The Rising Cost of Doing Business: What Tariffs Mean for You
Tariffs aren’t just abstract numbers on a government spreadsheet—they directly affect your bottom line. If you’re a small or mid-sized business (SMB) owner or financial manager, you’ve likely felt the sting of increased import costs, supply chain disruptions, and shrinking profit margins. Worse yet, trade policies are constantly shifting, making it even harder to plan ahead.
But don’t panic. In this guide, we’ll break down tariffs, their impact on your business, and—most importantly—practical steps to safeguard your profitability.
Tariffs 101: A Quick Refresher
At its core, a tariff is a tax on imported goods. When products enter the U.S., customs officials collect these fees at the border. According to the Tax Foundation, these costs are often passed on to businesses and consumers, rather than absorbed by foreign exporters.
Recent years have seen tariffs imposed on goods from key trade partners like Canada, Mexico, and China. For SMBs, these extra costs can quietly inflate the price of raw materials, components, and finished products—turning a once-stable budget into a moving target.
The Domino Effect on Your SMB
1. Budget & Forecasting Turbulence
- Unpredictable Rates: Tariffs fluctuate with shifting trade policies, making long-term planning difficult.
- Profit Margin Pressure: Every additional fee on imported materials chips away at your profits, reducing cash flow and tightening your margins.
2. Supply Chain Dilemmas
- Stick with Current Suppliers? Absorbing higher costs might work short-term, but it’s risky if tariffs increase further.
- Move to Other Countries? Importing from tariff-free regions can lower costs, but finding and vetting new suppliers takes time.
- Source Domestically? Avoiding tariffs altogether is appealing, but higher domestic production and labor costs could offset potential savings.
3. Impact on Taxes & Financial Liability
- Tariffs as ‘Extra’ Costs: Tariffs don’t appear as a line item on your tax return but impact your cost of goods sold (COGS), indirectly affecting taxable income.
- Accounting Complexity: Tracking tariff expenses is crucial for accurate financial reporting and optimizing tax deductions.
Planning Ahead: A Blueprint for SMBs
1. Map Your Supply Chain
- Document every supplier, their contribution to your inventory, and their shipping locations. This helps pinpoint where tariff risks are highest.
2. Run Multiple Budget Scenarios
Prepare “What if?” forecasts for different tariff conditions:
- Current Tariff Rates: Your baseline budget.
- Higher Tariff Rates: Can you still remain profitable if tariffs spike?
- Lower Tariff Rates: If trade tensions ease, how will you reinvest the savings?
3. Reassess Your Pricing Strategy
- Higher import costs might require price adjustments. Transparency is key—communicate pricing changes clearly to your customers, especially if you serve the B2B market.
4. Optimize Tax & Accounting Approaches
- Track tariff expenses separately to understand their impact on financial performance.
- Consult with tax professionals (that’s us!) to leverage deductions and credits that offset tariff-related costs.
5. Stay Nimble & Informed
- Tariffs are fluid. Monitoring trade policies allows you to react quickly, renegotiate supplier contracts, or explore new markets.
How We Can Help
Staying ahead of tariff changes and managing costs effectively can be overwhelming. That’s where we come in. Our expert team can help you:
✅ Develop Smarter Budgets: We create flexible forecast models, so you’re prepared for any tariff scenario.
✅ Find Supply Chain Savings: We analyze supplier options, helping you determine the best course—whether that’s shifting to a new country or sourcing domestically.
✅ Simplify Your Accounting & Taxes: From tracking tariff expenses correctly to optimizing your tax strategy, we ensure every penny is accounted for.
Take Control of Your Financial Future
Tariffs may be unpredictable, but your financial strategy doesn’t have to be. Contact us today to schedule a consultation and start protecting your business from unnecessary costs.
