Tariffs & Small Businesses: What You Need to Know to Protect Your Profits

Your business is impacted by more than just your local competition or customer trends — it’s also influenced by international trade policies. One of the most important (and sometimes overlooked) of these? Tariffs.

Whether you import goods directly or rely on vendors who do, tariffs can affect your pricing, margins, and customer satisfaction. Service-based businesses are also affected by tariffs through supplies and equipment. Let’s break down what tariffs are, how they can impact your business, and what steps you should take now to safeguard your profits.

What Are Tariffs, Anyway?

A tariff is essentially a tax on imported goods. Governments use them to encourage local production, penalize foreign producers, or even to respond to political tensions. They can be temporary or long-term, and they can vary by country, product, or industry.

For example, if the U.S. places a 25% tariff on steel imports from another country, any business that buys that steel (directly or through a supplier) will see their costs rise by that percentage unless they find an alternative source.

Why Small Businesses Should Pay Attention

Large corporations often have legal and supply chain teams to adjust strategies when tariffs change. Small businesses? Not so much. But here’s why you can’t afford to ignore them:

• Higher Costs: Tariffs can lead to increased prices on raw materials, parts, or finished goods.

• Unpredictable Margins: If your costs suddenly rise, and you haven’t adjusted your pricing, you’re eating into profits.

• Competitive Disadvantage: Larger companies may have volume-based discounts or alternative suppliers that small businesses can’t access.

• Customer Impact: You might be forced to raise prices, risking customer dissatisfaction or churn.

  
  

What Small Businesses Should Be Doing

1. Know Your Supply Chain

Understand where your products and materials come from. If you’re relying on imported goods, find out if they’re subject to current or proposed tariffs. Ask your vendors if they anticipate any changes in pricing due to tariffs.

2. Build Flexibility Into Pricing

Consider flexible pricing models or adding clauses to contracts that allow you to adjust prices if costs rise. Communicate transparently with customers if prices must increase — they’ll appreciate the honesty.

3. Diversify Suppliers

Avoid relying too heavily on one source, especially if it’s international. Explore domestic or tariff-exempt suppliers. Even if switching now isn’t feasible, having backup options helps you act quickly.

4. Monitor Trade Policy Changes

Sign up for industry newsletters, follow trade news, or work with a business advisor who stays informed on tariffs. Use tools like the U.S. International Trade Administration’s Tariff Tool to check duty rates and updates.

5. Revisit Your Financials

Review your profit margins by product or service line. Which items are most at risk from increased costs? Tighten operational efficiency and look for cost-saving opportunities elsewhere in the business.

6. Advocate and Collaborate

Join local chambers of commerce or industry associations. They often lobby on behalf of small businesses and provide updates on policy changes. Collaborate with other small business owners facing similar issues to share resources or strategies.

Stay Proactive, Not Reactive

Tariffs can seem like just another piece of government bureaucracy until they hit your bottom line. But with a bit of foresight and planning, small businesses can stay nimble and resilient.

The key? Stay informed, stay flexible, and don’t be afraid to adjust. Your ability to pivot quickly could be your biggest advantage.

Need help analyzing your supply chain risks or reworking your pricing strategy? Let our team at Aventi Enterprises help you protect your profits and prepare for what’s ahead. Visit www.aventienterprises.com.