Affected product categories included luggage, mattresses, handbags, bicycles, vacuum cleaners and air-conditioners. Tariffs on an additional $300 billion in Chinese goods, including toys, clothes, shoes, appliances and televisions, are planned.
Retailers say that the trade war is impacting their business and that shoppers will be the ones who bear the brunt of increasing costs. According to the Washington Post, these tariff increases translate into a typical family of four spending about $860 more a year. If Trump puts tariffs on all Chinese imports by the end of the summer as threatened, that cost will jump to more than $2,000.
The Tax Foundation forecasts that tariffs both enacted and planned will reduce the US’s long-term GDP by 0.2 percent ($50.31 billion) and wages by 0.13 percent while eliminating 155,878 full-time jobs. The impact will be felt by all, particularly small businesses, from cash flow to retail inventory to customer loyalty.
Even if you’re neither an importer or exporter, at least some of your office supplies, electronics, vehicles and possibly even break-room staples like coffee will be imported. As the prices of these goods rise, inflation and interest rates will too. Winter is coming. So what can you, as a small business owner, do to prepare?
Reduce your overhead
Take a look at your business expenses, reevaluate what’s necessary and cut back wherever you can. By putting on your accounting hat, you may even be able to avoid increasing prices, at least in the short term, until you get a clearer, more definite picture of how high tariffs will go and what the effects will be. If your company has significant buying power, your supplier(s) may even agree to split tariff costs with you. If you find that there’s no way to avoid passing on some of the costs to your customers, let them know clearly and early.
Manage your inventory
Stock up on core inventory, though of course how much you can stockpile will depend on what you’re selling and where. To free up cash flow, find ways to move inventory that’s not selling, whether you leverage wholesale channels or create product bundles. Combining new and slow-moving inventory into attractive package deals can help you maximize gross profit. If you’re in the tech category, you may even consider bundling new merchandise with refurbished goods.
Prepare for tomorrow today
It may be a good idea to borrow now before interest rates increase. For example, if you’re thinking about a new building, do it sooner rather than later, as tariffs on steel and aluminum are already raising construction costs. Lock in fixed-interest-rate financing now, increase your credit line, and lock in prices on needed items like vehicles, (refurbished) electronics, appliances and other supplies as well.
Expand your supplier base
Source similar items that appeal to your customer base made by manufacturers in North America and other non-tariff countries. Resources like ManufacturerSupplier.com can help you start developing relationships with vendors uninvolved in the trade war. If you can outsource your manufacturing to countries where you also sell your products, even better. You’ll save on shipping and other costs.
Diversify your business
Turn lemons into lemonade and look to diversify instead of relying on just one industry, region or large customer. Which other export markets might be available? Resources like SCORE or your local Small Business Development Center may be able to help. Consider investing your marketing and business development resources elsewhere as well.