Times of Tariffs: Weathering Trade Turbulence
Tariffs are barriers to international trade. Governments usually apply tariffs to protect local economies and encourage domestic manufacturing investment.
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 market uncertainty, hindering 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 is, some of your goods are imported. Securing lower-cost suppliers in different geographies for the same or similar products, and diversifying your product line, may help you offset tariff-related cost increases.
2) Have an Open Discussion with Your Suppliers
Discuss your import product price limits with your suppliers. They may have alternative product options or sources, or even be willing to split the tariff cost 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 affected by tariffs to maintain overall profit margins if you cannot pass along all or part 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 about other companies’ strategies for weathering U.S. tariffs and identify their key suppliers. You may be able to place combined orders to reduce the per-unit freight cost 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 the harsh economic conditions may be enough to keep them loyal. Business owners could also include an invoice line item for the tariff cost to be transparent with customers. It would give the business greater flexibility to explain retail pricing changes when tariff rates fluctuate.
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 pricing changes. 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, suppliers prioritized allocating limited production quantities to larger U.S. competitors. As a result, Company A gradually diversified its supplier base, but many of the product components are still manufactured in China. The business anticipates additional supply chain disruptions due to the evolving 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.
