Top Tips for Navigating Tariffs

Never in my 19 years in global production management have I ever experienced anything quite like this. Are you with me? 🙋‍♀️

On April 2^nd, President Trump announced sweeping tariffs on 90 countries focusing on ones he believes are not being fair to the US. Since this announcement, he’s enacted tariffs, retracted them, added them back again, and increased them. The only certainty we have right now is that nothing is certain.

So, what can small businesses do when they rely on global manufacturing? First, let’s all take a deep breath in, and then out – ahhhhhhhh 🧘‍♀️. Making rushed and reactionary changes to your supply chain is not the answer. Sourcing products from the right partners is detrimental to a healthy business and it takes time.

What can you do right now to minimize risk? Here’s 5 steps you can take immediately to manage your business through this uncertainty.

1. Evaluate Your Supply Chain 🚢

Let’s start by determining where you’re at. What countries do you source materials and production from and how does it affect your bottom line? 

Get down into the nitty gritty here. Understand where every single component comes from so you have an in-depth view of the cost levers you can adjust to maintain profitability.

2. Lean on Current Partners – Leveridge Existing Relationships 🙌🏼

Meet with your partners to discuss how you can share the burden. They’re also caught up in the trade war and trying to manage rising costs.

Great partners are those that offer help. I have clothing factories in China willing to pay for the entire US tariff to maintain business relationships. I have other factories offering to hold shipments to avoid importing with the current (hopefully) inflated tariff rates. 

Having an open conversation with your supply chain about the reality of your situation and what you need from them may help to minimize these unexpected costs.

3. Adjust Product Designs and Materials to Avoid High Tariff Countries 👠

Some materials and products are almost exclusively produced in high tariff countries. These locations dominate production because they’re more technologically advanced in producing these goods or have easy access to needed raw materials.

If you can, look for ways to focus on producing items that don’t require these countries. Maybe some of your assortment is produced with materials from Europe while others are made with materials from high tariff Asian resources. For now, you can hold off on placing orders or even halt production on higher cost products.

While not ideal, being nimble with inventory and reducing buys on high tariff items can minimize the pain.

4. Increase Retail Price Points – You Will Not Be Alone 🏷️

Higher costs mean higher consumer prices, for everyone. This is already happening across the board.

I’ve heard from multiple brands and retailers that are exploring adding a tariff fee to all transactions that will be adjusted daily to match the changing rates. Others are exploring ways to be more granular and increasing retails based on the specific product’s country of origin.

Customers, while not happy with increases, will have to get used to higher prices. You need to protect your margins to sustain your business.  Hopefully these are short term adjustments, but you need to cover your costs to sustain profitability. 

5. Diversify Your Supply Chain 🌎

Being reliant on one or two countries to produce your products has become increasingly risky. If COVID-19 and the following global logistics disaster wasn’t enough to teach you this lesson, these increased tariffs will.

There’s so much uncertainty in tariff rates and countries being affected with no clarity on the horizon. Broadening your network of suppliers and manufacturers gives you options to adjust.

Even though you may feel the need to produce with new partners immediately, be sure to maintain brand standards by vetting new partnerships as you would have before the tariffs. Talk to references, ensure they have social compliance certifications, and understand quality assurance processes. Making sudden supply chain changes without due diligence can compromise quality and consistency.

While I don’t believe that high tariffs are the end goal for any country, being smart on how you weather the storm can be the determining factor on the success of your business.

It’s easy to get wrapped up in the daily ups and downs. Take the time to understand the details of your business and to solidify viable alternative options to minimize risk going forward. 

We’re all in this together and we can only control what we can control. Connect with other Entreprenistas for guidance and support. 💪🏼💪🏽💪🏾💪🏿 You’ve got this.