How Might Tariffs Affect My Small Business’s Bottom Line?

Tariffs can be applied in different ways, based on the country the product comes from, the industry it belongs to, and what materials it’s made of. So, the same item could have different tariffs depending on how or where it was made.

Regardless of how the tariff is calculated, tariffs are usually paid by the importer—the business that brings the product in. 

How Tariffs Can Affect You—Even If You Don’t Import

Most small businesses don’t deal with international trade directly—but you can still feel the impact. That’s because when your suppliers pay more due to tariffs, they often pass those costs down to you.

According to a study from the New York Federal Reserve, about 75% of businesses facing tariff-related cost increases raised their prices and about 25% absorbed the costs—but that meant lower profit margins. 

If your business exports products to other countries, tariffs can hurt in another way. When one country raises tariffs, other countries often respond by adding their own tariffs to goods coming from that country. This can make your product more expensive for customers overseas—and may lead them to look for cheaper alternatives.

How to Protect Your Business

You can’t control global trade policies, but you can take steps to protect your bottom line. 

• Build a buffer: Add margin to your pricing to cover future cost hikes.
• Avoid long-term contracts unless pricing is fixed.
• Forecast conservatively: Plan for potential cost increases tied to global trade shifts.
• Keep cash reserves: Be ready to absorb short-term supplier cost spikes.

Developing a good brand and customer relationships is also important, especially as the prices of all goods and services steadily increase. If prices go up, customers are more likely to stick with businesses they trust and value. Review your customer experience and offerings. The more value your customers feel they’re getting, the easier it is to handle price changes without losing them.

Questions You Should Be Asking About Tariffs

Before you make any changes, start by asking a few key questions to help get an understanding of how your business may be affected by tariffs and your best options.

• Have we seen any unexplained price increases in our invoices? Which of our products or materials might be affected?
• Do our supplier contracts allow for sudden cost increases? Are there alternative suppliers that I could explore?
• If prices rise again, what are our options? Should we adjust our pricing, or pass on some of the costs?
• Are our current margins strong enough to absorb surprise cost spikes? What can we do to improve them?

What you can do next

• Talk to your suppliers. Ask them about recent and future price changes. Consider negotiating an agreement that limits price increases. Clear communication can lead to better terms or new alternatives.
• Adjust your pricing. Add flexibility to your pricing model, revisit your forecasting assumptions, and build in a buffer where you can.
• If you’re unsure about where to start, try asking Rocket Copilot or connect with a Legal Pro.

Tariffs may be about global trade, but they affect your business right here at home. By asking the right questions and planning ahead, you can reduce risk, protect your profits, and keep your business strong.