How Small Businesses Can Combat Supply Chain Risks Amid Trump’s Tariff War

Small businesses are bracing for impact in light of President Trump’s long-promised tariffs.

The tariffs on Canadian, Mexican and Chinese goods initially went into effect on Tuesday, March 4, but on Thursday, Trump temporarily paused tariffs on certain Canadian and Mexican imports. Mexico was expected to announce retaliatory tariffs, but this will likely be delayed until Trump’s pause ends on April 2; Canada and China have already announced counter tariffs.

Although the tariff situation remains in flux, it’s a good idea for small-business owners to prepare in case they’re affected. Tariffs can increase the cost of goods and services for small businesses and lead to supply chain disruptions.

Here’s what small-business owners can do to reduce their supply chain risk in the middle of a likely trade war.

Review your supply chain to determine whether you directly or indirectly import goods from Canada, Mexico or China. During this process, you should look through your existing supplier contracts and evaluate the cost of imported materials, manufacturing, transportation and other related expenses. This review will allow you to identify the areas in your supply chain where you may be most affected by tariffs — and as a result, estimate the potential cost impact.

Establish transparent and open communication with your suppliers. It can be helpful to acknowledge that tariffs impact you both — and neither of you have direct control over them. If you’re looking to negotiate for better pricing, try to propose solutions that are mutually beneficial. For example, your supplier may be able to offer a discount for a higher-volume order or if you agree to extend your contract. You may also suggest combining shipments to lower logistics costs or adjusting materials for cheaper production.

Reducing your reliance on a single supplier or country can help mitigate the impact of tariffs. Look for suppliers in countries that aren’t being threatened with tariffs or see if you can work with a domestic supplier. Partnering with multiple suppliers (especially those that aren’t impacted by tariffs) can help you lower costs, as well as avoid supply chain disruptions.

Investing in technology, such as supply chain management software or inventory management software, can help you save money in the long run. These products allow you to track inventory, manage supplier relationships and forecast sales demand. By using the advanced analytics these solutions offer, you can make more informed decisions about sourcing, pricing and logistics.

If you’re concerned about the potential of higher supplier costs, you might consider proactively taking out a business line of credit. You can use a business line of credit to purchase inventory in bulk, cover cash flow gaps or serve as a general emergency fund. Plus, unlike other types of financing, you can draw from a business line of credit as needed — and only pay interest on the funds you borrow.