Five Strategies for Surviving the Trade War

President Trump is following up on his campaign pledge to level the playing field in international trade. To him, the world needs us more than we need them. There is some credence to this position. The U.S. is by far the world’s largest economy, with a projected $22 trillion in GDP in the next few years. Our economy still significantly surpasses China’s and, according to the American Enterprise Institute, states like California and Texas have economies larger than some of our larger trading partners, like the U.K. and Canada.

Still, the trade war is heating up. Tariffs have been levied. Countries have fought back with their own, which of course initiated another round, and it continues.

So what do you do? My smartest clients—those that make plans months, even years, in advance—are taking these steps:

Raise prices while communicating with customers. If you’re selling products made with steel or aluminum, then prices will go up. But, you may have time; tariffs aren’t fully sinking in for a few months. Talk to customers now. Increase prices gradually. You don’t like surprises and neither do your customers.

Get creative with financing. Farmers will still need equipment, even if revenues go down. Other businesses will still have capital spending plans. What can you do to get deals done? Partner with leasing companies, banks, and other financial service providers that offer better ways to finance the purchase of your products. Offer extended payment terms if you can. Talk to banks that offer Small Business Administration loans and find out about specific lines of credit that could be available to you and your customers. Interest rates are still relatively low, so there are opportunities to work with customers to resolve cash flow challenges.

Cut overhead. Take a look at your operational and general and administrative expenses. Every percentage point you can add to your margins will give you more breathing room if customers push back on price increases.

Expand other services. If you sell equipment and prices go up, it’s likely your customers may put off purchases and try to get more life out their current machines. Look at your customers and think about other services they may need while they defer bigger investments.

Finally, explore new markets. Maybe relying on one industry, one region, or even one large customer isn’t such a great business model. What other companies in places and industries not as affected by the trade war can use your products? The “war” itself isn’t happening all over the world, so what other export markets are available? Reach out to your local Small Business Development Center for help identifying those markets, and re-invest your business development resources.

This is not going to be easy, fun, or quick. The hope is that when things are over, there will be more opportunities and better profits in years to come.

Writer Gene Marks was the keynote speaker at the Supply Summit & Showcase in Little Rock last year. This column appeared in Inc.com.