How Uncertainties over NAFTA, Tariffs and More Are Impacting U.S. Companies

cargo ship

Could the uncertain face of the global economy actually be good for U.S. businesses? With trade and tariff discussions up in the air as well as volatility over NAFTA, Brexit and the Federal Reserve, it's an ideal time for companies to re-examine their strategies—and look for potential growth opportunities.

As trade policies continue to evolve, it's important that companies understand the impact these new policies may have on their business strategies and be in a position to maximize potential growth opportunities and mitigate financial impact.

When exploring the impact of trade and tariff changes on businesses, it's important to keep these three things in mind:

  • Protective U.S. tariffs for companies that source products domestically may result in a price advantage—which could lead to sales growth, increased production and increased revenue. And if it becomes more cost effective to make goods in the U.S., production should, in theory, increase.  
  • Companies impacted by rising costs of tariffs on imported goods may need to absorb or offset the cost by passing along the excess to the customer by raising prices. This may result in reduced consumption.
  • If foreign governments respond with tariffs of their own either in the same industry or different industries, then export-driven U.S. businesses could be faced with a lower demand for goods.

The tariffs on imported steel and aluminum from China have many U.S. industry leaders saying that consumers could face higher costs for cars and trucks, beer and soft drinks and canned goods. Additionally, the American Apparel & Footwear Association, which represents more than 1,000 retail brands, claims that about 41% of apparel, 72% of footwear, and 84% of travel goods imported into the U.S. come from China, and worries that tariffs will force companies to increase prices or source alternative, cheaper solutions, which will be hard to find. In fact, researchers at Princeton University and the London School of Economics estimate the tariffs are costing the average U.S. household an additional $112 per year.

The high stakes around changing tariffs and trade policies has created a significant amount of uncertainty. Regardless of if and when new policies are put into place, companies may want to consider how policy changes could impact their suppliers, customers and profit margins so that they are strategically positioned to navigate the vagaries of the global market.

A version of this article originally appeared in The Secured Lender.

Stay up to date with email alerts