What Are Tariffs?
Tariffs are taxes or duties imposed on imported goods by a government to make foreign products more expensive and less competitive compared to domestic alternatives.
What Impact Can Tariffs Have?
On 12th March 2025, the US placed a 25% tariff on all aluminium and steel products from Australia. If you’re not in this industry, it may seem like it’s not an issue for you… However, the question is: what’s next?
This could be just another negotiating tactic from Trump and possibly a temporary state of affairs. It’s very hard to predict what Trump will do next, but some planning and preparation for potential impacts is a wise idea.
The impact of tariffs would be to make your product/service less competitive with US competitors (the whole point of tariffs!) and therefore impact your export revenue. Conversely, if Australia places tariffs on other countries, you could find yourself with many more customers seeking out your product/service and need to ramp up quickly.
What Can You Do About Tariffs?
It’s a good idea at any time to do a SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis, with an emphasis on the ‘Threats’ being potential tariffs on certain products and services.
If a tariff were to be placed on your product/service that you export to the US, what would you do? Some options to overcome this could be:
- Seek alternative markets either overseas or focus more on domestic business.
- Find ways to reduce your costs and pricing in order to compete with foreign competitors, perhaps using AI/Robotics.
- Pivot towards other products/services that carry fewer tariffs.
- Lobby government via your Industry Association to approach the US to remove/reduce tariffs.
- Move production to countries with lower tariffs.
- Add more value to your product/service to make them ‘premium’ and therefore be able to charge a higher price.
Now is a great time to consider what your business delivers and how you can set it up to cope with potential headwinds from not just tariffs, but also a potential recession.
Consider:
- What are your strengths and how can you build upon them?
- What are your weaknesses and how can you overcome them?
- What are your opportunities and how can you take advantage of them?
- What are your threats and how can you guard against them?
Summary
To sum up, it’s all about being nimble and efficient in how you go about your business. When we think back to COVID, this is exactly what businesses that survived did well. They pivoted towards different ways of doing things—think of restaurants and cafes that started delivering to customers to keep going.
The outcome of these questions will lead to the need for business planning. Before heading off in a particular direction, it’s important to do the modelling to see what could be the outcome of particular decisions and actions. Without doing this, you could end up in a worse situation than before. It really pays to have a logical thinker on board to plot it all out in black and white, so that you can make informed decisions and financial plans.
If you need outside funding, such as loans or investment, you will need to produce financial plans to support applications. Investors and lenders are going to be much more cautious in the current economic climate.
CFO On Call is here to help. Contact us for a ‘No obligation’ chat about your situation today!
