As a certified public accountant, I work with many leaders, CEOs, and senior executives of small and medium-sized businesses, and my most profitable clients have one thing in common. That means always thinking ahead.
They think months or even years ahead. They don't like surprises. They plan their investments, spending, and hiring ahead of time. They consider what is happening around them and plan for different scenarios. After the election, many people are thinking about tariffs.
President-elect Donald Trump has said it very clearly: Raise tariffs as soon as he takes office. He plans to raise tariffs on all Chinese imports to 60%. He plans to impose a flat 10% price increase on all other imported goods. It also wants to keep open the option of imposing tariffs of up to 20% on other countries, depending on the situation.
Tariffs are definitely, definitely going up, and if you run a business, you could be affected. You need to make a plan to deal with this now. Don't expect Trump not to follow through. Don't think he doesn't have authority. He would and will.
So what should I do now?
According to the Wall Street Journal report This week: “American companies are dusting off the strategy they used during President Trump's first term to stock up on imports before tariffs go into effect.'' Buy now while prices are low . This is a working capital issue. Please consult your bank to increase your credit limit. You'll eventually be selling these items, so assuming you can find the space (and can afford to pay prime rate interest) nearly 8 percentwhich could be 9 percent or 10 percent or even more, depending on your credit score), this short-term strategy can buy you time.
Foreign governments are also concerned about U.S. tariff increases, and one possible scenario for President Trump's tariff hikes is retaliation. I am confident that the leaders of our most important trading partners are already preparing for that option. this happened in 2017 And it will happen again. All this, according to the incoming Secretary of Commerce howard lutnickprobably a precursor to negotiations, but whatever the outcome, negotiations will take time and there will likely be some long-term price increases regardless. So if you raise your prices, it's time for your customers to take advantage of what's available.
China is the bad guy in all of this and will face the biggest tariff increases. A trade war is likely. China will raise tariffs in return. The war will last for a while, and it could be terrible. An alternative is to focus on the 10 percent of countries, or those likely to be on the lower end of tariff increases.
Mexico and Canada are ours largest trading partner And (as far as we know) they haven't hacked our infrastructure or supplied supplies to North Korea. The UK, Australia, Vietnam and India are also friendly. There are other smaller countries in both South America and Asia that could avoid the brunt of these increases. My recommendation is to contact organizations such as: World Trade Center Association, This allows you to introduce your business to alternative suppliers in friendlier countries and foster relationships.
There are about two months until President Trump's inauguration, but if your business relies on overseas suppliers or customers, like many of my smart clients, you've already talked to them. I hope you are. Are prices negotiable? Are there other conditions to consider? Is it possible to enter into short-term or long-term supply agreements that only come into effect if tariffs increase? Depending on the situation, you can increase shipment volumes or , can it be reduced or changed? Does the supplier have other locations where inventory can be stored, shipped and invoiced in countries where no tariffs apply? Can I sell it to a Canadian intermediary who will resell it at a fair price?
Rhetoric aside, we must not forget the main reason behind President Trump's tariff plans. That means it's meant to preserve money and jobs here in the United States. Companies that don't have to worry about this are those that buy 100% of their products domestically and sell domestically. Customs duties apply only when sales are made to foreign companies.
With two months left to launch, there's still time to focus on alternative domestic suppliers and pursue U.S. customers. If you're a soybean farmer who sells 50% of your product to the Chinese, or you run an e-commerce business with only domestic suppliers, that's easier said than done. However, if you have flexibility in the location of your suppliers and customers, it's time to dig deeper into those options.
Finally, if necessary, companies can raise prices or absorb costs themselves. walmart announced Tariffs are expected to rise in late November, potentially pushing prices higher. Walmart doesn't want this to happen, but the move proves there are limits to the costs even the largest companies can absorb.
Many of my clients are putting together their 2025 budgets and are preparing various scenarios that take into account how tariffs will impact margins and where that difference will come from. Some companies are giving up profits, cutting jobs, or reducing investment to stem price increases. Some companies plan to immediately pass the costs on to customers. Some companies are waiting for the market to pay them, while others are secretly hoping they can avoid a slightly higher price hike than the tariff hike in order to make more profit.
Are there other strategies? Probably, but this is what I'm looking at now. For the salty business owners out there, you've probably been to this rodeo before. They have avoided such problems and survived. That's because they're good at spotting storm clouds on the horizon and taking shelter.
The introduction of tariffs is imminent. Please hide.
Gene Marks is the founder of The Marks Group, a small business consulting firm.
