Navigating Tariffs: What SMEs Need to Know

Tariffs and shifting trade policies are reshaping the business landscape, injecting uncertainty into markets as federal and state regulations continue to evolve. At the center of this volatility are the proposed tariff measures under the current administration—changes that will have direct consequences for businesses of all sizes, including small and medium enterprises (SMEs). Depending on industry reliance on imports, financial stability, and operational flexibility, the severity of the impact varies. Yet regardless of where a business falls on this spectrum, one thing is clear: resilience against tariffs must become a central pillar of strategic planning.

Key Challenges SMEs Face

Tariff policies remain under discussion, but early projections suggest two possible scenarios (The Federal Reserve Bank of Boston - The Impact of Tariffs on Inflation):

• Scenario 1: A 25% tariff on imports from Mexico and Canada, plus an additional 10% tariff on imports from China.

• Scenario 2: A 60% tariff on imports from China, plus a 10% tariff on goods from the rest of the world.

Regardless of which path materializes, SMEs must prepare for three core disruptions:

1. Rising Costs and Tighter Margins

Most SMEs already operate with narrow margins, making tariff-induced cost increases particularly challenging. The financial strain varies depending on industry dependence on imported goods and overall business health:

Without proactive cost-management strategies, SMEs could face profit squeezes, price hikes, or operational constraints.

2. Supply Chain Disruptions & Uncertainty

Nearly 48% of U.S. supply chains relied on imported goods as of 2023 (Commerce.gov). Tariffs threaten to disrupt these links, forcing businesses to explore alternative suppliers—many of which may offer higher pricing or less reliable sourcing.

• Supply Chain Reconfiguration: Businesses must audit their procurement strategies, identify vulnerable goods, and assess alternative sourcing options. Restructuring requires careful planning and investment in new supplier relationships.

• Supply Imbalances: Widespread supply chain shifts may trigger shortages, bottlenecks, or excess inventory. To mitigate risks, SMEs should strengthen inventory management, optimize logistics, and build partnerships with local suppliers.

3. Potential Job Losses

SMEs may be forced to reduce workforce costs or restructure operations to maintain profitability. While layoffs are a last resort, businesses can minimize employment disruptions through:

• Government Support Programs: Funding, tax incentives, and workforce development grants are available to stabilize affected industries.

• Operational Efficiencies: Streamlining processes, automating routine tasks, and renegotiating supplier contracts can help offset rising costs.

• Workforce Sharing Programs: Sharing employees across multiple SMEs offers cost-saving benefits while preserving jobs.

If downsizing becomes unavoidable, business owners must prioritize transparent communication, retain critical skills, and offer transition support to affected employees.

Preparing for the Road Ahead

Although uncertainties remain, SMEs can take action now by assessing financial health, identifying key risk areas, and crafting mitigation strategies. Whether through supplier diversification, efficiency improvements, locking in long-term pricing with suppliers, or workforce protections, proactive planning can help businesses navigate tariff challenges with greater resilience.