1. Understand your exposure
Identify all imported inputs (raw materials, components, finished products) and their countries of origin.
Determine the specific tariff rates applied to these items. The United States International Trade Commission's (USITC) Harmonized Tariff Schedule can help.
2. Re-evaluate your supply chain
Diversify suppliers: Seek alternative suppliers in countries not subject to tariffs or those with more favorable trade agreements. Consider domestic sourcing options to avoid tariffs altogether.
Negotiate with existing suppliers: See if they are willing to share the cost burden of tariffs or offer better payment terms.
Explore nearshoring: Consider suppliers in geographically closer countries like Mexico or Canada, who may benefit from established trade frameworks and reduced shipping costs.
Optimize logistics: Streamline shipping processes, combine freight, and diversify transportation modes to reduce costs and delays.
3. Adjust your business model and pricing
Analyze your breakeven point and cost structure: Understand how much price fluctuation your business can sustain and identify areas to reduce non-essential expenses.
Implement dynamic pricing: Adjust prices based on real-time data like demand, competitor pricing, and inventory levels to protect profit margins.
Reassess product strategies: Consider using less expensive components to offset rising costs, but carefully evaluate the impact on quality and potential need for additional investment in research and development.
Explore bulk purchasing or long-term contracts with suppliers to secure better pricing.
4. Communicate transparently with customers
Explain the reasons behind price increases, emphasizing the value you offer and the quality of your products or services.
Consider offering budget-friendly options to appeal to a wider customer base.
5. Leverage technology and seek expert advice
Utilize supply chain management software to identify and evaluate potential new suppliers based on cost, reliability, and lead times.
Implement AI tools to reduce fixed costs.
Consult with trade professionals, legal advisors, or financial consultants to develop effective tariff mitigation strategies.
Consider partnering with a fractional CFO for experienced finance leadership and guidance.
6. Stay informed and adapt
Monitor policy changes and announcements related to tariffs and trade agreements.
Develop financial forecast models and key performance indicators (KPIs) to identify potential impacts and run "what if" scenarios.
Be prepared to adjust your business operations as the trade landscape evolves.
7. Protect your personal finances
Build an emergency fund, diversify income streams, or secure financing in advance to weather economic uncertainty.
A business line of credit can help manage cash flow disruptions caused by rising costs.
