Small businesses are no strangers to challenges, and the recent news about tariffs are just the latest hit. What are tariffs? They are taxes or duties imposed by a government on imported or exported goods. Often, they’re used to protect domestic industries from foreign competition, regulate trade, or generate revenue for the government. Therefore, import tariffs will affect small businesses if they rely on foreign sources for products or services.
For example, if you’re a homebuilder, you may source your timber from Canada and your metal brackets and appliances from China. To offset new tariffs, these imported goods will increase in price, costing you more. And, in turn, this will cost your customers more.
With consumers especially wary about the impact of changing tariffs, how can you continue to grow your business? In this article, we’ll cover the immediate effects on the economy and small businesses, as well as actionable steps organizations and retailers can take to attract more customers and continue to expand.
Tariffs’ Effects on Small Businesses
While the effects of tariffs on the economy can include both positives and negatives, their effects on small businesses can be significant. Depending on the nature of the business, the type of goods involved, and the degree to which the business relies on international trade, impact can vary widely. Below are some of the key ways tariffs can affect small businesses.
Increased Costs for Importers
Obviously, small businesses that rely on imported goods or raw materials will face higher costs when tariffs are imposed on those items. This can lead to an increase in production costs or the cost of goods sold (COGS), which may be difficult for small businesses to absorb.
For example, a small business that imports electronics, clothing, or materials from abroad may face higher costs due to tariffs on those imports. These increased costs could force them to raise prices or eat into their profit margins.
Price Increases for Customers
If small businesses pass on the higher costs from tariffs to consumers, it can lead to price increases for the goods or services they sell. This may reduce customer demand, especially if consumers are price-sensitive or if cheaper alternatives are available.
One illustration is a small retail shop selling imported goods. This business might find it hard to raise prices too much without losing customers, as consumers could turn to other sources for the same goods at a lower price.
Supply Chain Disruptions
Small businesses often rely on global supply chains for both finished products and components. Tariffs can disrupt these supply chains, especially if goods are delayed or become more expensive due to the additional costs.
An example of such a disruption would be a small business that assembles products from imported parts. It might face delays in receiving critical components, leading to longer lead times for production and potential lost sales.
Increased Competition from Local Players
In some cases, tariffs on imported goods can make domestically-produced products more competitive. While this might help local businesses, it could create challenges for small businesses that rely on imports. Local competitors may have the advantage of not facing the same tariff-related cost increases.
For example, a small coffee shop that imports specialty coffee beans might see local roasters benefiting from tariffs on foreign beans, making it harder to compete on price or quality. But this is a win for local roasters—so it depends which side your business is on.
Opportunities to Diversity Suppliers
As explained above, tariffs can affect small businesses negatively. But they can also provide opportunities to explore alternative suppliers or markets. Some businesses may be able to find new suppliers in countries not subject to the tariffs, or diversify their product lines to reduce reliance on heavily-taxed goods.
One such instance is a small electronics manufacturer facing tariffs on Chinese-made parts. Instead, they might seek out alternative suppliers from other countries, like Vietnam or Mexico, in order to reduce their tariff exposure.
Opportunities for Niche Markets
In some cases, tariffs can open up opportunities for small businesses to focus on niche markets. If tariffs make imported goods too expensive, local businesses can step in to meet specific consumer demands for quality or unique products.
For example, a small business that makes locally-sourced, eco-friendly textiles might see an increase in demand if imported goods become more expensive due to tariffs.
Ultimately, the way tariffs affect small businesses depends on their specific circumstances, such as the types of products they sell, their supply chains, and their ability to adapt to changing market conditions. Small businesses that stay flexible, are able to adjust their sources, or can find creative solutions may be better equipped to navigate the challenges posed by tariffs.
7 Ways Small Businesses Can Continue to Grow
During times when tariffs are impacting the cost of goods and trade, small businesses can still leverage email marketing to maintain and grow their customer base. This can even allow them to cut down on other, more expensive marketing efforts. After all, email marketing has a return on investment (ROI) of $36 for every $1 spent.
Here’s how small businesses can use email marketing strategically to navigate tariffs:
#1 Communicate Transparently with Customers
No matter how tariffs affect your small business, communicating transparently with customers goes a long way to build trust. Use email to share educational content about how tariffs are changing the landscape for your industry. This could be in the form of blog posts, infographics, or video explainers. Position your business as an expert who is looking out for their customers and providing them with valuable insights during challenging times.
If prices are changing, it’s important to be transparent about that too. Make customers feel informed and valued by being honest about the situation. You can also highlight any steps you’re taking to minimize the impact, such as seeking new suppliers or finding cost-saving strategies.
#2 Offer Exclusive Discounts or Loyalty Programs
Send targeted email campaigns offering exclusive discounts, limited-time promotions, or loyalty rewards to customers who might be feeling the impact of higher prices. For example, offering a discount on the next purchase or a free gift with a certain order amount can help mitigate the effect of price hikes and encourage repeat business.
#3 Segment Your Email List for More Targeted Marketing
Different customers may be affected by tariffs in different ways. Segment your email list based on customer preferences, purchase behavior, or geographic location. For example, if you have customers in regions where tariffs on certain products are higher, you can send them targeted emails with alternatives or special offers. Tailoring your emails helps ensure your message is relevant and resonates with each group.
#4 Highlight the Value of Your Brand & Customer Service
While tariffs may lead to higher prices, exceptional customer service and a strong brand identity can keep customers loyal and engaged. Use email marketing to emphasize the value of your brand, such as superior customer service, faster shipping, or personalized experiences. Highlight customer testimonials, the quality of your products, and any added value you provide. If customers see that they’re getting more than just a product (e.g., great service or a unique experience), they may be more willing to accept price increases.
#5 Promote Pre-Order or Bulk Purchase Options
If you anticipate that tariffs will continue to rise or fluctuate, offering pre-orders or bulk purchasing options can help customers lock in lower prices before increases occur. Email marketing can help promote pre-order opportunities for products that are likely to be impacted by future tariffs.
For example, if you have a popular product, give customers the chance to order ahead at current prices. Similarly, offering bulk purchasing discounts can help customers save money and ensure a steady stream of revenue for your business.
#6 Promote Domestic or Tariff-Free Products
If tariffs are affecting imported goods, promoting products that are locally sourced or not subject to tariffs can give your business a competitive edge. Use email marketing to highlight tariff-free options. Create campaigns that emphasize the benefits of buying local, such as supporting domestic jobs, faster delivery times, or higher product quality. This can resonate with customers who are looking for alternatives to more costly imported items.
#7 Focus on Value-Added Content & Brand Loyalty
During times of higher costs due to tariffs, customers are more likely to appreciate value-added content that goes beyond product promotions. A good email strategy should include sharing valuable, non-promotional content such as how-to guides, product usage tips, behind-the-scenes looks at how you source products, and other engaging content. This helps maintain a relationship with customers, keeping your brand top of mind even if product prices fluctuate.
By using email marketing in these ways, small businesses can turn the challenges presented by tariffs into growth opportunities. Transparent communication, value-driven content, and strategic offers can maintain customer loyalty and even attract new customers during challenging times.
Keep a Growth Mindset
While tariffs present significant challenges for small businesses—especially those reliant on imported goods or international supply chains—they also offer opportunities for adaptation and growth. Small businesses that can embrace flexibility, diversify their suppliers, and communicate effectively with customers have the potential to navigate these turbulent times successfully. By leveraging strategies like the ones listed above, small businesses can continue to attract and retain loyal customers.
With the right approach, tariffs don’t have to hinder growth. Instead, they can serve as a catalyst for innovation and resilience in the face of changing market conditions.
Enlisting the help of a good email marketing agency can also help you get through any challenges and negative impacts of tariffs on your small business. With a calculated, tailored strategy, email can negate the impacts and help you grow your business during uncertain times.
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