5 Ways to Prepare Your Business for Tariff Increases

With the current administration imposing tariffs on imported goods, it is important to be prepared. By being prepared, you can be proactive and prevent certain losses from happening.

This blog will discuss how to prepare your contracting business for tariff increases. Hopefully by the end of this blog you will be more knowledgeable about preparing for the impacts.

A tariff is a fee that governments impose on goods that are brought in from other countries. They are meant to help protect domestic industries. They also create more revenue for the country imposing the fees.

Some of the countries the United States has imposed tariffs on are China, Canada, and Mexico.

There are typically five types of tariffs that a country can impose. These include:

• Specific: A fee on specific imported goods based on the weight or number of imported goods.
• Ad Valorem: Taxes a percentage of what the good is worth.
• Compound: A combination of Specific and Ad Valorem. A fee on imported goods based on number of imported goods and the value of those goods.
• Tariff-rate Quota: A combination of Tariffs and Quotas. Sets a lower fee on imported goods up until a certain point (Quota).
• Retaliatory: Retaliatory tariffs are created to punish another country. A recent example of this is the current trade war between the United States and China. President Donald Trump imposed a 145% import tax on all Chinese goods after they could not reach a trade agreement.

There are multiple ways to prepare for tariffs. Some of the most important ways to prepare are:

• Having Efficient Inventory Management
• Checking Your Supplier
• Pricing Adjustments
• Communicating with Customers
• Focusing on Related News

Efficient Inventory Management

When preparing for potential fees, it is important to optimize your inventory management. During this time, you should not over purchase or understock. By being precise with your inventory, you can avoid financial risks and lost sales.

It is also important to look at what the consumers really want so you can plan. This will help with ordering what you need. Bulk purchasing is also an option as well. While the upfront cost may be expensive, you will save money in the long run.

By having efficient inventory management, you can have some financial stability while there is economic uncertainty.

Check you supplier

Before the tariffs happen, analyze the supply chain. See where your supplier is located. If they are in a country with higher rates, then it may be wise to choose a different supplier. This is important because some countries will have a higher price of imports than others.

If you have built a strong relationship with your supplier, you can always try negotiating for a lower price.

Pricing Adjustments

The prices of goods and services will unfortunately go up during this time. To prepare for this increase in price, use strategic pricing. You can implement dynamic pricing to adjust the price based on the demand.

Another pricing adjustment is to offer substitute products at a lower price. Substitute products and materials from tariffed regions with those from non-tariffed regions to offset price increases.

Communicate with your customers

Your loyal customers are what keeps you in business. They will also be concerned about the fees and how they will affect them. To prevent them from worrying, it is best to keep full transparency.

Do not surprise clients with immediate price increases. Foster goodwill with a newsletter or email campaign. Use periodic newsletters and emails to keep customers/clients up-to-date on inventory, pricing, and lead time changes.

With newsletters, email, and call campaigns, you can even offer incentives to keep them around. For example, you can have loyalty programs where they make purchases and eventually get dollars off for being loyal. Or you can offer potential coupons that will cut the price when they use your business.

Follow Regular News Updates

While preparing, it is also important to know about the latest news on tariffs. If you stay updated on market changes, your business can react quickly to sudden shifts. Use news updates to help make proactive decisions for your business resistant to tariff increases. Ensure you have other plans in place if anything changes.

Tariffs help to increase the purchase of domestic products. Unfortunately, these fees can lead to panic and economic uncertainty. However, if you are prepared, the tariffs do not have to put your company out of business. Find ways to be proactive with these fees so you do not have to worry about them later.