The Ecomcrew Ecommerce Podcast E257: What does the latest tariff increase mean for your ecommerce business?
Dave’s back on the podcast with me to talk about one of our favorite topic - tariffs (insert sarcasm). As anyone caught in this plight will know, the US and Chinese governments have reached another impasse in the ongoing trade talks. This resulted in the Trump administration raising tariffs from 10% to 25% on $200 billion worth of goods imported from China effective this month.
Here are some key points from our discussion.
How are things looking?Both sides of the fence are playing it tough in this trade war for distinctly different reasons. Trump believes he’s a great negotiator and is convinced that he will sway the Chinese and bring back manufacturing jobs to America. The Chinese, on the other hand, has learned not to kowtow to any country that perceives itself as a ‘superpower’. It stands firm on its position and will retaliate if necessary to push their trade agenda forward.
What are the possible implications?On June 17, 2019, the implementation of 25% tariffs on the remaining $300 billion worth of goods (List 4 | the final tranche) will be reviewed. If a trade deal isn’t reached, it could take effect late in the year.
If Chinese imports are tariffed to the hilt, there would be inflationary consequences.
How does an ecommerce company like yours prepare for this?
- Monitor growth
- Focus on profit instead of top-line growth
- Make sure cash is being used as effectively as possible
- Take a closer look at your debt and identify ways of clearing it with a lesser impact on your bottom line
If your products have a low-profit-margin, increasing prices is inevitable. It’s also good to monitor invoices from your Chinese manufacturer and determine how you can cut back on those.
And if this mess with tariffs has taught us anything, it’s to diversify, diversify, diversify. Source from different countries. China might be a manufacturing powerhouse but other countries like have their strengths too. Vietnam, for instance, produces great textile products.
The situation is downright frustrating. But I hope that the insights shared in this episode can still be helpful to all ecommerce sellers out there impacted by the enforced tariffs increases. If you have questions or comments, I’d love to know. Please leave them in the comment section below.
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