Times of Tariffs: Weathering Trade Turbulence
Tariffs are barriers to international trade. Governments usually apply tariffs to protect local economies and encourage manufacturing investment at home. Paid by the importer, tariffs are fees assessed on the value of imported products, including freight and insurance, which increases the cost of importing goods.
The current U.S. administration’s rapidly changing tariff assessments on numerous countries and product sectors create marketplace uncertainty, which prevents local investment initiatives.
According to a recent survey by Small Business Majority, “53% of small businesses are concerned about tariffs negatively impacting their business and 77% are concerned about announced tariffs negatively impacting the U.S. economy as a whole.” Significantly, small and medium-sized businesses represent “$868 billion, or roughly one-third, of annual U.S. imports, according to the Census Bureau.”
Once tariffs are applied, importers must decide whether to absorb the cost and reduce their profit margins, negotiate with the exporter to lower its price and thereby absorb part of the tariff cost, or pass along the additional costs to the end consumer. In any scenario, tariffs incentivize importers to find a lower-cost supplier or relocate manufacturing to another country with fewer or no tariffs applied to target export markets–especially if production in the United States is not a viable option.
In Response to Tariffs, What Can Small Businesses Do?
Small businesses are particularly vulnerable to increases in supply chain costs and market uncertainty because they “typically don’t have the same leverage to negotiate with suppliers or large cash cushions.”
Below we provide five strategic recommendations to limit the financial impact on your business.
1) Diversify Your Supply Chain
No matter how big or small your business, some of your goods are imported. Securing lower-cost suppliers in different geographies for the same or similar products and diversifying what you sell, if your company sells more than one or two products, may help you offset cost increases attributed to tariffs.
2) Have an Open Discussion with Your Suppliers
Talk to your suppliers about your import product price limits. They may have alternative product options or sources, or they may even be willing to split the cost of the tariff with you.
3) Evaluate Where You Can Cut Costs and Adjust Pricing
Assess your historical costs and expenses against your tariff-imposed operating budget. Are there other expenses you can cut or reduce to offset the increase in product costs? Will your business still generate enough cash flow to support your business operations in the long term?
A less optimal option is to increase the prices of products not impacted by tariffs to maintain overall profit margins if you cannot pass along some or all of the additional cost of tariffed products. (This approach would require a reliable and regularly updated sales forecast model to determine whether this is a sustainable strategy for your business in the near and long term.)
4) Network With Other Businesses
Attend local Chamber of Commerce events and other business networking opportunities to learn more about other companies’ strategies to weather the imposition of U.S. tariffs and learn who their suppliers are. You may be able to place combined orders to reduce the per-unit cost in freight or secure supplier discounts for bulk orders.
5) Be Transparent With Your Customers
Communicate openly with your customers about your firm’s strategy to either offset or share costs with customers. Customer loyalty and a shared understanding of tough economic conditions may be enough for them to remain loyal. Business owners could also include an invoice line item representing the cost of the tariff to be transparent with customers. It would give the business flexibility in explaining changes in retail pricing when tariff rates change.
By considering other sourcing options, reevaluating your company’s budget, and remaining flexible, your business will become more resilient and better equipped to adapt to uncertain market conditions. Evaluating both short- and long-term risks presented by tariffs will improve your business’s ability to weather times of turbulent tariff policies and beyond. When making long-term business investment decisions is practically impossible, your company’s ability to keep open, transparent lines of communication with both suppliers and customers will facilitate nimble, less disruptive shifts in business strategy.
“Company A,” whose supply chain originates with large manufacturers in northeast Asia, has yet to hear from its suppliers about upcoming changes in pricing. This mid-size business competes with other firms, purchasing larger quantities of imported products from the same suppliers with manufacturing in Asia.
During the pandemic, the suppliers prioritized allocations of limited production quantities to larger U.S. competitors. As a result, Company A gradually diversified the number of suppliers, but many of the product components are still manufactured in China. The business predicts further supply chain disruptions caused by the changing U.S. tariff policies. To survive, Company A anticipates that the increased import costs will be reflected in new, higher retail prices for the end consumer.
Other Sources: Lessing, M. (2025, April 04). How Trump’s latest tariffs could impact small businesses. Bankrate.
