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Concerned about tariffs? Six ways to manage uncertainty

April 10, 2018 Article 3 min read
Lou Longo
Given the volley of announcements about tariffs on goods imported from China and many other countries, businesses are wondering how to make sound business decisions in an uncertain climate. Here are six suggestions.

A photo of multiple flags from different nations.

In response to recent U.S. tariffs on imported steel and aluminum, China responded with targeted tariffs on some $3 billion of U.S. imports, a seemingly measured and strategic move. But as the U.S. Trade Representative considers additional measures, China is threatening further retaliation, including additional tariffs on some of the United States' most profitable exports.

As we closely watch the volley of near-daily announcements about tariffs on goods imported not only from China but many other countries as well, business leaders are wondering how to respond. How do you make sound business decisions in an uncertain climate? We offer six suggestions.

1. Don't panic

Some companies already are raising prices, which only leads to panic buying and increased demand. In turn, this pushes prices north, speculatively. This doesn't help in an already unsure situation.

2. Review your supply chain

Look at your purchasing patterns and sales — who are you buying from? Where are the materials and products coming from? Who are you selling to, and where are your products going? More important now than ever before, this information should become part of your executive dashboard so that it's reviewed at the highest levels — frequently.

3. Review supplier and sales contracts

You'll want to be clear about your purchase obligations and the terms of your agreements. While there's almost always a market reaction to increased tariffs, what are your legal obligations for paying them? Do you have any client contracts that might be at risk of cancellation? Going forward in this time of transition, considerations related to tariffs should certainly impact the new agreements you enter into, particularly regarding which party is obligated to pay duties, tariffs, and taxes on sales and purchases.

4. Seek reliable information

Businesses should be sure they're getting accurate information. Seek out well-established, reliable sources, such as the Office of the U.S Trade Representative (USTR). All trade-related actions as well as official U.S. reactions to statements or actions by foreign governments, will be described on this site.

5. Do your due diligence

In response to U.S. actions, it's not impossible to imagine that foreign governments might also look beyond retaliatory tariffs, such as discouraging U.S. travel, which would curtail spending in the United States. Non-tariff-based retaliatory moves could also include strict interpretation of regulations for U.S. businesses operating in other countries. Therefore, now is the time for diligence; if you have business investments or conduct business activities in China and elsewhere, make sure you're timely and fully compliant with all regulatory requirements.

In response to U.S. actions, it's not impossible to imagine that foreign governments might also look beyond retaliatory tariffs...

Now is also an opportune time to consider the flexibility of your business and contingency plans. If the situation escalates, what impact can you envision the tariffs having on your company? What options and alternatives might be available to mitigate the risks and impact?

6. Engage

As you're evaluating the effects of U.S. and foreign government actions on your business, share those impacts with elected officials as well as business, trade, and industry associations. Note that, unlike the initial steel and aluminum tariffs that were instituted through presidential proclamation, the new tariffs are being considered by the USTR, and the process includes two public comment periods. The first ends on May 11, 2018. The second, a post-hearing public comment period, ends on May 22.

In conclusion

If the additional tariffs are approved — they are by no means a done deal — they aren't likely to be implemented before June. Use the time between now and then to consider the ideas outlined above. We'll continue to monitor the situation and share our thoughts as events unfold.

As always, if you have any questions, feel free to give us a call.

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