Tariffs and The Bottom Line: 5 Smart Moves to Navigate Market Shifts

Tariffs on imported goods can pose challenges for businesses involved in international trade, impacting pricing, profit margins and global payment operations. While small and medium-sized enterprises (SMEs) may be more sensitive to these effects, larger companies are not immune — especially when it comes to higher product costs, supply chain disruptions, and added pressure on their ability to compete globally.

That said, advances in financial technology are making it easier for businesses to navigate these challenges. Global payments providers like SUNRATE offer smart tools that streamline cross-border transactions, stabilise exchange rates, and reduce international business costs. This kind of flexibility is key to staying competitive and resilient, especially in uncertain economic times. 

Understanding Tariffs  

Tariffs are taxes imposed by governments on imported goods, raising their prices compared to locally produced alternatives. This added cost can reduce profit margins for businesses that rely on imports.  

While tariffs are often used to generate government revenue, they also serve to protect domestic industries from foreign competition or to gain leverage in trade negotiations. For example, the recent tariff changes in the United States aims to encourage the consumption of locally made products — a strategy to support local industries and preserve jobs. 

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Tariffs and Pricing

Tariffs drive up import costs, squeezing profit margins and forcing businesses — especially small and medium-sized enterprises (SMEs) — to make difficult choices between absorbing losses or raising prices, potentially at the expense of customer loyalty.

While larger corporations may be better equipped to weather such financial pressures, SMEs often lack the same flexibility. This dilemma is especially relevant amid the latest US-China tariff developments, where renewed tariff hikes on Chinese goods could trigger retaliatory measures, escalating trade tensions. Such a cycle not only increases operational costs for businesses on both sides but also threatens their global competitiveness and pricing strategies.

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Tariff Challenges for Businesses

Tariffs can have wide-ranging effects on businesses, particularly those with limited financial flexibility and narrow profit margins. Key challenges include:

•  Rising costs of goods: Even minor increases in import costs can significantly reduce profitability and put a strain on cash flow, especially for businesses lacking the scale or reserves to absorb higher expenses. 

•  Price sensitivity: Passing costs on to customers risks losing them, particularly in highly competitive or price-sensitive sectors like retail. 

•  Supply chain disruptions: Tariffs can lead to shipping delays, supplier exits, and the need to rapidly secure alternative sources, resulting in longer lead times and higher procurement costs. 

•  Reduced global competitiveness: Retaliatory tariffs can make exports more expensive abroad, putting some businesses at a disadvantage compared to local competitors and threatening their international market share.

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Possible Strategies for Mitigating the Impact of Tariffs

Strategy 1: Minimising Currency Risk Through Multi-Currency Account Management 

Managing multi-currency accounts is a key strategy for businesses engaged in cross-border trade to offset the impacts of tariffs. Global payments platforms like SUNRATE provide solutions that help reduce currency exposure and protect against currency fluctuations.  

By enabling businesses to make transactions and receive payments in different currencies, multi-currency accounts offer flexibility when transacting with international suppliers and customers and preserve the company’s profit margins. 

Strategy 2: Strategic Sourcing from Low or No-Tariff Markets 

Diversifying the supply chain and minimising reliance on a single supplier can effectively reduce tariff exposure. Businesses sourcing from alternative suppliers in low or no-tariff countries, or Free Trade Agreements (FTA) partner countries, can reduce import costs or even eliminate tariffs.  

Leveraging supply chain risk management (SCRM) software enables businesses to identify risks and prevent supply chain disruptions. As suppliers diversified, the numbers of cross-border transactions increased, making reliable global payments providers essential for ensuring efficient and secure payments. 

Strategy 3: Diversification of Risk Through Market Expansion 

Expanding into new geographic markets helps businesses reduce dependence on a single market and can mitigate the impact of sudden tariffs on one of the markets. By diversifying the assets, businesses can better adapt to market volatility and balance out losses.  

New customers from the expanded region contribute to increased revenue, reducing the risk of overconcentration in one region. Businesses may also benefit from more favourable tariffs and trade environments in new markets. 

Strategy 4: Implementation of Dynamic Pricing Strategies 

Static pricing may not be effective when the import costs are rising due to tariffs. Implementing dynamic pricing models allows businesses to adjust prices based on factors like tariff fluctuations, market trends, and customer segmentation.  

Gradual price increases could be utilised as a short-term strategy to maintain customer loyalty, and communication with customers about the reason for the change is essential. A differentiated pricing strategy can be implemented for business customers, which accounts for their needs, industry, price sensitivity, and helps the company remain competitive and protect profit margins. 

Strategy 5: Optimisation of Inventory Management Practices 

Effective inventory planning plays a key role in supporting businesses to mitigate the impact of tariffs. Making decisions about stockpiling, purchasing, timing, and pricing is crucial before the implementation of tariffs. Inventory strategies such as just-in-time (JIT) inventory and sales forecasting can reduce storage costs and assist businesses navigate challenges related to current assets.

Global payments platforms ensure smooth cross-border transactions, optimise payment timing and maintain cash flow. Small and medium-sized enterprises (SMEs) may rely on spreadsheet tracking for inventory management, while larger companies can consider enterprise resource planning (ERP) software. 

As tariffs affect businesses in global trade, companies must implement strategies to manage currency volatility, explore new market opportunities, and protect profit margins. With the increasing demand for market diversification and multi-currency transactions, global payment solutions have become essential. By ensuing secure and efficient strategies, businesses can mitigate the impact of tariffs and contribute to long-term growth. 

To get started and partner with a solutions provider that can help your business optimise payments and help you scale both locally and globally, open a SUNRATE account today or contact our sales team.