Does your business have a Plan B for the Trump tariffs?

The Hill

3 days ago

I have a client in New Jersey who manufactures industrial films. A big source of their supply comes from two Chinese companies. You would think with President Trump's tariffs they would be suffering, right?
Luckily, the owner of the company (and her partner) paid attention. Going all the way back to 2023 they knew — like we all knew — that the presidential election would be tight. By mid-2024 it got even tighter. And what was then-candidate Trump saying back then?
He was promising significant tax cuts but providing no answers as to how they would be funded. He was promising to overturn many of the Biden administration's regulations, from environmental to DEI to overtime pay. He was promising to deport millions of undocumented immigrants. But more importantly to my client, Trump was planning on handing down big tariffs, especially targeted at China. And they took him seriously.
They're not Trump supporters, but they are pragmatists. So back in 2023 they started searching for alternative suppliers.
They reached out to nonprofits like the World Trade Center Association and Small Business Development Centers, and they got help from the International Trade Administration. They traveled to India, Malaysia and Brazil. They realized that if Trump was elected, their main source of supply would be seriously threatened. They also understood that the Biden administration was no big fan of China either. You can't run a business that's dependent on such a precarious source of supply that it could be seriously disrupted by a single politician. So they took action.
Unfortunately, some business owners didn't.
The media has been reporting about small businesses that are now suffering because of Trump's tariffs. A steel products manufacturer in Salt Lake City says his company could be 'devastated.' A flower shop owner in California that buys products from South America laments the significant increase in her costs. Two Iowa business owners, who buy 75-80 percent of their products from overseas, are looking at a 'nightmare' holiday season. According to a CNN report, a high-end electronics manufacturer has had to cut employee hours, and a guitar seller fears the 'mass extinction' of small businesses.
I feel bad for these business owners, but life isn't fair. And history repeats itself. Businesses, regardless of their size, are always at the mercy of government interventions. Today is no different.
Which is why my client and her partner, having read history, took Trump's tariff warnings seriously. They're smart. And like the many other smart business people I have met, they share one common characteristic: They're always looking ahead. They always have a Plan B. They diversify.
Investors know that too much reliance on one party creates risk. There's a reason the SEC requires that companies disclose in their financial statements when a customer represents more than 10 percent of their business. The flower-seller, guitar maker and electronics manufacturer all relied too heavily on foreign supply for their businesses. Fair enough — this model has, until now, worked well for them. But it's a risky model when you rely too much on one source of supply for your livelihood — particularly when you have new leaders telling you that they're going to take actions that will put that source of supply in jeopardy.
Of course that's easier said than done. But, like my New Jersey client, those small-business owners should also have been looking ahead and mitigating their potential risk. My client saw the writing on the wall two years ago and took steps to prepare. And they weren't the only ones.
The chief strategy officer for a robotics company, for example, said he always 'plans ahead 9-12 months' and had a 'plan B' to produce necessary hardware outside of China, where it was operating before. 'Maybe this is also a good time to say, 'Let's not put all the eggs in one basket,'' he told CNN, 'and, you know, start looking on other kind of territories that will reduce the risk for us going forward.'
According to an NPR report, a Maryland business owner — a former Marine (no surprise) — has been stockpiling products for months in advance of looming tariffs, admitting that his 'warehouse was bursting.'
But then there are the countless other small-business owners who just like to keep their fingers crossed and hope against hope that nothing bad will happen. That's no way to run a business, especially when there are employees with families who are relying on your decisions.
So do I feel bad for those business owners suffering under Trump's tariffs? I do. But this is the game you play when you run a business. You take risks, you reap rewards. And if you don't plan ahead and diversify, you suffer the consequences.
Gene Marks is founder of The Marks Group, a small-business consulting firm.