Effects of Tariffs on International Business Practices

I have a new first question for every CPG founder I speak to: How are you (or might you be) affected by the tariffs? Unacceptable answers: ❌ "We're not worried about it." → You should be. Tariffs impact pricing, margins, and supply chain risk. If you haven't analyzed them, that's a red flag. ❌ "I don't know yet." → You don't need perfect answers, but you should be able to estimate based on your current materials and supply chain, and you absolutely must have a plan to get them. ❌ "We'll figure it out if/when it happens after the 90 days." → That's reactive. Investors fund proactive founders who get ahead of problems. ❌ "Our manufacturer/distributor/importer/supplier will handle that." → You're responsible for your unit economics. Push for real answers. You can't wave this away. Acceptable answers are: SOURCING MATERIALS: -My raw materials are sourced from [country], and the current tariff is X% and possibly going to Y%. This will change my margins from A% to B% in a worst-case scenario. - I source my materials from an importer/distributor/supplier, and I've asked them for exact figures. Early calculations show a decline in my gross margin from X% to Y%. MANUFACTURING: - We manufacture in the US and aren't directly impacted, but our packaging components are sourced from [country] and will increase costs by $C. - We're currently offshore. We've run models on relocating to a US partner. Costs would rise by $C per unit and delay production by 4–6 weeks. - We manufacture offshore and plan to continue doing so. Our landed cost will increase by $C per unit due to new tariffs. We've modeled this into our margin assumptions and adjusted pricing, sourcing, and volume targets accordingly. EFFECT ON RETAIL PRICE: - We're raising prices to protect margin, and we believe we can hold demand because we are a premium product/were low to begin with/have a sticky customer base. But we're reducing forecasted units by X%, and we'll hit profitability Y months later. - We're holding prices and accepting lower margins. It's going to slow our path to scale by Z months, and I've updated our capital plan accordingly. ALTERNATIVES: - We've researched new suppliers/manufacturers in A, B, and C. Our best options are [A, B, or C] in the short term and [A, B, or C] in the long term. We've implemented a quarterly sourcing review process to avoid surprises and stay proactive. CASH FLOW IMPACT - Tariffs increase our landed cost by X%, which changes our inventory strategy. We now need $Y more in working capital per order cycle. This shortens our runway by Z months and changes our next raise to A. Of course, these aren't the only acceptable answers, but please note what the acceptable answers have vs. the unacceptable: - Detail - Specific Data - Research-Backed Estimates If you haven't done this work, I suggest preparing this before pitching. PS - Reach out if you need a good fractional CFO recommendation to help you with this. I have several.

Don't just believe what you're told about tariffs. Do your own homework. The real facts impact your wallet. Imagine the world's economy as a global market. Every country is a vendor, bringing its goods, from advanced electronics and designer clothes to agricultural products and essential raw materials. As a consumer or a business in the U.S., you have access to a vast array of products, both "Made in the USA" and imported. A tariff is like a "cover charge" or an "entry fee" that the U.S. government imposes on products before they are allowed into the American section of this global market. This fee is paid by the U.S. company or person importing the goods. So, if a circuit board from South Korea typically costs a U.S. electronics manufacturer $50, a 20% U.S. tariff on that circuit board means it now costs the U.S. manufacturer $60 to import it. By making the circuit board more expensive, the U.S. government hopes American electronics manufacturers will buy a U.S.-made circuit board instead (if available). The reality is: You pay more for goods and services. 👉That smartphone with the South Korean circuit board? The U.S. electronics company will likely pass on the extra $10 (or more) tariff cost to you. So, the price you pay for that phone goes up. This applies to a wide range of goods, from cars and appliances to clothing and food. 👉Many "Made in the USA" products still rely on imported components or raw materials. If a U.S. furniture maker uses imported wood, a tariff raises their costs, and they'll likely pass that on to you in the price of the furniture. If the "cover charge" makes certain imported goods too expensive, U.S. retailers might stop carrying them. This reduces the variety of products available to you in stores and online. With less competition from foreign goods, U.S. companies might face less pressure to innovate, improve their products, or lower their prices. When the U.S. imposes a "cover charge" on goods from another country, that country often retaliates by imposing its own "cover charge" on U.S. products. This makes U.S. exports more expensive, leading to reduced sales for American companies. This directly hurts U.S. industries that rely on exports, leading to lower profits and potential job losses in those sectors. Companies often source parts and assemble products from many different countries to be efficient and cost-effective. Tariffs disrupt these global supply chains, forcing businesses to find new (often more expensive or less efficient) suppliers or even move production facilities, leading to costly complications and delays. Tariffs are essentially taxes on imports that are largely paid by U.S. consumers and businesses. They lead to higher prices, fewer choices, increased costs for American companies, and the risk of triggering retaliatory tariffs that harm U.S. exports and jobs, ultimately making the overall U.S. economy less efficient and competitive.

The Impact of American Tariffs on Canada and Mexico: A Deep Dive into the Automotive Industry The recent imposition of tariffs by the United States on imports from Canada and Mexico has sent ripples through various sectors, with the automotive industry being one of the hardest hit. These tariffs, which include a 25% tax on goods from Canada and Mexico, have far-reaching implications for the industry, affecting everything from production costs to consumer prices. The automotive industry is highly interconnected, with parts and components often crossing borders multiple times before a vehicle is fully assembled. The new tariffs mean that each crossing incurs additional costs, which can quickly add up. For instance, the tariffs could increase the cost of manufacturing a vehicle by anywhere from $4,000 to $12,000, depending on the type of vehicle and the extent of its reliance on imported parts This increase in production costs is likely to be passed on to consumers, leading to higher prices for new vehicles. Analysts predict that the price of new cars could rise by as much as 10% This price hike could make new vehicles less affordable for many consumers, potentially driving them towards the used car market, which may see increased demand as a result. Broader Economic Implications The tariffs are not just a concern for automakers; they also have broader economic implications. Higher vehicle prices could lead to reduced sales, which in turn could result in job losses within the industry. The tariffs could also disrupt supply chains, leading to production delays and further increasing costs. Moreover, the retaliatory tariffs imposed by Canada and Mexico on American goods could exacerbate the situation. Strategies for Cost Reduction Short-Term Measures: 1. Diversifying Supply Chains: Automakers can look for alternative suppliers in countries not affected by the tariffs. This could help reduce the immediate impact of the tariffs on production costs.  2. Increasing Efficiency: Implementing lean manufacturing techniques and optimizing production processes can help reduce waste and improve efficiency, thereby lowering costs Long-Term Measures: 1. Investing in Automation: Automation can help reduce labor costs and improve production efficiency. By investing in advanced manufacturing technologies, automakers can reduce their reliance on imported parts and lower overall production costs  2. Developing Local Supply Chains: Building a more localized supply chain can help reduce the impact of tariffs and other trade barriers. 3. Innovating Product Design: By designing vehicles that are less reliant on imported parts, automakers can reduce their exposure to tariffs. This could involve using more locally sourced materials or developing new manufacturing techniques The road ahead may be challenging, but with innovation and strategic planning, the industry can navigate these turbulent times and emerge stronger. Your comments are indeed welcome!

APCIA has been informing federal policymakers about the potential impact of tariffs increasing automotive repair costs, home rebuilding, and ultimately auto and property insurance rates. According to APCIA, these tariffs could increase claim costs by an estimated $30-$60 billion for personal auto insurance alone over a 12-month period. Here are some of my concerns about the broader macro-economic and geo-political impacts of escalating tariffs on our marketplace. 1) The global impact of these tariffs is shifting the world's divisions from primarily geopolitical alliances to economic trading blocs, with friction arising among our closest allies from Canada to Japan. The line between allies and adversaries has been blurred, as strategic ideological partnerships no longer guarantee exemption from economic rebalancing among countries.  2) The emerging economic friction complicates the challenges of building an anti-China coalition. For example, tariffs on Southeast Asia (SEA) undercut a decade of U.S. policy aimed at reducing regional reliance on China. Countries like Vietnam and Indonesia -- once seen as alternative supply chains for Western businesses seeking to diversify away from China -- are facing tariffs of 30-50 percent. Those tariffs punish firms that relocated from China to SEA and will greatly undermine efforts to shift the alignment preferences of Southeast Asian states away from China and towards the West. 3) The challenge for U.S. treaty allies is also significant. I doubt Japan will respond aggressively, given its limited strategic alternatives. Still, the harm to the domestic constituencies of U.S. allies -- such as their exporters and industrial manufacturers -- will call into question their security cooperation with the U.S. 4) The sudden imposition of tariffs may also accelerate efforts by U.S. allies to expand alternative economic partnerships to hedge against a less-reliable United States. 5) Even if tariffs are reversed quickly -- though that seems unlikely -- it could reinforce the growing perception of the U.S. as an unreliable or self-interested actor.  The insurance industry will be deeply impacted by the tariffs. Many insurance cost inputs -- particularly steel, lumber, and heavy equipment needed for auto and home repairs -- are globally sourced. While tariffs may not lead to a direct one-to-one increase in claims or construction costs, especially if exchange rates absorb part of the impact, they still introduce friction: delays, price volatility, and inflationary risk across supply chains. For insurers, that translates into greater uncertainty around claims severity, reinsurance pricing, and asset planning. The risks to our industry -- and the broader economy -- are clearly multi-dimensional. When domestic policy shifts significantly, it's not only the announcements themselves but also the market's response that ultimately determines the overall impact.