The current nightmare will cause pricing problems.
The tariff mess will require price increases at or close to the amount of the tariffs.
But...
A budding recession may eventually force price decreases.
The result is lower contribution margins and less profit. If there is a profit.
This is going to get ugly, really ugly.
Being pro-active is the best strategy, if there is a useful strategy to this mess.
The tariff wars are currently focused on a 1-to-1 battle between the US and China.
China is critical to many of our consumer goods supply chains.
Retailers are going to be in a very bad way if this continues for long.
The other 75 (unmamed countries) who are anxious to negotiate seem to be nowhere in sight.
Odds of a recession are rising, rising, rising.
The current "trade wars" and tariff battles will inevitably cause some chaos in supply chains, foreign and domestic.
What exactly will happen? We do not know. The situation changes day-by-day.
What can you do?
Keep in close contact with your suppliers.
Order early rather than later.
Scout alternate sources.
Keep a close eye on inventory levels.
Try to take care of important and large customers first.
Be honest with customers if you have log jams.
So what is next?
Analyze your geographical area.
Diverse economy?
Non-diverse economy?
Heavy with tourism? Heavy with manufacturing? Heavy with healthcare?
Stable area or area in transition?
This helps you to determine the risk level to your business should a recession develop.
Higher the risk, the more urgent the preparations.
The Trump tariff wars are off again, on again, partially on again, somewhat modified and tomorrow will likely change again. Best to anticipate the worst and hope for the best.
Every small business owner should do a risk profile of the business.
Does the business deal in...
Necessities?
Nice but not necessary?
Luxuries?
Is the sales/service in an area....
sensitive to economic downturns?
neutral to economic downturns?
immune from economic downturns?
Is the sales/service....
Sensitive to supply chain disruptions?
Neutral to supply chain disruptions?
Immune to supply chain disruptions?
More to follow on the next post.
