A persistent concern prevails among small business owners: they constantly operate on the brink of financial instability. Every year, a single event, such as the departure of a critical employee, the collapse of a long-standing supplier, or the devastation from a natural disaster, threatens their business’s survival.
This year, the element affecting most American small businesses is the looming imposition of widespread tariffs. The increase in tariffs on imported goods could elevate costs for some businesses, though fluctuating expenses are not a rare occurrence, as businesses are accustomed to adapting to such changes.
The real issue lies in the ongoing uncertainty surrounding this matter. Policy changes regarding tariffs have been introduced with ambiguous and conflicting messaging. Business owners are left questioning which countries will be affected, the new rates applicable to their materials or finished goods, the timelines of implementation, and whether this is a temporary negotiating strategy or a lasting policy shift.
While small business owners are adept at making challenging decisions, the uncertainty has compelled many to pause operations. In practical terms, this means they are halting new hiring activities. Job openings are being closed, and vacancies left by departing employees are not being filled. Additionally, investment decisions are being postponed, resulting in deferred inventory purchases and crucial future investments in technology, facilities, and other infrastructure. This cautionary approach slows down sales and is detrimental to long-term growth and innovation.
Some businesses have opted for swift action that may seem short-sighted, such as rerouting shipments through alternative countries or modifying supplier invoicing processes to alleviate the tariff impact. While it is understandable for businesses to seek cost reduction or loopholes to maintain profitability, these activities do not reflect the traditional American spirit of innovation in product development, process optimization, and sales expansion.
One notable absence in the current business response is the initiative to shift manufacturing back to the United States. Despite such efforts during the COVID-19 pandemic, when many businesses, big and small, made efforts to boost domestic manufacturing, this trend has not continued. This year, in the apparel manufacturing sector, tariffs are expected to hit hard, with several long-standing manufacturing operations likely closing due to reduced demand.
To survive the uncertainty posed by tariffs, small businesses can consider the following strategies:
Develop structured frameworks for decision-making: As the situation continues to evolve, defined processes for gathering information, evaluating opportunities, and making informed decisions are crucial. Creating frameworks for operations such as hiring, purchasing, and pricing can help businesses remain agile. Businesses should be prepared to scale back inventory purchases and sales activities if demand slows and have plans to adjust pricing and enhance customer value if costs rise.
Foster collaborative relationships: The spirit of collaboration witnessed during the COVID-19 pandemic was vital for the survival of numerous American businesses. Partnering with neighboring businesses, suppliers, or even competitors can introduce substantial value and stability.
Stay informed and focused: While tariffs may be a significant event, the true test for businesses will be the subsequent years, as the broader economy may undergo shifts in inflation, unemployment, and interest rates. Remaining focused on customers, products, and core business activities is essential.
- Explore domestic alternatives: Although it may be impractical for most industries to completely eliminate reliance on overseas manufacturing instantly, even small businesses can start diversifying their supply chain to mitigate exposure to potential tariffs or other disruptive events.
American business owners are resilient, and many will navigate through these uncertain times. However, small businesses do not aspire merely to survive; they aim to thrive. As the backbone of the American economy, they can continue to contribute through innovation, job creation, and community engagement once the uncertainty surrounding tariffs is resolved.
The views expressed in opinion pieces on Fortune.com are the authors’ own and do not necessarily represent those of Fortune.
Further reading includes articles on the exposure of businesses to tariffs chaos, the sale of century-old companies to employees, and the emerging workforce crisis involving tariffs and AI.
This story initially appeared on Fortune.com.
