Have you ever seen a brilliant domino masterpiece that seems to defy the basic laws of physics? This amazing triple spiral will blow your mind. Or at least provide you with an entertaining 2-minute work break while also helping you to grasp the cause and effect relationship of tariffs on the economy…
Whether you are in favor of or against tariffs being instituted on imported goods into the United States, the reality is that tariffs already exist globally and are a priority for the 2025 U.S. Presidential office. Understanding what tariffs are and how they affect the local, regional, national, and global economy is essential for business owners.
If you don’t think the new tariffs are going to affect you or your business, I’d like you to rewatch the domino art video above. Changing current or implementing new tariffs is like knocking over the first domino in a chain of thousands of dominos. You might be a domino towards the end of the ripple, but the ripple is coming for you nonetheless.
Tariffs are complicated and the effect they have on your business may not be obvious. Just like in a beautiful domino masterpiece, you may not know exactly what is going to happen until the dominos start falling. That’s why you should hire me, your financial domino artist! I can help you understand your place in the bigger economic picture and prepare you for the inevitable tariff domino ripple that is headed your way. Schedule a free consultation with me today to get started.
What are tariffs?
Tariffs are government-imposed taxes on goods and services imported into a country. Tariffs act as a trade barrier, designed to promote domestic sales and decrease offshore purchasing. The idea is that a tariff will make foreign goods more expensive than U.S. goods so that citizens will buy from domestic companies instead of international ones.
This could help your business, but it could also hurt it. Tariffs are often a double-edged sword, both helping and hurting domestic companies across industries.
For example, foreign countries sometimes place retaliatory tariffs on U.S. imported goods or exported goods headed to the U.S. (You tax our goods, we’re taxing yours!) Let’s consider a U.S. based appliance company. This company buys raw materials from foreign countries, manufactures the appliances in the U.S., then sells domestically and internationally. New tariffs both in the U.S. and in other countries could shut them out of some markets entirely because they can no longer compete with rising prices. This company has to pay tariffs when buying the materials they use to manufacture their products, making their product more expensive to produce. Then the retaliatory tariffs from other countries make their product even more expensive to those international customers.
Tariffs operate in a see-saw fashion, making them even more complicated for business owners. They go up and down, come and go, depending on political decisions and economic waves. For example, the tariffs have changed 15+ times just in the few weeks that this article was in production! The New York Times image below does a beautiful job of visualizing the see-saw nature of tariffs.
It’s incredibly hard for businesses to plan even the most basic buying of inventory at a time when pricing can oscillate more than 100% instantly.
Knowledge is power! I’d love to help you wrap your mind around tariffs and how they affect your business so you can protect your profits. Contact me to learn more.
How do tariffs affect my business?
You may be thinking, “But Geneve, my sales prices will finally be more competitive! The tariffs on my foreign competitors allows me to get more customers since their pricing is much closer to mine. Plus, I am a local business that doesn’t buy internationally at all. These tariffs are good for me, or at a minimum won’t affect me!”
Oh, how the dominos fall in unexpected ways!
That amazing triple spiral domino masterpiece linked above is the perfect representation of how the economy is interconnected. Did you notice that the inside of the domino spiral had orange and blue dominos? The orange fell first. I bet those blue dominos thought they were safe since only the orange dominos were falling at first. But they weren’t. Eventually, the ripple made its way to them. The economy is the same – all aspects of it will be affected eventually. It’s just a matter of time before the tremors are felt by all.
If you think the tariffs won’t affect you:
Consider your vendors – where do they buy their materials? Maybe you aren’t the first spiral of dominoes, but your vendors might be. If their prices go up, you better believe that you will be paying more too. And if your costs go up, then your profit goes down…unless you raise your prices.
Consider your employees – the items they buy at the grocery store or for their home are going to go up. Their hard-earned wages don’t go as far as they used to.
This article from the Associated Press outlines how tariffs on China will affect everyday goods we purchase in the US.
Your employees are going to be asking for a raise soon to cover their increasing cost of living. In turn, your payroll expense is going to go up. When payroll goes up, so do your payroll taxes. And your worker’s compensation insurance. That’s two more dominoes. Did you ever think your worker’s compensation insurance would be affected by tariffs?
Consider your everyday costs for doing business – paper, toner cartridges, even some software subscriptions and licenses are going to increase in price (among dozens of other things). These expenses will increase, so what does that mean for your bottom line?
Consider your timeline for doing business – delivery times from the supply chain may be delayed as they tackle tracking and paying tariffs. Their delay is your delay. Delays can mean a loss of clients, cracks in your reputation as a reliable business, and ultimately lost revenue.
As you can see, there are many ways tariffs can affect your business that aren’t obvious. Each business has a different situation, so how it will affect you is just as unique. Contact me to learn how and when the tariff dominos will start to fall around your business.
Tariffs will affect your business. So what do you do about it?
Two of the most straightforward ways to manage tariffs are:
- To do a straight passthrough of the tariff cost to your customers and make it transparent on your invoicing. This lets everyone know that you are not lining your pockets with a higher profit. Communication is key when it comes to raising your prices. This is an easy-to-implement and straightforward way to get the tariff cost covered as soon as possible.
- To include a note on your invoices that explains the percentage increase in pricing is because of tariffs. This is a good option if you aren’t directly affected by the tariffs but your materials or vendor costs are increasing because of it. A simple note on your customer invoices that say “markup for increased costs due to tariffs on parts” is sufficient. This isn’t quite as transparent, but addresses the increased cost and allows you to adjust the percentages as the tariffs may change quickly.
Do you know the right mix of passing costs to your customers and lowering your profit margin to account for the tariffs? The effect of tariffs are really complicated and highly specific to your company and industry. I’ve only discussed a few of the hundreds of tariff dominoes that are going to affect the economy and potentially your business.
I can help you map out how and when tariffs will affect you, and put a plan into place to manage it effectively. Contact me today for a free consultation.
