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Steps Companies Must Take to Adapt to Trade War Uncertainty

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The current political climate has made companies that engage in international trade nervous. Threats of new tariffs come almost weekly, and businesses that deal in international trade, particularly with China and Mexico, are nervous about their prospects. A third of foreign companies have considered canceling or delaying their investments in China because of the escalating trade tensions.

What can businesses do to decide how to handle these uncertain times? Start with drawing up a blueprint for withstanding trade war uncertainty.

Raise Prices

The first strategy that most businesses will need to adopt is raising their prices. Especially if they deal in products like aluminum, their costs will rise so much that they cannot afford to keep prices at their previous levels.

Raise prices slowly and communicate with your customers to explain why you are doing so. Most customers are also aware of the consequences of the trade war and will be making arrangements of their own to cope with the changes it will bring.

Look at Overhead Costs

Trade wars are a uniquely challenging time to run a business, and you must look carefully at every dollar you are spending. One good way to raise profits is to carefully consider the cost of overhead. If you have any means of cutting overhead costs, do it. Whether your business needs to cut some non-essential employees or reduce the amount of space you are leasing, these costs can help put money back into profit generation.

Look into Different Ways of Borrowing

The trade war means that businesses will have less money to spend on financing. Companies will need to talk to lenders to find the best possible deals on loans. If your business qualifies, consider looking into the programs offered by the Small Business Administration. These loans may have more attractive costs than those offered by private lenders.

Start Offering Services

Changing your business model is another way of protecting your business from the ongoing trade war.

If your customers won’t want to purchase materials or machinery from your company at the volume needed to stay afloat, look into offering services like repair and maintenance. Keep your customer base’s needs in mind when you are planning to offer assistance in addition to sales.

Be Creative About Your Market

If you are continually hit by trade tariffs where you export products, consider looking into other countries to deal with. Not every country has put these punitive measures into effect. Many countries are ready and willing to do business with the United States and capitalize on the current landscape.

Look into smaller markets for your products and be ready to be creative. It is good to diversify your customer base, spreading your investments across a broader range of countries.

Look into Investing in Alternative Materials

While the steel and aluminum industries have been hit hard by Chinese tariffs, a few companies have been able to bank profits because other firms are looking for alternatives to costly imported metals.

Plastics and fiberglass companies are seeing improved profitability. If your company can invest in these alternative materials, it would be a good hedge against the damages the trade war will cause.

Winning the Trade War

Trade with China and other countries can be simplified with the right knowledge, systems, and support.

Companies complain of interference from the government, stolen technology, and the devaluation of their products. It may be that the tariffs imposed by the current administration could be a long-term advantage for businesses by encouraging them to look elsewhere for trading partners. Companies need to first look after their own profits to survive the trade war.

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