Tariffs and trade wars: How businesses can prepare for the storm

Fast Company

18-06-2025

I've lived through the chaos that tariffs and trade wars can unleash. If you run a business, invest in global markets, or simply care about the cost of living, you can't afford to ignore them.
Tariffs may sound like policy jargon, but the ripple effects hit everything from your bottom line to the checkout line. Let's break down what tariffs are, the pros and cons of their use, and, more importantly, how to prepare when a trade war erupts.
WHAT ARE TARIFFS?
Tariffs are taxes placed on imported goods. Governments use them to make foreign products more expensive, thereby giving domestic producers a price advantage. Sounds smart in theory—but the reality is far more complicated.
THE PROS OF TARIFFS
1. Protecting domestic industries
One of the biggest advantages of tariffs is that they shield homegrown businesses from cheaper foreign competition. When a country imposes tariffs on imported steel, for example, it allows local steel manufacturers to remain competitive—even if they can't produce at the same low cost.
2. Encouraging local production
Tariffs can serve as a catalyst for companies to source and produce locally. This boosts domestic employment and helps create self-sufficiency in key industries.
3. Leverage in negotiations
Tariffs can be used as a bargaining chip. They give governments leverage when negotiating trade agreements, especially when other countries have unfair trade practices.
THE CONS OF TARIFFS
1. Higher consumer prices
Let's not sugarcoat it: Tariffs raise prices. When import costs rise, companies pass those costs on to consumers. That new washing machine or car you were eyeing? It's going to cost more.
2. Retaliation
Trade wars don't happen in a vacuum. When one country imposes tariffs, others retaliate. Suddenly, your exports are getting hit with taxes abroad, and your once-thriving international sales dry up.
3. Supply chain disruption
If you're sourcing components from multiple countries, tariffs can wreck your entire production line. Suddenly, your materials are delayed, your costs spike, and your margins evaporate.
4. Uncertainty for business planning
I've seen companies delay major investments, hiring, and expansion plans simply because they couldn't predict where the next tariff would land. Uncertainty is toxic for growth.
HOW TO PREPARE FOR A TRADE WAR
As someone who believes in being proactive rather than reactive, I've developed a few strategies that can help any business or investor prepare for trade tensions.
1. Diversify your supply chain.
Don't rely on one country for critical materials or products. Spread your sourcing across multiple regions to reduce risk. Yes, it may cost more upfront—but it's a hedge against future disruption.
2. Monitor tariff trends and political signals.
You need to keep your eyes on government policy like you watch your bottom line. Changes in administration, diplomatic relations, or economic pressure points can all signal that a trade war is brewing.
3. Lock in long-term contracts.
When tariffs are looming, negotiate long-term deals with suppliers at current prices. It can save you a fortune when costs spike overnight.
4. Optimize operational efficiency.
In times of uncertainty, lean operations matter. Invest in automation, streamline processes, and cut waste. The leaner you are, the more you can absorb shocks without bleeding out.
5. Build cash reserves.
Trade wars can slow sales and inflate costs. Cash flow becomes king. Make sure you've built a financial cushion to ride out periods of turbulence.
6. Evaluate your pricing strategy.
If tariffs raise your input costs, decide whether to pass them on to customers or absorb them. This is a strategic decision that depends on your brand, market position, and customer loyalty.
7. Consider reshoring or nearshoring.
If the numbers make sense, bring production closer to home or to stable, allied countries. It reduces exposure to unpredictable international policies and shortens your supply chain.
FINAL THOUGHTS
Tariffs and trade wars are part of the modern global economy, like it or not. Some view them as necessary protection. Others see them as economic warfare. The truth lies somewhere in between. I don't believe in waiting around to see which way the wind blows. I believe in staying prepared.
You don't need to panic, but you do need a plan. Evaluate your exposure. Understand your risks. Diversify your operations. Then, when the next trade war hits—and it will —you won't just survive it. You can be one of the few standing tall in the storm, while others scramble to catch up. That's the difference between playing defense and playing to win.