Since Pres. Trump has taken office, we’ve seen a wave of new tariffs hit the global economy. In this new era of uncertainty, the effect of steel and aluminum tariffs has forced some manufactures to change the ways they do business.
For U.S., small business manufacturers, these metal tariffs can have both positive and negative side effects. With tensions around the world on the rise and foreign countries imposing reciprocal tariffs on U.S. products, small business manufacturers can often get lost in the mix.
Trump’s “America First” Initiative
Even before Trump became President, he had been an outspoken critic of American global trade practices with other countries. As part of Trump’s “America First” attitude, he has issued a series of abrupt tariffs on a variety of foreign import products which includes anything from raw steel to solar panels. President Trump states these new tariffs will help cut the unfair manufacturing and trade practices abroad that seem to be competing with native manufacturers in the U.S. By raising prices on imports from other countries, businesses and manufacturers will be encouraged to buy from producers and sellers on American soil instead. As with everything, the effect of steel and aluminum tariffs will impact each business differently and we may not know the full impact until many years down the road. But, that’s not where the story ends.
Taxes and higher costs on foreign product imports also allows American manufacturers to be competitive and raise prices for their products.
Because of the uncertainty with the global trade market, prices on essential manufacturing materials like aluminium and steel have increased rapidly and some small business manufacturers have started to worry about the future of their companies. Data still suggests that the U.S. economy is strong and manufacturing continues to succeed in America, but for manufacturers with fewer resources, it’s an unnerving time.
How Tariffs Could Hurt Some Manufacturers
Manufacturers are divided in their opinions of these new imposed tariffs. It depends on which side of the manufacturing coin a small business rests, as to how hard it will be impacted by increased costs.
With competition returning to the United States for purchasing aluminum and steel, metal manufacturers can charge higher rates, while still keeping their costs lower than imports of those same materials. This works out great for metal producers, but what about the manufacturers who buy those raw materials to make actual products and parts? Because of the increase in pricing for these materials, buyers are required to pay more up front and as a result, need to increase the cost for finished products which ultimately impacts their consumers.
For example, if you’re a manufacturer that sells steel and aluminum, life is good! You can increase your prices and worry less about competition from other countries. However, if you’re a manufacturer who tends to purchase raw materials to make products to sell, it’s a tricky situation. You could possibly pay more for raw materials because of new, imposed tariffs and then have to charge more for your completed products down the line. Those higher prices could anger your customer base and potentially slow business down.
The price you pay one day to get obtain raw materials may not stay consistent. For bigger manufacturers, this may be annoying, but may not necessarily put them out of business. However, for small business manufacturers, the prices and cost inconsistencies, will have a greater impact.
The increase and imposition of trade tariffs could also negatively impact those manufacturers who require materials, specialty metals, or products that are not yet produced in the United States. While some manufacturing businesses may experience growth and could potentially hire and expand, others may be forced to reduce spending and development projects until prices and costs become somewhat stable again.
What Can Manufacturers Do
Any small business, regardless of industry, needs to be prepared to go through hard times. Prices will vary, customers may leave, budgets will change, but you need to whether the storm. Whatever stage of business development you’re currently in, make sure your have a well thought out business plan and documented processes for each department of your business. If one area of your business starts to suffer, you need to make up for it in other areas. Consider deepening your niche marketing efforts, boosting your content marketing strategies, using social media to increase network connections, and taking advantage of multi-channel marketing tactics.
You may find a need to develop new business practices and marketing strategies. Make sure you’re still in contact with your customers, supply chain, co workers, and employees so you have a thorough understanding of how your business is being run. Communicating with your audience, employees, and associates will give you good insight in regards to changes you can make to possibly save on resources while maintaining your customer base and revenue.
It’s an uncertain time for American manufacturers right now. If you do think your small business could be negatively impacted by the new metal and product tariffs, take action now to ensure your manufacturing business will continue to remain successful.