Tariffs have been in the news recently, causing a lot of people to become increasingly anxious. It's truly unfortunate that right in the midst of an economic boom, when faith in U.S. business is rising, terrifying talks of trade disputes are dominating headlines and giving consumers second thoughts. In my experience with finances and accounting, I have seen how events like these get blown way out of proportion.
Many industries are already starting to feel the impact of these harsh economic doctrines. Steel and aluminum tariffs are negatively affecting the U.S.'s relationships with Canada and Mexico while raising prices. Retaliatory tariffs from China are raising the prices of soybeans, which is an important and lucrative export in America's agricultural industry. The EU's tariffs have caused small whiskey distilleries to lose international clients and jack up their prices. With all these changes happening so rapidly, it makes sense that people are starting to refer to recent events as the beginning of a trade war.
So what do you do when trade war comes to you? Here are a few tips on the best ways to react if your business is affected by tariffs, either right now or in the future.
1. Avoid raising prices (if you can).
Understandably, this is going to be next to impossible for many small businesses with already thin margins. However, if you can feasibly prevent your prices from increasing, you stand to benefit greatly in terms of customer growth. While competing businesses in your industry will likely need to pass the increased costs on to their customers, you can win these scorned consumers over if you are able to prevent your organization from doing the same.
Some potential ways to pass off the added costs of these tariffs are to downsize areas of your team, find tax breaks and government business relief programs that you qualify for, and simply eat the cost with reduced profit margins. Many of these potential courses of action will require the assistance of accountants and financial analysts, so you'll definitely want to make sure you still have a few of them around if you decide to shake up your team.
2. Communicate with your customers.
In the unfortunate event that you need to raise prices on some of your goods, it's important to keep your loyal customers in the loop. The last thing you want is to be silent and opaque during a time of financial uncertainty. While you may think this tack will make your business look stable and unaffected, the more likely consequence is that uninformed people will start speaking on your behalf and justify your business decisions with negative connotations.
Find a way to explain the decisions you've made in a way that fits within your brand's story. If you present your business as a plucky young upstart, make an appeal to people's love of underdog stories. If you present yourself as a bold and disruptive game-changer, justify any increased costs with new features or benefits. A good community manager or social media expert will be instrumental in this step.
3. Stay the course.
All of the strategies listed above have one thing in common: maintaining the status quo. You don't need to start screaming and running for the hills because of concerning headlines and scary sound bites from politicians. While they are intimidating and cause a lot of change, tariffs can be very beneficial for businesses in the long run. And at the end of the day, no one really wants to start a war, even if it's only on the battlefield of trade.
As they say across the pond, "Keep calm and carry on."
If you have an accountant, financial adviser, or stockbroker that you trust, speak to him or her in depth before trying any of these above strategies.
Bryce Welker is a CPA and the CEO of multiple companies in the online education space, including Crush the LSAT.