The President’s long promised tariffs on most trading partners in the world took affect this weekend. They range from 10% to 50% on products imported from other countries.

Whether you believe this is a sound economic strategy for the country or not (I do not), you need to prepare your business for the new reality; everything will cost more for you and your customers.

The way it will work, when a small business imports a product they use at their company or resell it, it will now cost them more as a result of the tariffs because they will have to pay an added fee to the federal government. The owner  then has two choices:

  1. Absorb the cost and make less profit.
  2. Pass part or all of the higher cost onto the customer.

Remember small business owners are not in business to make less money and can ill afford to at this point.

Ninety percent or more will pass the cost onto the customer resulting in higher prices. In the past few days, many small businesses have already sent notifications that their prices are going up as a result of the tariffs. Others companies are encouraging customer to buy inventory now to get products are the “old” price.

Customers are expecting prices to go up. I was at Whole Foods today and these well off people were “panic buying”; I flashed back to COVID.

Companies and people can’t switch quickly to US made products overnight. The tariffs will cause a cycle of higher prices and inflation. People already feel poorer with the crash of the stock market these past few weeks and with it, their 401K. This combination will cause consumers to buy less increasing the chances of another recession.

In the short term, none of us can influence federal government policy. But what we can do is to prepare our small businesses on what is to come and prepare for the long term:

  1. Do a review of your entire company’s supply chain to see what higher prices will have on your products or services.
  2. Determine how much influence the increase in these products will have on what you provide customers.
  3. Determine when you will have to pay more for these products.
  4. If you have the cash, buy extra inventory now.
  5. Look for lower costs alternatives that are affected less by the tariffs.
  6. Determine what affect an increase in price will have on the demand of your products.
  7. Determine if your competitors will be all affected equally
  8. Determine what lower cost substitutions customers may make away from your products as a result of higher prices.
  9. Alert your customers as soon as possible as to what those increases will be.
  10. Redo you your profit and loss forecast making necessary cost cuts in other areas if needed.

If will be a rocky ride, but small businesses are resilient as long as we plan ahead and not ignore the new economic realities.