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Employers should understand the tariff evolution – from a tax to any potential trickle-down effect on the workforce. Now is the time for businesses to review and evaluate current processes impacting everything from how to manage costs to how to maintain your edge in the constant battle for talent.

What Is a Tariff?
A tariff is a tax placed on imported goods and services from an exporting country. Tariffs are paid to the government by the businesses importing the products and can be used to:

• Raise revenue for the federal government
• Serve as protection for certain U.S. industries and manufacturers
• Be a tool for trade negotiations

Who Pays Tariffs?
Tariffs are paid to the government by the businesses importing the products. Businesses trying to stay in operation might not want to incur those higher costs on their own. So, the likely next step for businesses is to pass the cost of the tariff on to consumers in the form of increased prices.

Tips To Manage the Costs of Tariffs
Here are a few tips to help your business clients manage the costs associated with tariffs:

• Use free trade zones or bonded warehouses: Employers will not incur the tariff until goods shipped to these places are removed from the premises.
• Work with organizations familiar with trade: Organizations, including the Export Import Bank and Small Business Association, provide free consulting on overseas trade.
• Review your supply chains: With the potential for renegotiations to change the landscape, employers can lessen the uncertainty by developing three- to -six-month alternative strategies for goods provided by key vendors.
• Rethink your overhead costs: If employers can reduce or eliminate unnecessary expenses – the money saved can be used to lessen the price increase passed on to consumers.

If tariffs impact your ability to grow the business in the short term, business owners have options, like considering a hiring pause.  During this time, employers can look for ways to develop skills from within their current teams.

Read the full article on tariffs at go.paychex.com/micpa-may25