Tariffs are escalating. What you need to know, and how you can prepare.
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 set foot in Econ 101, here’s a quick refresher. Tariffs are taxes on goods coming into a country. In the United States, many tariffs are paid at the time of entry to the country, plus other duties and fees that may apply. Historically, tariffs are key in foreign trade policy.
For consumers, the eventual impact of a tariff differs based on the industry. But major corporations are more likely to see repercussions, depending on how trade talks take shape.
Tariffs in the headlines
The United States has recently been implementing significant changes in its trade policy. Trade tariffs have been escalating since the spring, when the United States 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 changes, the U.S. is raising tariffs on certain goods imported from China, which totaled about $50 billion in 2017.2
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. Some industries that may be impacted include:
- Electrical equipment and appliances
- Computers and electronic products
- Transportation equipment manufacturing
- Fabricated equipment
- 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 an impact too. Tariffs on different raw materials may play out differently, depending on where the majority of suppliers are. And 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.
Stay the course.
Don’t let the 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.
- Lead the charge in communication.
With tariffs and trade wars in the headlines, potential changes are bound to spark questions for your staff, your stakeholders and your 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.
- Revisit projections and 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 here in our company. If X happens on the national stage, our company will respond in Y way.
Then, build an action plan for each scenario. Possible responses include investigating alternative suppliers, taking a different path to acquire company assets, even 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.