Tariffs are a hot topic in the business world, and small businesses are feeling the impact. If you’re running a small business that relies on imported goods, materials, or equipment, you’ve probably already noticed price increases and supply chain disruptions. But what do tariffs really mean for your business, and how can you navigate these challenges?
In this article, we’ll break down the impact tariffs may have on your small business, how business insurance is critical to protecting your investments, and how you can take action to insulate or reduce the negative effects of tariffs. Let’s dive in.
Topics Covered
The Impact of Tariffs on Small Businesses
The hope is that tariffs on imports from major trading partners like China, Mexico, and Canada will make U.S.-based manufacturing more competitive in the long run. Whether that happens is an open question at this point. In the short term, what we do know is that they lead to higher prices, inflation, and significant supply chain disruptions. Businesses that rely on global suppliers will need to adapt quickly or risk financial strain.
When tariffs increase, the cost of imported products rises, and these higher costs often get passed on to consumers. This can lead to reduced consumer spending, which in turn slows down the economy. If small businesses don’t adjust their strategies, they could face declining sales and shrinking profit margins.
Tariff policies are often driven by shifting political landscapes and trade negotiations. Some tariffs may be temporary, while others could persist if they align with broader reshoring efforts. Businesses that build financial resilience and supply chain flexibility will be better positioned to weather future trade uncertainties.
How the Insurance Market is Adapting—and Why it Matters for Your Business
With tariffs and trade tensions impacting businesses, the insurance market is also evolving. Rising costs, supply chain risks, and increased financial uncertainty are driving up insurance premiums across various sectors. Here’s what small business owners should be aware of:
- Commercial Property Insurance – Due to increased costs of materials and imported goods, property insurance premiums are rising. If your business relies on imported equipment or renovations, expect higher coverage costs.
- General Liability Insurance – As businesses look to cut costs and restructure operations, liability risks can increase, leading to higher premiums.
- Workers’ Compensation Insurance – Wage inflation and changes in labor policies due to economic shifts may cause premiums to rise, especially for industries reliant on hourly workers.
- Business Interruption Insurance – With supply chain disruptions becoming more common, insurers are adjusting policies and increasing rates to account for the rising risk of financial losses due to delays or shortages.
Understanding these changes can help business owners plan ahead, compare policies, and ensure they have the right coverage at the best possible price.
The Bigger Picture: Global Trade and Business Resilience
Beyond tariffs, small businesses must also consider geopolitical risks, supply chain disruptions, and cybersecurity threats. According to industry experts, challenges like inflation, sanctions, and economic friction will continue to impact global trade for the foreseeable future. Companies that proactively manage risks and adapt to changing conditions will have the best chance of long-term success.
At the end of the day, agility is key. By staying informed, diversifying supply chains, and optimizing pricing strategies, small businesses can navigate tariff challenges and survive in a fluctuating economy.
How Small Businesses Can Lower Costs from Tariffs
The fear of rising costs from tariffs is very real, especially for businesses operating with tight margins. Small business owners need to be more strategic than ever to keep operations running smoothly without compromising on quality.
The good news? There are practical ways to reduce expenses and cushion the impact of these economic shifts. Let’s explore some strategies that can help your business stay profitable and resilient.
Smarter Sourcing and Inventory Management
One of the first places to look at when trying to cut costs is your supply chain. Being proactive about sourcing and inventory can make a significant difference.
- Switch to Local or Regional Suppliers – Sourcing ingredients and products locally can help you avoid tariff-related price hikes and reduce the risk of shipping delays.
- Reshore or Vertically Integrate: If feasible, consider bringing production closer to home or taking greater control over your supply chain. While reshoring is a long-term solution, it could provide stability in an uncertain trade environment.
- Renegotiate Supplier Terms – Have an open discussion with your vendors. Bulk discounts, better payment terms, or exclusive pricing could help lower your costs.
- Diversify Your Supply Chain – Relying on a single supplier can be risky. Expanding your network can help you find more competitive pricing and alternatives when needed.
- Optimize Inventory – Using an inventory tracking system can prevent overstocking, spoilage, and unnecessary waste, all of which impact your bottom line.
- Buy in Bulk – If prices are expected to rise, stocking up on high-demand items before those increases take effect can save you money in the long run.
Adjusting Menus and Product Offerings
Sometimes, adapting your offerings can help maintain profitability without sacrificing customer satisfaction.
- Modify Menus and Offerings – Consider replacing expensive imported products and ingredients with cost-effective, high-quality alternatives.
- Feature Seasonal & Local Ingredients – Not only does this often reduce costs, but it also appeals to customers who value locally sourced food products.
- Prioritize High-Margin Items – Highlighting dishes and products with better profit margins, such as specialty cocktails or locally sourced seafood, can help offset rising costs.
Managing Labor Costs Efficiently
Labor costs are one of the biggest expenses for businesses. Finding ways to streamline operations while keeping employees happy is key.
- Cross-Train Employees – Staff who can perform multiple roles allow for greater flexibility and efficiency.
- Optimize Scheduling – Use scheduling software to ensure shifts are covered without excessive labor costs.
- Flexible Staffing – Hiring part-time employees during peak hours can help manage payroll expenses more effectively.
- Implement Self-Service Technology – Kiosks, mobile ordering, and digital payment systems can reduce the need for additional staff.
Rethinking Pricing and Promotions
Price increases may be necessary, but how you implement them matters. Gradual, transparent price adjustments tied to added value, such as improved customer service or loyalty perks, can help ease sticker shock for price-conscious customers. Businesses should also monitor their competitors’ pricing strategies to stay competitive.
Raising prices strategically—such as introducing new product sizes or offering exclusive deals—can help balance profit margins without losing customers. Businesses should also track industry trends to understand how widespread price increases are affecting consumer behavior.
Strategic pricing adjustments and smart promotions can help maintain revenue while controlling costs.
- Strategic Pricing Adjustments – Small, incremental price increases on select items can help absorb rising costs without shocking customers.
- Create Value Bundles – Offering bundled products or menu items can attract more customers while maintaining profitability.
- Leverage Loyalty Programs – Rewarding repeat customers with discounts or incentives can boost retention and encourage more frequent visits.
Exploring Additional Revenue Streams
Diversifying income sources can make your business more resilient in uncertain times.
- Expand Online Sales – Selling products online can tap into a wider customer base.
- Introduce Catering & Delivery Services – These services allow you to reach more customers without a significant increase in overhead costs.
- Host Private Events – Renting out your space for special events, private dining, or corporate gatherings can maximize revenue per square foot.
- Explore Financial Assistance: Look into grants, small business loans, and government relief programs that can help offset higher costs. Negotiating better terms with suppliers can also provide some financial breathing room.
The Role of Business Insurance in Times of Uncertainty
Tariffs and trade wars bring significant financial and operational challenges for small businesses. However, one of the most effective ways to reduce financial risk is through a comprehensive business insurance plan. The right coverage—such as business interruption insurance, commercial property insurance, workers’ compensation insurance, and liability protection—can provide a critical safety net against supply chain disruptions, rising costs, and economic instability.
By investing in business insurance, you can protect your assets, maintain financial stability, and position yourself for long-term success, no matter what trade challenges lie ahead.
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*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please get in touch with your local agent to learn how we can help with your insurance needs.
Sources
Aegis. How Small Businesses Can Lower Costs Amid Potential Tariffs. https://www.aegisifs.com/blog/how-small-businesses-can-lower-costs-amid-potential-tariffs
All Business. How Tariffs Affect Small Businesses—Plus Tips on Navigating Them. https://www.allbusiness.com/how-do-tariffs-impact-small-businesses
All Business. 7 Experts Predict Small Business Trends for 2025. https://www.allbusiness.com/small-business-trends-for-2025
Risk and Insurance. Stop Tariffs from Decimating Your Supply Chain with These 3 Insurance Products. https://riskandinsurance.com/stop-tariffs-from-decimating-your-supply-chain-with-these-3-insurance-products/
DSP Insurance. How Would Tariffs Impact the Insurance Industry? https://www.dspins.com/blog/tariffs-impact-insurance