US Tariff Increases: 7 Concerns and What You Can Do About Them
As the US continues to impose tariffs, the ripple effects are being felt across the globe. While these measures primarily target other countries, UK businesses are not immune to the consequences. The impact on our local businesses is significant, from rising costs in the supply chain to shifts in global trade dynamics.
Here are a few things to consider how these tariffs could affect your business and what steps you can take to navigate these challenging times.
1. Falling Confidence and Sales
Financial markets are dropping, and business confidence is low, leading to reduced spending. This can affect your sales, especially if your products or services are considered non-essential.
Action Steps:
Focus on customer retention: Offer flexible options, smaller packages, or promotions to keep work flowing.
Highlight the essential value: Present your products/services as indispensable, even in tough times.
Review your sales mix: Check if you rely heavily on vulnerable customers or sectors.
Tip: Review your last 6 months of sales for any signs of slowing down. Build a cash buffer or explore ways to even out income.
2. Rising Costs
Tariffs increase costs along the supply chain, affecting your margins. Even small increases can add up over time.
Action Steps:
Set up a cost tracker: Monitor the monthly costs of the things you buy. A simple spreadsheet can do the job, but accounting software would be preferable and effective.
Review profit margins: Consider adjusting your pricing if necessary.
Tip: If you haven't done a cost review in the last six months, now's the time. Compare supplier prices or look at your gross margin trends.
3. Customer Impact
Tariffs might affect your customers, leading to changes in their buying behavior, such as smaller orders or longer payment terms.
Action Steps:
Talk to your top clients: Understand their challenges and how they are being affected.
Use insights: Adjust your offerings and support customers proactively.
Tip: This month, check in with your top 5-10 customers through a short email or phone call to uncover valuable information and strengthen relationships.
4. Supplier Relationships
Suppliers may face tariff-related pressures, causing price hikes, product shortages, or slower delivery times.
Action Steps:
Check your top suppliers: Understand where they source from and if it could create issues for you.
Develop a backup plan: Prepare for supplier issues by having alternatives.
Tip: Contact key suppliers now and ask if they expect any disruptions or price changes in the next 3-6 months.
5. Global Impact
Global supply chains might be redrawn due to US tariffs on other countries, potentially affecting the availability and cost of products.
Action Steps:
Assess stock and equipment: Identify items that are hard to replace quickly.
Consider investing now: If planning to invest in equipment, do it before prices rise further.
Tip: If you rely on imported goods, speak to your supplier about forward ordering or locking in current prices.
6. Potential UK Response
The UK might introduce retaliatory tariffs, affecting prices and trade relationships. This could create new opportunities or challenges.
Action Steps:
Be cautious with contracts: Avoid long-term supplier contracts if there's a risk of tariff-related changes.
Look for local suppliers: They may become more competitive if tariffs rise.
Explore new markets: Check if competitors are stepping back from markets you could enter.
Promote UK-made products: Use changing conditions to highlight locally made or tariff-free products.
Tip: Act quickly to spot growth opportunities others might miss. Stay informed and curious.
7. Focus on Control
Uncertainty can make your business feel vulnerable, but proactive steps can help you manage the impact.
Action Steps:
Review your monthly Profit & Loss reports: Regularly check your financials to spot trends early.
Maintain communication: Keep in touch with customers and suppliers to avoid surprises.
Assess exposure: Identify areas where your business is most vulnerable, such as pricing, sourcing, or demand.
Tip: Revisit the basics during uncertain times. Track spending, earnings, and how long you can sustain if things get tight. Simple tracking can provide clarity and confidence.
At the best of times, these are vital steps to protect your business and provide resiliency.