Additional tariffs went into effect on Wednesday, April 2. Many small businesses may face significant uncertainty as a result. Industries such as hospitality and retail, which rely heavily on imported goods, are bracing for increased costs, supply chain disruptions, and economic volatility.
Small businesses may find themselves challenged to absorb these new expenses without passing the cost on to customers or compromising their competitiveness.
What are tariffs and why do they matter?
Tariffs are a tax levied by the government on the value of imported goods. They can increase the cost of American products to foreign buyers, and vice versa. Governments often use tariffs to protect domestic industries from foreign competition by making imported goods more expensive, thereby encouraging consumers to buy locally produced products.
However, tariffs can also lead to trade disputes, raise prices for consumers, and disrupt global supply chains. Tariffs have been around for years, and the U.S. had tariffs in President Trump’s first term as well as Biden’s presidency. While the impacts of past tariffs may not have been widely felt, there is growing concern that these additional new tariffs may have broader implications.
Who will be most affected?
Tariffs have been implemented on 10% of nearly all imported goods, with added duties on goods from countries that hold the highest trade deficits with the United States. Many small businesses in particular rely on foreign stock for the goods and services they provide.
For example, restaurants and local grocery stores could be especially impacted by the new tariffs, as the fruits and vegetables they typically import may become more expensive. This may force businesses to either raise prices or source exclusively from American farms, potentially reintroducing seasonal restrictions to consumers who have become used to boundless options.
This example illustrates many of the core ways in which increased tariffs could impact small businesses: Increases in the cost of goods, price increases for consumers, and supply chain issues. Businesses that export goods, such as machinery or chemical manufacturing, may run into trade challenges. While the potential disruptions from tariffs run the gamut from everyday operations to customer retention, small businesses can draw from a number of proactive steps to combat negative impacts.
Tips to lessen the impact of tariffs
Keeping the customer’s trust is most important. Be transparent about any price increases, and if rising costs are forcing you to charge more, clearly explain the reasons behind the change. Emphasize what sets your products apart – whether it’s quality, craftsmanship, or unique features – and express appreciation for your customers’ continued support.
Internally, assess your supply chain and explore other sourcing options. This could mean finding suppliers in countries not affected by tariffs or partnering with local vendors. If switching suppliers isn't feasible, try negotiating better terms or volume discounts.
At the same time, take a close look at your operations to identify ways to reduce expenses and increase efficiency. Working with a financial advisor, accountant, or small business mentor may also help you develop a smart, tailored strategy to navigate challenges and stay resilient.
Explore financing options to help ease the transition
Small businesses can also explore financing options that can help maintain cash flow and preserve operations to stay ahead of potential tariff-related disruptions.
In addition to a line of credit, an SBA loan through SmartBiz BankSM may be a strong fit for small businesses feeling the effects of increased tariffs. SBA loans are known for their longer repayment terms and lower interest rates compared to other types of financing, making them a smart choice for business owners looking to invest in long-term stability. These government-backed loans may be used for working capital, inventory, equipment, and other essential expenses, offering small businesses the ability to adapt without compromising growth.
At SmartBiz®, we understand the unique pressures that small businesses face. We are dedicated to providing innovative financing solutions, strategic resources, and guidance to help entrepreneurs weather these challenging times and continue to thrive. With tailored support, we're empowering local businesses to navigate this changing economic landscape confidently and emerge stronger.
Stay prepared and informed
Together, we can help ensure that small businesses continue to thrive regardless of the economic climate. Business owners can find additional resources about which tariffs could affect their businesses on the official website of the International Trade Administration.
