How to Handle Tariffs as a Small Business Owner

In today’s globalized marketplace, tariffs can significantly impact a business’s bottom line—whether you're importing raw materials or exporting finished goods. Understanding how tariffs work and how to navigate them strategically is essential for business owners who want to stay competitive and profitable. Here's a guide packed with practical tips to help you manage tariffs wisely.

1. Understand the Basics of Tariffs

A tariff is a tax imposed by a government on goods and services imported from other countries. The purpose of tariffs is to protect domestic industries, generate revenue, or retaliate against trade practices. Tariffs can take the form of:

• Ad valorem tariffs – a percentage of the value of the item.

• Specific tariffs – a fixed fee per unit of imported product.

• Tariff-rate quotas – lower tariffs for imports within a certain quantity, with higher rates beyond that limit.

Understanding what type of tariff applies to your goods is the first step toward managing them effectively.

2. Classify Your Products Correctly

Misclassifying your goods can lead to paying higher tariffs or penalties. Use the Harmonized System (HS) codes to ensure accurate classification. Double-check the codes used by your suppliers and consult a customs broker or trade compliance expert if needed.

Pro tip:

Customs authorities look for consistency—make sure your invoices, packing lists, and shipping documents all reflect the same product codes and descriptions.

3. Explore Free Trade Agreements (FTAs)

Free Trade Agreements can drastically reduce or eliminate tariffs on qualifying products. Determine if your country has FTAs with your trading partners and what rules of origin apply. For example, under the USMCA (formerly NAFTA), many goods traded between the U.S., Canada, and Mexico are duty-free.

Action item:

Check your eligibility and keep detailed records to prove your goods meet the FTA requirements in case of an audit.

4. Consider Tariff Engineering

Tariff engineering involves designing or altering a product to qualify for a lower tariff classification. This could include changes in materials, manufacturing processes, or even packaging.

While this strategy must comply with all legal requirements and shouldn’t be deceptive, it can offer significant savings if done right.

5. Stay Updated on Trade Policy Changes

Tariff regulations can change rapidly due to shifting political landscapes or global trade disputes. Subscribe to industry newsletters, government updates, or use a customs broker to stay informed.

Useful resources:

• U.S. International Trade Commission (USITC)

• World Trade Organization (WTO)

• Your local Chamber of Commerce

6. Work with a Customs Broker or Trade Specialist

Tariff regulations are complex. A licensed customs broker or international trade consultant can help you:

• Navigate classification codes.

• File paperwork accurately.

• Apply for duty drawback programs.

• Avoid compliance issues.

Though it comes at a cost, their expertise often saves more money than it costs in the long run.

7. Build Tariffs Into Your Pricing Strategy

If your business model includes importing goods regularly, factor tariffs into your product pricing. This ensures you maintain your profit margins and can communicate transparently with customers about any price adjustments.

Final Thoughts

Tariffs are a reality of global commerce, but they don’t have to be a financial burden. With the right knowledge, strategy, and expert support, you can minimize their impact and keep your business thriving. Think of tariffs not just as a cost, but as an opportunity to streamline your operations and make smarter sourcing decisions.