Here’s what we know so far…
The following tariffs went into place last Tuesday.
1 – A 25% tariff on goods and a 10% tariff on energy from Mexico and Canada
2 – A 10% tariff on goods from China
3 – Potential tariffs on cars were suspended for 30 days
The February numbers for the Consumer Price Index will be published Wednesday Morning. Economists are expecting a 0.3% increase. The Producer Price Index numbers come out the following day with another 0.3% increase expected.
Please remember that this potential increase is from February before the new tariffs went into place. Imagine what could happen in the next three or four months.
Let me leave you with this…
This isn’t about politics or if what our new administration is doing is right or wrong. Where you land on this issue depends on your own political beliefs.
This is about pricing and maintaining your margins.
The Ripple Effect
For those who don’t understand what a tariff is, it’s a tax on foreign imports paid by the US Entity importing the goods. As an example, if your company imported plastic cups from Mexico at $10 per box, in order to get that box through customs, it will now cost $12.50.
1 – If this was your business, in order to maintain your margins, you’d have no choice but to pass the increased cost onto your consumers.
2 – If you’re importing raw materials from Canada like wood or aluminum to manufacture a product, the end result would be the same. In order to maintain your margins and pay your bills, you’d have no choice but to raise your prices.
3 – Energy is something that we all use. When those prices go up, it effects all of the companies inside the Daisy Chain of Manufacturing. If there are four companies involved in producing a particular product, then all four will need to raise their prices adding much more to the ultimate cost of the product at a retail level.
4 – At the very least, in any inflationary period you have to pay your people more. As prices go up, their cost of living increases as well. You’ll need to increase your wages just to keep up with your competitors so that you don’t lose employees.
Tariffs create a Ripple Effect as the pricing increases go through complex supply chains that are very difficult to predict. These effects can make it impossible to plan your pricing strategies as a result.
But if you don’t do something about your pricing, the only person who’ll feel it is the entrepreneur. These sorts of issues can drive businesses into insolvency.
Before my more radical readers on the left or right start sending me hate emails, this isn’t about right or wrong. I’m not supporting or condemning anything.
I’m telling you to watch your monthly financial statements and your bottom line.
No one wants to talk about raising prices. It isn’t a comfortable conversation and not a good time on a Saturday Night.
But it looks like it may be necessary. Be careful.
The company you save may be your own.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
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