How Small Businesses Can Combat Supply Chain Risks Amid Trump’s Tariff War

Small businesses are bracing for impact in light of President Trump’s long-promised tariffs.

The tariffs on Canadian, Mexican and Chinese goods initially went into effect on Tuesday, March 4, but on Thursday, Trump temporarily paused tariffs on certain Canadian and Mexican imports. Mexico was expected to announce retaliatory tariffs, but this will likely be delayed until Trump’s pause ends on April 2; Canada and China have already announced counter tariffs.

Although the tariff situation remains in flux, it’s a good idea for small-business owners to prepare in case they’re affected. Tariffs can increase the cost of goods and services for small businesses and lead to supply chain disruptions.

Here’s what small-business owners can do to reduce their supply chain risk in the middle of a likely trade war.

1. Determine how you may be impacted

Review your supply chain to determine whether you directly or indirectly import goods from Canada, Mexico or China. During this process, you should look through your existing supplier contracts and evaluate the cost of imported materials, manufacturing, transportation and other related expenses. This review will allow you to identify the areas in your supply chain where you may be most affected by tariffs — and as a result, estimate the potential cost impact.

» MORE: How Trump’s tariffs may impact small businesses

2. Strengthen your relationship with your existing suppliers

Establish transparent and open communication with your suppliers. It can be helpful to acknowledge that tariffs impact you both — and neither of you have direct control over them. If you’re looking to negotiate for better pricing, try to propose solutions that are mutually beneficial. For example, your supplier may be able to offer a discount for a higher-volume order or if you agree to extend your contract. You may also suggest combining shipments to lower logistics costs or adjusting materials for cheaper production.

3. Consider diversifying your supply chain

Reducing your reliance on a single supplier or country can help mitigate the impact of tariffs. Look for suppliers in countries that aren’t being threatened with tariffs or see if you can work with a domestic supplier. Partnering with multiple suppliers (especially those that aren’t impacted by tariffs) can help you lower costs, as well as avoid supply chain disruptions.

4. Leverage technology

Investing in technology, such as supply chain management software or inventory management software, can help you save money in the long run. These products allow you to track inventory, manage supplier relationships and forecast sales demand. By using the advanced analytics these solutions offer, you can make more informed decisions about sourcing, pricing and logistics.

5. Reevaluate your financing needs

If you’re concerned about the potential of higher supplier costs, you might consider proactively taking out a business line of credit. You can use a business line of credit to purchase inventory in bulk, cover cash flow gaps or serve as a general emergency fund. Plus, unlike other types of financing, you can draw from a business line of credit as needed — and only pay interest on the funds you borrow.

How much do you need?

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Once we uncover your personalized matches, our team will consult you on the process moving forward.

6. Stay informed and create proactive strategies

With the uncertain trade landscape, it’s important to keep a pulse on policy changes and how they may impact your operations. You can refer to NerdWallet’s tariff guide for the latest news and information. It may also be a good time to meet with a business or financial advisor to discuss potential strategies and create a tariff-response plan. You can also join local trade organizations — which may be able to offer supply chain advice and advocate for small-business interests.