess inventory

• Transparent Communication: Explained pricing changes to customers, emphasizing the quality and sustainability of their products

The result? They not only maintained profitability but also strengthened customer loyalty by prioritizing value and transparency.