Trump Tariffs: How It Will Impact Small Businesses

President Trump warned throughout his campaign of potential tariffs. Matching the breakneck speed of his first few weeks in office, he approved 25% tariffs on Canada and Mexico to go into effect on February 4th. However, those have been delayed by one month as both countries backed down to negotiation requests. However, China was hit with a 10% additional tariff on top of earlier import duties imposed during Trump’s first administration.

Here’s what this means for you and your small business.

Trump Tariffs Will Impact Your Bottom Line

President Trump is not mincing words: this will be financially painful for everyone involved. In a recent post on social media, he said "WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!).” A CNBC Flash Fed survey of 24 economists said GDP would fall and inflation would rise in the wake of tariffs, and this pain will be felt by consumers and small businesses alike.

It’s estimated that the average U.S. household will spend an extra $830 this year, according to an analysis from the nonpartisan nonprofit Tax Foundation. Some say this could add to an already sticky inflation rate. For consumers that are already stretched thin from post-pandemic inflation, this could reduce consumer spending even more, hurting both small and large businesses alike.

How Trump Tariffs Will Work

For small business owners who import goods from Canada like machinery, metals, energy-related products like oil and gas, you could find yourself paying more for the product you need. Here’s how it works:

When you import goods, you likely work with a customs broker or submit documents to U.S. Customs and Border Protection (CBP). CBP then determines the tariff or fee you owe to bring the products in. At this point, you will see the larger fee tacked on by the Trump administration. This fee could be hard to swallow at first, but you could get funding to absorb it and decide how your business can offset it later.

However, for small businesses that relies heavily on importing goods from these countries, it could be too much to handle. Small businesses that sell groceries, automotive parts, machinery, and wholesale imports and exports will likely feel the economic pinch first.

How Small Businesses Can Prepare for Tariffs

Amere two weeks into a new presidency, businesses large and small are figuring out what the impacts are of the dozens of executive actions taken. Biz2Credit CEO Rohit Arora says there can potentially be some positives to come from this. “In the best case scenario, [it could] lead to lower deficits,” but followed that there is palpable economic uncertainty.

During a period of potential tariffs raising costs, small business owners can focus on several functions of their organizations to mitigate the burden of tariffs:

• Supplier Negotiations: When tariffs hit, it's time to look at your current contracts with suppliers to see if it’s still the best deal. If the agreement isn’t suitable, consider looking for new or local suppliers who might offer lower prices or more flexible deals.
• Contingency Plans: Your supply chain could be rattled during this time, throwing off your entire organization. As these economic shocks happen, look into creating failsafe plans.
• Invest in New Technology: This may be the time to slow down sales while improving and scaling tools. Automation, data analytics, and cloud platforms can make operations smoother, manage inventory better, and improve communication with suppliers and customers.
• Have Capital Ready: If your business is full steam ahead and you have to pay more for the goods you need, it could be beneficial to have additional capital resources to pay for levied tariffs.

Bottom Line

The Trump tariffs and the terms associated are changing rapidly, so it’s best to stay in touch with your vendors and watch the news cycle to find the latest update. But as this administration has shown in its early days, being prepared with business funding could give your business the edge it needs to withstand policy changes.