Tariffs and Business Performance

Since the beginning of Trump’s presidential term, a great deal of business news has emerged, shedding light on the effects of tariffs and trade wars. The recent Trump tariffs have attracted analysis and speculations regarding large industries and financial markets. The tariffs targeted agricultural goods such as dairy and liqueurs; hence, EU nations exporting the goods to the US suffer significant implications (Swanson, 2019 par. 3). Besides, the tariffs put employees in affected sectors at risk of losing their job. Notably, tariffs increase the cost of imports or exports.

A tariff may hinder business operations. Hence, all employees in big, SMEs, and small businesses risk losing their jobs, and the unemployment index increases (Anderson, 2019). The risk face employees in both the country imposing the tariff and the victim since the tariff hinder supply capability and the purchasing power. For instance, trade experts expect Parmesan cheese consumption in the United States to decrease by 80% or 90% (Gifford, 2019 par. 8). However, they must maintain their profitability and revenues in the US market despite the tariffs. Businesses must understand that tariffs are inevitable seismic events in the international markets, usually motivated by politics (Fetzer and Schwarz, 2019, par. 5). Since both the importer and exporter are affected by tariffs, each should devise a business strategy that addresses pricing, inventory management, and profit margins.

Tuning costs entails identifying the costs that the business can absorb and cover and the optimum expenditure that would result in an ideal price. The process is part of strategic management, and business owners may utilize cost-volume-profit calculators to identify optimum metrics for sustainable business (Lulaj and Iseni, 2018, p.100). Besides, since the trade war through tariffs primarily affects the prices of imports and exports (Carvalho, Azevedo, and Massuquetti, 2019, p.3), a business may evaluate its pricing strategy using the CVP. For instance, a cheese company may identify the value-price index for their cheese before varying the price for their products.

In some cases, tariffs might not affect the product as expected or said in business news. For instance, cheese affected by Trump’s tariffs is considered a luxury in the US; hence, rising prices do not change their market status. Hence, businesses may allocate more resources to R&D and increase the price slightly to alight into the market averages. Lastly, a business should manage its inventories, reducing loopholes for misuse of resources or missing opportunities. All export or import goods should be strategically planned to sell at specific market prices within a given period (Them, 2019, par.16). That would demand heavy investment in R&D and genius analysis of the CVP calculations.