Navigating Tariffs: Understanding and Adapting to Trade Changes
In today’s global economy, small businesses can find themselves impacted by tariffs. These taxes on imported goods can affect your costs, supply chains, and competitive edge. We’re here to help you understand and navigate these changes.
What steps should I take as a small business?
- Identify Affected Products:
- Determine which of your products or raw materials are imported.
- Research the Harmonized System (HS) codes for these products to identify applicable tariffs.
- Assess the Impact:
- Calculate the potential increase in your costs due to tariffs.
- Evaluate how these increased costs will affect your pricing strategy and profit margins.
- Consider the impact on your supply chain and potential delays in receiving goods.
- Explore Alternative Sourcing:
- Investigate domestic suppliers or suppliers in countries with favorable trade agreements.
- Diversify your supply chain to reduce reliance on a single source.
- Negotiate with Suppliers:
- Discuss potential cost-sharing or alternative pricing arrangements with your existing suppliers.
- Explore long-term contracts to lock in prices and reduce uncertainty.
- Adjust Your Pricing and Marketing:
- If necessary, adjust your prices to reflect increased costs.
- Communicate with your customers about potential price changes and the reasons behind them.
- Seek Expert Advice:
- Consult with a customs broker or trade attorney to ensure compliance with tariff regulations.
- Contact your local Michigan SBDC office for personalized guidance and resources.
- Stay Informed:
- Monitor changes in trade policies and tariff rates that may affect your business.
- Subscribe to industry publications and government updates on trade.
What are tariffs?
Tariffs are taxes imposed by a government on imported goods. They are designed to:
- Protect domestic industries: By making imported goods more expensive, tariffs can encourage consumers to buy locally produced products.
- Generate revenue: Tariffs can be a source of income for the government.
- Influence trade policies: Governments may use tariffs to negotiate trade agreements or address trade imbalances.
How do tariffs work?
When a product is imported, the importer is required to pay the tariff to customs authorities. The cost of the tariff is often passed on to consumers in the form of higher prices.
Tariffs can be specific (a fixed amount per unit) or ad valorem (a percentage of the product’s value). Tariffs are subject to change based on international trade agreements, and domestic trade policies.
Why are there tariffs against Mexico and Canada?
The tariffs against Mexico and Canada are implemented to address concerns related to border security, illegal immigration, and the flow of illicit drugs. There is also the motivation of reducing the U.S. trade deficit.
These tariffs are implemented under the International Emergency Economic Powers Act (IEEPA). IEEPA is a U.S. federal law grants the president the authority to regulate commerce in response to a national emergency that threatens the United States.
Retaliatory tariffs have been put in place by both Canada and Mexico.
What goods are impacted by the tariffs in Mexico and Canada?
Tariffs are placed on all goods that do not satisfy U.S.-Mexico-Canada Agreement (USMCA) rules of origin.
To be considered “originating,” a good must generally be wholly obtained or produced entirely in the USMCA region, or if produced using non-originating materials, must undergo sufficient production in the region to meet specific rules of origin.
Goods that qualify under the may be exempt from these tariffs.
Resources
U.S. International Trade Commission (USITC) Harmonized Tariff Schedule
The Harmonized Tariff Schedule of the United States (HTS) sets out the tariff rates and statistical categories for all merchandise imported into the United States.
U.S. Customs and Border Protection (CBP) Trade
CBP Trade facilitates legitimate trade, enforces law, and protects the American economy to ensure consumer safety and to create a level playing field for American businesses.
Export Michigan
Developed jointly by MEDC’s Export Office and the International Business Center in the Broad College of Business at Michigan State University to assist Michigan businesses successfully begin exporting and expand upon their success.
ST&R Trade Report
A daily publication covering trade and customs news in the U.S. and worldwide.
Van Andel Global Trade Center Tariff Dashboard
Their platform offers current updates on tariff implementations, reductions, and exemptions, providing clear insights into how these changes impact various industries.
U.S. Trade Presidential Tariff Actions
View the Presidential actions taken pursuant to his authority under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.)
White House Fact Sheet
President Donald J. Trump Increases Section 232 Tariffs on Steel and Aluminum
White House Presidential Action
Modifying Reciprocal Tariff Rates to Reflect Discussion with the People’s Republic of China.
Navigating Tariffs and Supply Chain Resilience Webinar
Webinar presented by Conscious Capitalism that discusses how to proactively foster and leverage long-term, trusting relationships with all stakeholders—your suppliers, your customers, and most importantly, your internal teams.