Looking at the impact of global trade tariffs on SMEs
As the global trade landscape constantly evolves and undergoes serious transformation, it is impacting small businesses worldwide by creating barriers of entry, impacting costs and affecting supplier relationships. While a lot of these market dynamics seem to be taking place on a macro-level, it is important for every SME to understand the trickle-down effect it can have on you via your industry, your partners or your suppliers.
Challenges and impact of trade tariffs
Seismic shifts in trade tariffs anywhere in the world can impact your small business in ways that you might not anticipate. For instance, companies that may be importing manufacturing materials such as aluminum or steel might be subjected to a hike in import tax. As a result, SMEs globally are being forced to diversify their supplier networks and renegotiate agreements or payment terms.
Trade compliance and staying on top of regulation is another area that SMEs often overlook. Whether customs clearance or import fines/penalties, it is important to stay ahead of the curve and not shy away from the changing requirements.
The way moving forward
So, how does an SME navigate its way through the new realities of global trade? We recommend three areas that SMEs can take control of –
a) Integrate technologies that enable trade: A report by McKinsey & Company and the World Government Summit outlined that while trade on digital platforms still represents a very small share of overall economic activity in most countries, the growth potential is high. As global penetration deepens, trade based on digital platforms is likely to grow faster than global GDP. International e-commerce is just beginning to penetrate a number of regions with growing consumer classes, such as Latin America, Africa, and the Middle East–here the room for future growth is extensive. In addition to having a positive impact on trade, these platforms will likely continue to increase the diversity of elements participating directly in international trade, as SMEs as well as individuals take advantage of new opportunities to offer products and services to international markets.
a) E-commerce or digital trade will come to the forefront: In line with the previous point, e-commerce is increasingly becoming an easy and efficient way of global trade between emerging markets. Vinay Mendonca echoes this sentiment in his expert commentary for UPS: “At a time of global trade tensions, international cooperation around digital trade can help give the global economy a shot in the arm. Consumers and businesses alike should hope for a successful outcome to the negotiations. Consumers would benefit from cheaper goods and services while lower costs would enable SMEs to export far more widely, supporting higher-wage jobs and economic growth.”
b) Digitization of processes to become more agile: We know that the long-term future of trade will continue to be shaped by global forces and policy changes are to be expected. Staying agile by digitizing core processes and workflows can help your SME quickly implement any new regulations without much disruption.