How United States' Trade War with China Impacts Businesses

When the Republican Party took control of the White House in 2016, President Trump announced a series of aggressive moves that will mark the beginning of his term. He facilitated the passage of a number of laws and quickly demonstrated his new way of governing. Setting aside for a minute the success or failure of his decisions, it is important to realize that his actions have certainly impacted millions of individuals and businesses around the nation.

Just consider, for instance, how a small, family-owned business that uses a lot of steel was affected after the steel-based tariffs were created. The most likely outcome is panic over increasing cost of business and concern over how to move forward. Nevertheless, many organizations utilized this as an opportunity to transfer their production lines back to the U.S. and avoid charges on imports.

What Exactly Are Tariffs?

According to Forbes, a tariff is a form of tax that gets imposed on imported goods. The reason why most tariffs are created goes back to the fair trade that all countries strive for. Thus, if the United States is importing items from Mexico at higher prices than Mexico is importing from the United States, there may be some concerns. This is why the current administration has made it a priority to even the scales.

Given that a number of nations around the world have visibly profited from unfair trade deals that the U.S. has been involved in, Trump's administration considered it mandatory to put a stop to such dealings. So, in order to incentivize countries like China to be friendlier to the American producers, it began implementing tariffs on goods that China exports. Now, those fees that American sellers have to pay to sell their products to the Chinese markets are reflected when Chinese sellers attempt to sell here in Falmouth, per se.

Imposing Tariffs

Unfortunately, the previous scenario is mostly a hypothetical outcome and not exactly what tends to take place. Consider some of the steel tariffs that have been the subject of debate recently. Although their goal was to minimize inequality in trading between China and the U.S., they primarily achieved a spike in prices on domestic purchases. Take a local steel business here in Falmouth, for instance, and look at some of the effects of the tariffs on it. If it relies on steel to create its products, it now has to pay more money for raw materials. The response can either be lower profits or passing those costs on to the consumer instead.

How Business Should React

Luckily, there are some ways to combat tariffs effectively. According to Craig Bouchard, the easiest alternative is to stop purchasing foreign goods and produce them domestically. As the CEO of Braidy Industries, Inc., Mr. Bouchard has a plethora of experience in this area. His strategy advises companies to simply start making their own raw materials instead of importing them, or import from countries who are not as heavily impacted. So, businesses that are adversely impacted by tariffs can mitigate some of the losses by being their own suppliers. After all, being one's own source of raw materials will most definitely reduce tariffs and fees.

Other Ways to Survive Trade Wars

Since the bottom line consumers and producers often suffer the most during international trade wars, it is important to think about some survival strategies. In the words of Mr. Bouchard, a couple of advanced techniques include cutting overhead expenses, slightly raising prices, negotiating better purchasing deals, and looking for new markets.

Also, being patient while the trade war goes on is important for companies looking to come out victorious. This is because no tariff-based competition can go on forever as it would cost all countries involved billions of dollars. The producers who survive it, however, can definitely count on becoming a stronger brand and having more loyalty with their customers.