“When Elephants Dance...”

On September 18, 2018 China announced USD60 billion in retaliatory tariffs following U.S.  tariffs of USD200 billion on Chinese goods.

Tariffs have indirect and unintended consequences throughout the economies they target. As someone said and paraphrased here, “When elephants dance, we get all shaken up”. Small businesses in the supply chain get “sucked-up” with higher costs they can’t pass quickly enough to customers. That impacts pricing and cash flow. An example is a bakery that uses tins or whipped cream (from metal canisters). What then can you do?

·       Stay focused on profit margin – is there a cost element that could offset the tariff related hike? Is there room to negotiate?

·       Understand own pricing – what’s the tolerance level for customers?

·       Manage inventories better – reduce money tied-up in inventories. “Cash is king” says a former PM! And cash is the lifeblood to keep businesses moving.

·       Communicate more with your supplier/s – building relationships and trying for key advantages may help.

The biggest issue in any business is cash flow – it is the oxygen for survival. If cash flow is threatened then one has to cutback spending. So conserve and wait!

The main feature of the current global environment is uncertainty – so long-term goals/planning is rather difficult. But now is the time to act - on pricing or re-pricing, recalibrating costs and renegotiating contracts. Best of luck!

Reference

Business News Daily, September 19, 2018, Adam C. Uzialko