(Updated) US China Tariffs Trade War: Business Owners Prep For Challenges Ahead

This post was most recently updated on October 4 to reflect the latest developments in the ongoing US-China trade war. 

The United States and China, the two greatest economies in the world, are currently at odds in what China has referred to as “the largest trade war in economic history.”

Although the Trump Administration is attempting to correct an imbalance in the way our country has been importing and exporting international goods for the last few decades, US business owners and consumers alike are being directly impacted by this initiative.

How can business owners prepare for trade war challenges ahead, and how has the government recently escalated this effort to compel China to act?

US China Tariff Update: Increasing From 25 to 30%

The latest US China tariff update might be the most significant development in the ongoing saga yet.

Starting on October 15th, the Trump administration plans to raise some tariff rates from 25% to 30%. This new change will affect a number of products from aircraft engines to cereals—with total market value reaching a whopping $250 billion.

According to Business Insider, this is the most drastic protectionist policy the world has seen since the 1960s.

Products Affected By the US China Tariff Update

This latest tariff update will impact countless products, including (but not limited to):

• Nuclear reactors
• Farming and construction equipment
• Industrial equipment
• Electronics and electronic parts
• Trains
• Plastics, styrofoam and rubber materials
• Furniture
• Metals
• Fertilizers
• Food (meat, dairy, fruits, vegetables, sugars, breads and pastas, beverages, and more)
• Tobacco

While these tariffs are implemented to push the economy in favor of America, these costs may fall to American businesses and consumers in the short term.

What is the China Trade War?

In June of 2019, trade tensions with China soared again after President Trump threatened to levy additional tariffs on $300 billion worth of goods. This recent development came after China failed to comply with previous efforts.

Previously in 2018, the United States imposed more than $250 billion in tariffs on Chinese goods in an effort to fix the way imports and exports have been handled in the past. China was not alone in feeling the burn from these tariffs– they also cost U.S. consumers over 22 billion since the tension began. However, Beijing retaliated by imposing tariffs on $110 billion worth of US goods.

Now in 2019, the two economic giants are continuously increasing “tit-for-tat” tariff charges and costs on exchanged goods while new terms are being worked out. Until an agreement can be reached between the two countries, this means that American consumers and business owners are expected to pay more for the products and materials that are currently upcharged by China, and vice versa.

Agriculture Secretary Sonny Perdue told the media, “This is obviously a short-term solution that will give President Trump time to work on a long-term trade policy and deal to benefit agriculture as well as all sectors of the American economy.”

Tariffs on Tech Place Limitations on Chinese Companies

In another move driven by both trade tensions and national security concerns, the U.S. recently placed five Chinese corporations on a blacklist. This effectively prevents them from accessing American technology, namely microchips, compounding these existing tensions. Among this list is Sugon, a leading supercomputer company, which earned over $1 billion last year alone, and is poised to pioneer the next generation of supercomputers.

Due to these new restrictions, Sugon may encounter difficulties in continuing to push this technology forward.

How These Tariffs Impact US Business Owners

Both national and international companies within different industries are being harmed from this trade war. How can you expect the US China Trade War to affect your business?

New Tariffs: New tariffs have been imposed on billions of dollars worth of products sourced from China and allied countries like Canada and Mexico, including computer chips, cars, aluminum, medical equipment, soybeans, nuts, coffee, vegetables, etc. As a result, the technology, automobile, and agriculture industries will be most impacted by this trade war.

Material Costs: Companies within the automobile, manufacturing, and medical industries are expected to see a drastic 25% upcharge in the costs associated with acquiring materials for production and use. These goods that were previously affordable and easily accessible will now cost more or become inaccessible, so business owners will have to adjust or find other ways to source these materials.

Product Pricing: Goods that have been tariffed or are no longer being imported from China will result in an increase in pricing for business owners, which trickles down to an increase in product prices for consumers. For example, a trade war report conducted by Experian states that the best selling cars in the US will now see up to a $5,000 increase in prices on Jeeps, Toyotas, Fords, and Nissans.

Some U.S.-based tech giants, like Apple, are speaking out against these tariffs on the basis that they favor competitors. Because many Apple products are manufactured in China, these new tariffs would raise prices on these products. But, China-based companies like Huawei that do not have a share in the American market would not be impacted in the same way.

Although this trade war may be temporary, the global economy will be taking a direct hit in several ways in the meantime.

How To Protect Your Business From The Tariff Trade War

Fortunately, there are options available to US business owners that can help to offset these new tariffs and product costs associated with this trade war. Here are three ways to avoid the impact so you can continue to run your company as smoothly as possible:

Small Business Loans: Depending on how long you’ve been in business, you may be eligible to receive business financing to avoid going into debt while you work out the details of where you will receive your goods and how you will pay for them. National Business Capital is one of most reliable SBA loan providers which offers various types of small business loans with flexible repayment terms and low rates.

Business Line of Credit: If you’re worried about how you will afford to operate your business during this period of economic stress, gain peace of mind with a business line of credit. Maybe you don’t need the funds right away, but access to additional finances when the time comes to reorder parts or materials can make or break your company. A business line of credit enables business owners to withdraw and spend money at their leisure however they see fit.

Reduce Current Costs: Assess your current business strategy and expenses in an effort to reduce regular payments and eliminate unnecessary bills. There are cloud-based bookkeeping technologies, payroll software, credit card processors, and utility services that can decrease the costs associated with running your business so you can save thousands of dollars per month that may just wind up going toward purchasing products with these newly imposed tariffs.

Call National To Protect Your Business From Trade War Challenges!

Although the United States and China are working towards reaching an agreement, there is currently no end to this feud in sight. Prepare for any challenges that might arise and impact your company from this trade war before it’s too late by contacting National!

Discuss business financing options with a business advisor on our team by calling (877) 482-3008 or submitting a 1-minute online application today.