We live in turbulent times. Brexit, tariffs, the US-China Trade War; all of these and more have contributed to general anxiety in global business communities. We’ve heard about big companies being affected, and the possible consequences of rising tariffs on US and Chinese consumers. Unfortunately, small businesses are left out of these conversations. While nearly all US business exports come from small businesses, stories around these issues have decidedly ignored their perspective. Even more unfortunate is the fact that small businesses are some of the most affected by rising tariffs. Tariffs have hidden effects on small businesses that are both overlooked and underreported.
Rising tariffs effectively raise the price of consumer goods that are produced in tariffed countries. As China is one of the US’ largest trade partners, many products are affected. This is an issue that news outlets have covered time and time again, without considering the cost of the business importing or selling those goods. Small businesses are forced to raise prices to make a profit. For both ecommerce and physical retailers, it’s difficult to compete in this environment. Consumers have more choices now than they ever did, and finding a cheaper, cost-effective alternative is as easy as checking your phone. So, prices go up, customers go elsewhere, and small business revenue plummets.
That’s not the end of the story, either.
Small business owners generally don’t have a wad of money laying around to tide them over until the storm clears. Their livelihoods are their business, and they’ve given everything they have to it. When the money isn’t there, everyone suffers from the top down. Payroll, overhead bills, supplier payments, everything that it takes to run a business is affected by pricing changes as a result of tariffs. Many people that are unaware of small business operations have recommended simply diversifying their supply chain. If China or the U.S. are costing too much, shift to a new market. If you know small business owners, you know that is much easier said than done.
Clearly, small businesses aren’t like large corporations. One of the most important things to them is establishing a personal, longer-lasting relationship with people in all areas of their business. Nearly none of these relationships are more important to a small business than their suppliers.
Establishing partnerships with overseas suppliers and partners is a big effort, especially if you aren’t an established corporation or large company. Your brand isn’t easily recognized around the world, and what you have to offer may not be immediately evident. So, business owners have to sell the idea of not only their business but themselves. This often means physical trips to the country to meet with partners, phone calls, and email exchanges to iron out a deal.
This takes a lot of time, effort, and money. Telling a business owner to simply pack up their operations and move onto a new supplier is expensive and not easily implementable. The stability and certainty built up from working with the same partner for a long time is invaluable to business owners. They trust that their goods will arrive on time, the quality will be good, and payments will be made in full. Just another thing a busy business owner doesn’t have to worry about. Taking the time and effort to sever a business relationship and start a new one from scratch may cost them even more than tariffs ever would. This is effectively tearing down an entire supply chain just to build it back up again.
Plus, by the time this is all said and done, the trade war might be over, tariffs have receded, and it would have probably been best to stay with the former supplier in the first place. The heart of all of these issues is that uncertainty. We just don’t know what, or when, anything will happen with tariffs or the trade war. Businesses cannot operate on uncertainty. Sure, they take risks to build their business all the time. But an unstable, turbulent market is not an environment that growing businesses can thrive in.
That’s why we need to help business owners. We need to partner with them, spread the word about the effect of tariffs, and help find a solution that is practical and cost-effective. Businesses are struggling with this. When legislators won’t help we must be responsible for helping those in our own community.
Written by Marwan Forzley
Read more posts by Marwan Forzley