Tariff Uncertainty Weighs on Small Businesses

Tariffs are important, particularly when it comes to trade negotiations. From the US to China to the EU to the UK and beyond, trade and tariffs are important factors in our political system. As we continue to wait for Donald Trump’s “perfect” trade deal, the Chinese import tariffs are taking their toll on small businesses, dimming the overall business outlook for the economy.

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Economic Confidence Falls Among Small Businesses

Economic confidence is at its lowest level since November of 2012.  The monthly survey from the Wall St. Journal reported that 40% of small businesses expected the economy to worsen in the next 12 months, which is up significantly from the prior month (29%) and prior year (23%). 

The Reason? Tariffs.

Slightly less than half of the small businesses said that these tariffs are impacting their businesses. It’s not just the tariffs but the uncertainty that is rattling most owners. They don’t know how long these additional costs will remain.  They also don’t know what else is coming.  These together make it nearly impossible to plan accordingly.

The Ripple Effect

Less investment and slower hiring are the two most tangible short-term effects of this ill-conceived policy. 

“It’s hard enough to adjust to price increases, but it’s just more difficult when you are uncertain how the policy will unfold in the future,” said Richard Curtin, a University of Michigan economist. “For small firms that means being more cautious in your investment and hiring plans.” 

Supply chains are feeling the pinch. Customers are ordering less in advance. Fewer are making major purchases. 

“This is the strangest I’ve ever seen it,” said Wiscon President Torben Christensen, who has run the company for the past decade. “It’s busy. The economy is booming, but there is great uncertainty. A lot of it has to do with trade policy.”  

Small businesses can be more nimble, but they also have smaller cash reserves, making it difficult to deal with wild swings in demand 

“Travis Luther, the founder of Queen Anne Pillow Co., a Denver-based maker of high-end bed pillows, said larger competitors have accelerated purchases to get ahead of tariffs, something his six-year-old company can’t afford.”  

Price pressures limit the amount of excess cost that can be passed through to customers. 

Trump is clueless

Mr. Trump continues to reject the notion that his trade policies were hurting the U.S. economy. Instead, he blames the businesses as “badly run and weak companies”.  Neither of which is true.  Alternative facts and propaganda do not pay bills.  With impeachment in full swing, I wouldn’t expect his administration to get their act together anytime soon.  

What Can You Do?

So much of this is outside a small business owner’s control. However, there are a few things you can do.  First, is there anything you can do to increase demand through upselling, bundling, etc.? This can help you boost revenue can help offset some of the costs.  Second, is it possible to remove costs from your organization in other areas? This can help offset some of the increased cost of goods.  Finally, can you increase your price, even a little?  Any off-set is better than none. 

What we really need is stability, and unfortunately, I do not see that happening without a change in the Administration.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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