Tariffs Are Escalating – What You Need to Know
How businesses can prepare for potential market shifts and economic waves
Trade tariffs have been escalating since the spring. With changes on the way, it's easy to feel uncertain about how national policy will impact your company. But as we wait to see the full effect, it's smart to stay informed and get strategic about your company's next steps.
Here's what you need to know about tariff changes, plus simple actions you can take today so you're ready, no matter what.
HOW TARIFFS WORK
If it's been awhile since you brushed up on Econ 101, here's a quick refresher:
Tariffs are taxes on goods coming into the country. In the United States, many tariffs are paid at the time of entry to the country , along with other duties and fees that may apply. Historically, tariffs are key in foreign trade policy.
For consumers, the eventual impact of tariff differs based on industry. But major corporations are more likely to see repercussions, depending on how trade talks take shape.
TARIFFS IN THE HEADLINES
The U.S. has recently implemented significant changes in its trade policy. Trade tariffs have been escalating since this spring when the U.S. announced tariffs on steel and aluminum imports.
As a presidential candidate, Donald Trump made trade a big talking point on the campaign trail.
Since his inauguration, a number of changes have taken place. Among these, the U.S. is raising tariffs on certain goods imported from China, which totaled about $50 billion in 2017.
The decade's old North American Free Trade Agreement (NAFTA) has been replaced with the United States-Mexico-Canada Agreement, including major shifts and revisions from the 1994 agreement. The full influence of today's tariff changes remains to be seen.
THE POTENTIAL IMPACT
Many companies across the country have been or will be affected by these tariff wars, both positively and negatively. The eventual impact of national policies will differ by region and industry, but those most likely to be affected include:
- Electrical equipment and appliances
- Computers and electronic products
- Transportation equipment manufacturing
- Fabricated equipemnt
- Nonmetallic mineral product manufacturing
- Chemical manufacturing
- Printing and related support activities
- Crop production
- Oil and gas extraction
Now, this isn't an inclusive list, and other industries may see changes as well. Tariffs on different raw materials may play out differently, depending on where the majority of suppliers are. Any each region can anticipate different effects, too. For example, tariffs on soybeans or wheat impact agricultural communities differently than tariff on steel would a Rust Belt community.
WHAT YOU CAN DO NOW
The overall effect and outcome of tariffs remains unknown. However, there are some actions you can execute today. We can't predict the future, but we can plan for it.
1. STAY THE COURSE
Don't let headlines startle you into looking before you leap. Stick to your company's strategic plan. Pivot when necessary, but stay the course. Long-term success calls for a long-term perspective.
2. LEAD THE CHARGE IN COMMUNICATION
With tariffs and trade wars in the headlines, potential changes are bound to spark questions for your staff, stakeholders and customers. It's natural to wonder and ask: How will this impact me? So, keep the lines of communication open. Demonstrate foresight by leading the charge in communication about tariffs. Anticipate questions and show leadership in addressing the conversation directly. Proactive, transparent discussion now can head off nerves down the road.
3. REVISIT PROJECTIONS + CONSIDER SCENARIO PLANNING
In times of uncertainty, scenario planning can help. Gather your executive team and revisit projections. Strategically dive into anticipated outcomes. If A happens overseas, we'll take B action. If X happens on the national stage, our company will respond in Y fashion.
Then, build action plans for each scenario. Possible responses include:
- Investigating alternative suppliers
- Taking a different path to acquire company assets
- Shifting operational tactics
No matter what policy changes take place, it's wise to stay informed, take action where you can and seek out advice from trusted experts. Set the stage for success with smart communication and forward-focused planning, regardless of the headlines.
Robin Wandschneider is the senior vice president of Commerce Bank, manages small business banking sales and retail banking operations in Denver. She has more than 25 years of experience helping companies with the right financing solutions. Contact Robin at 303.214.5430 to learn more about Commerce Bank’s solutions to help your business thrive.