Global trade has traditionally operated within a structured framework established by the General Agreement on Tariffs and Trade (GATT), later reinforced by the World Trade Organization (WTO). These systems helped expand international commerce and facilitated the rise of a globalized economy. As a result, goods and services now flow freely across borders, and supply chains have become increasingly complex and interdependent.
What Are Tariffs and Why Do They Matter?
Tariffs are taxes imposed on imported goods. Governments use them to protect domestic industries, counter foreign trade policies, or incentivize local production. While large multinational corporations often have the resources to adapt to shifting tariff landscapes, small and medium-sized businesses (SMBs) typically face much steeper challenges.
The Current U.S. Tariff Environment: Disruption and Uncertainty
Between April 2 and April 8, the U.S. implemented a rapid and sweeping series of tariff changes affecting more than 180 countries and territories—excluding Russia, Belarus, Cuba, and North Korea. The scale and speed of these changes are unprecedented, with new tariff rates ranging from 10% to 145%.
This abrupt shift has caused widespread confusion and uncertainty. Capital markets have reacted strongly, with equities, bonds, and even U.S. Treasuries experiencing volatility. If the current tariff structure is fully enacted, the effective U.S. tariff rate could reach its highest point in over a century—surpassing even the infamous Smoot-Hawley Tariff Act of 1930, which exacerbated the Great Depression.
The Impact on Supply Chains
Tariffs do more than raise costs—they inject uncertainty into supply chains, which can be especially damaging to small businesses. Long-term contracts become riskier, while pricing strategies, inventory management, and marketing efforts require constant recalibration.
In addition, tariff actions often provoke retaliatory measures from affected countries. U.S. exports could face increased tariffs abroad, reducing the competitiveness of SMBs in international markets and potentially shrinking revenue.
Limited Flexibility for SMBs
Large corporations can often adapt by shifting their sourcing strategies or investing in domestic production. Small businesses, however, usually lack the capital, infrastructure, or scale to make such adjustments quickly.
What Can Small Businesses Do?
While SMBs cannot control international policy, they can take steps to reduce exposure and build resilience:
- Diversify suppliers – Avoid over-reliance on any one country or vendor.
- Build financial buffers – Reserve funds can cushion the impact of sudden tariff increases.
- Enhance data-driven planning – Use financial data to conduct sensitivity analysis on product margins as tariffs shift.
- Update inventory valuation – Adjust inventory values based on fair market pricing to maintain accurate financial statements and collateral assessments.
- Control costs and shift sales focus – Cut non-essential expenses and redirect sales efforts to less-affected products.
- Negotiate with partners – Work with vendors and distribution channels to share cost burdens and maintain competitive pricing.
- Evaluate Duty Drawback Codes – Drawbacks are refunds of duty paid on imported materials when used for exported products, unused/rejected, or destroyed materials.
- Stay informed – Regularly monitor international trade news and policy updates.
- Advocate collectively – Join industry associations or small business groups to make your voice heard in policy discussions.
Conclusion
Rapid changes in global trade policies and tariffs can create major challenges for small businesses, from rising costs and supply chain disruptions to increased uncertainty. In this volatile environment, agility and preparedness are essential.
At 2GO Advisory Group, our experts are here to help your business navigate these complexities and build a strategy that promotes resilience and long-term success.
If you find this information helpful and want to learn more, contact Francis at francis@cfos2go.com.
Francis Ota, co-lead of the International Business Practice group, is a seasoned financial executive with more than 40 years of experience in finance, accounting, and business operations. Born in Tokyo, Japan, and raised in multicultural communities in the United States, Francis brings a unique international perspective to his work. Francis has held senior financial roles at prominent companies such as Hewlett-Packard, Medtronic, and Quest Diagnostics. His expertise spans various industries, including technology, healthcare, and telecommunications.
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