Tariffs and Business Performance

Since the beginning of Trump’s presidential term, a great deal of business news has emerged shedding light on the effects of tariffs and trade wars. The recent Trump tariffs have attracted analysis and speculations regarding large industries and financial markets. The tariffs targeted agricultural goods such as dairy and liqueurs; hence, EU nations who are major exporters of the good into the US suffer major implications (Swanson, 2019 par. 3). Besides, the tariffs put employees in affected sectors at risk of losing their job. Notably, tariffs increase the cost of import or exports. A tariff may hinder business operations. Hence, all employees in big, SMEs and small businesses are face risk of losing their jobs, and unemployment index increases (Anderson, 2019). The risk face employees in both the country imposing the tariff and the victim, since the tariff hinder supply capability and the purchasing power. For instance, trade experts expect Parmesan cheese consumption in the United States to decrease by 80% or 90% (Gifford, 2019 par. 8). However, they must maintain their profitability and revenues in the US market despite the tariffs. Businesses must understand that tariffs are inevitable seismic events in the international markets, usually motivated by politics (Fetzer and Schwarz, 2019 par. 5). Since both the importer and exporter are affected by tariffs, each should device a business strategy that addresses the pricing, inventory management, tuning of profit margins.

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Tuning costs entails identifying the costs that the business can absorb and cover and the optimum expenditure that would result in an ideal price. The process is part of strategic management, and business owners may utilize cost-volume-profit calculators to identify optimum metrics for sustainable business (Lulaj and Iseni, 2018 p.100).  Besides, since the trade war through tariffs primarily affects prices of imports and exports (Carvalho, Azevedo and Massuquetti, 2019 p.3); a business may evaluate its pricing strategy using the CVP. For instance, a cheese company may identify the value-price index for their cheese before varying the price for their products.

In some cases, tariffs might not affect the product as expected or said in business news. For instance, cheese affected by Trump’s tariffs are considered luxury in the US; hence, rising their prices does not change their market status. Hence, businesses may allocate more resources to R&D and increase the price slightly to alight into the market averages. Lastly, a business should manage their inventories, making sure to reduce loopholes for misuse of resources, or missing opportunities. That is, all export or import goods should be strategically planned to sell at certain market prices within a given period (Them), 2019 par.16). That would demand heavy investment in R&D and genius analysis of the CVP calculations.

Bibliography

Anderson, S. (2019). Tariffs Are Costing Jobs: A Look At How Many. [online] Forbes.com. Available at: https://www.forbes.com/sites/stuartanderson/2018/09/24/tariffs-are-costing-jobs-a-look-at-how-many/#4597c34f7b26 [Accessed 13 Dec. 2019].

Carvalho, M., Azevedo, A. and Massuquetti, A. (2019). Emerging Countries and the Effects of the Trade War between the US and China. Economies, 7(2), p.45.

Fetzer, T. and Schwarz, C. (2019). Tariffs and Politics: Evidence from Trump’s Trade Wars. SSRN Electronic Journal.

Gifford, C. (2019). Cheesed off: how US tariffs are harming the EU dairy market. [online] Europeanceo.com. Available at: https://www.europeanceo.com/home/featured/cheesed-off-how-us-tariffs-are-harming-the-eu-dairy-market/.

Lulaj, E. and Iseni, E. (2018). Role of Analysis CVP (Cost-Volume-Profit) as Important Indicator for Planning and Making Decisions in the Business Environment. European Journal of Economics and Business Studies, 4(2), pp.99-114.

Swanson, A. (2019).  U.S. to Tax European Aircraft, Agriculture and Other Goods. [online] Nytimes.com. Available at: https://www.nytimes.com/2019/10/02/us/politics/airbus-tariffs-wto.html [Accessed 13 Dec. 2019].

Them), S. (2019). How to Prepare to Manage Tariffs for Your Business. [online] Business News Daily. Available at: https://www.businessnewsdaily.com/10931-small-business-tariff-impact.html [Accessed 13 Dec. 2019].

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