How Businesses Can Navigate Rising Tariffs and Geopolitical Uncertainty

Just two months into the new year, many companies are already feeling the weight of new tariffs and geopolitical tensions. According to the latest survey from The Conference Board, CEOs worldwide view intensified trade wars as the biggest threat to their businesses. The ongoing tensions between the US, EU, and China are expected to have the most significant geopolitical impact, putting business owners on edge.¹

Yes, the buzz around tariffs impacting businesses is all over the headlines. But just how worried should you be about the potential impact on your business in 2025?

We all know that tariffs can change the cost of products and influence where businesses source their materials, ultimately affecting the prices businesses and consumers pay every day. For instance, if a tariff makes raw materials too expensive and they’re not readily available in the U.S., a factory might need to find a new supplier in a different country. This can lead to production delays and fewer products hitting the shelves. It’s a challenging scenario, but understanding these dynamics can help you navigate the complexities ahead. What’s your take on the situation? How prepared do you feel for the potential ripple effects?

While the future may be uncertain and its impacts unknown, as business owners, there are several proactive steps we can take to stay ahead and be well-prepared. Let’s consider these scenarios:

Impact on Pricing

When tariffs increase, the cost of importing goods, raw materials, and components also rises. This can lead to higher production costs for businesses that rely on these imported items. Companies must decide whether to absorb the extra costs or pass them on to customers through price increases. Both options come with their own challenges. Absorbing costs can reduce profit margins, while passing them on may impact on customer demand and satisfaction. To effectively manage these changes, businesses should conduct a thorough analysis of their cost structure and determine the potential impact on their pricing strategy. This includes assessing which products and services are most affected and by how much.

Communicating Potential Price Increases

Clear and transparent communication with customers is paramount when implementing price increases. Inform customers well in advance about the upcoming changes to help them prepare and reduce the element of surprise. Clearly explain why price increases are necessary, highlighting specific factors like increased tariffs that have led to the decision. Transparency is key—specify which products and services will be affected and provide examples to ensure customers are fully aware. Outline how the price adjustments will be implemented over the next six months, giving customers a clear timeframe to plan accordingly. Additionally, show empathy and offer support to customers who may be affected by the price changes.

Assessing Supplier Reliability

Suppliers are integral to a company’s operations, but they also present potential risks. Assess the stability and dependability of your suppliers. Maintaining open communication and fostering strong relationships with suppliers can enhance their performance and minimize the risk of disruptions. Ensuring that suppliers receive fair compensation for their services can also reduce the risk of losing vital supply chains during challenging times. To effectively evaluate and manage supply chain risks, consider several key factors with your leadership team. Start by assessing the projected sales forecast for the next 6-12 months and determining the number of products needed to meet this anticipated demand. Identify which supplier relationships are most critical to fulfilling this demand and consider where you can pivot or find redundancies if necessary.

Maximizing Supplier Relationships for Business Continuity

Strengthening and maintaining solid relationships with suppliers help to prevent disruptions to the business. After confirming you’ve selected the right suppliers, nurture these partnerships. Companies that take proactive steps in fostering supplier relationships, rather than waiting for a crisis, are the ones that will endure and prosper. Here are some strategies:

Identify Key Suppliers: While good relationships with all suppliers are essential, it’s recommended to focus your investments on where they have the most impact. Often, the top 20% of suppliers account for 80% of our business operations. Ensuring a reliable supply from these key partners is more critical than simply securing the lowest price.

Manage Supply Chain Risks: Effective risk assessment planning helps companies to remain agile. Collaborate closely with suppliers to anticipate challenges together. By working on contingency plans and forecasting—such as adjusting sales projections, businesses can face potential disruptions as a united front.

Create Backups: Having multiple suppliers for similar products is a good initial step, but in the event of industry-wide disruptions, a backup supplier nearby might face the same challenges as your primary one. The key is diversifying your supply sources and methods.

Innovate and Diversify: Only 22% of companies have a proactive supply chain network. Seek alternative resources to reduce dependence on any single at-risk supply. This might include vertical integration, where you gain greater control of production resources through acquisition or gradual growth, reducing reliance on upstream partners. Alternatively, innovate your products to be less dependent on specific materials, utilities, or components.  ²

Establish Strong Partnerships: Regulatory hurdles can often lead to inefficiencies, supply shortages, and wasted resources. By banding together with fellow businesses in your industry, you may push for changes that enhance the entire supply chain. Working together on these initiatives can bring about much-needed relief and better conditions for all.

Guiding Your Business Through Complex Terrain

Navigating the maze of new tariffs, geopolitical tensions, and economic uncertainties can feel overwhelming. As business owners, you can tackle these challenges with strategic planning and proactive steps. By strengthening your supply chains, evaluating supplier risks, constantly evaluating pricing and margins, you can better prepare for what lies ahead. Strong leadership and a clear understanding of the potential impacts can help you steer your business through these turbulent times with confidence.

At B2B CFO ^®, our experienced business advisors bring firsthand expertise in handling economic impacts to businesses. By following our guidance, you can empower your company to manage the impact of increased tariffs and build resilience against geopolitical and economic challenges. Trust us for keen decision-making and solid plans for growth and stability.  To schedule a discussion, please email ArtBottoms@b2bcfo.com.

Sources:

1. The Conference Board: February 4, 2025 US Tariff Plan Would Cut GDP Growth, Swell Inflation. https://www.conference-board.org/publications/US-tariff-plan-would-cut-GDP-growth-swell-inflation
2. Zippia: 18 Stunning Supply Chain Statistics [2023]: Facts, Figures, And Trends,  https://www.zippia.com/advice/supply-chain-statistics/