My plan for surviving a trade war

For most businesses, daily operations do not change based on who is in political power. Companies are primarily affected by their own decisions, not by the government.

However, occasionally there are exceptions. Here in the U.K., it is Brexit. In the U.S., it is the trade tariffs and the threat of the President to close the Mexican border. Both have a similar impact. If it cannot rely on critical products at predictable prices, a company suffers and may even collapse.

That’s why cross-border commerce is so critical. Even the smallest businesses depend — directly or indirectly — on importing or exporting manufacturing parts, components, food, medicines, and employees with other countries. And it’s all at risk when governments do not provide clear signals and plans, with timetables.

If it cannot rely on critical products at predictable prices, a company suffers and may even collapse.

Surviving a disruption

So what should a business do? For starters, lobby your representatives. They are supposed to represent you. But it may not be effective. If you live in a district where one party is always elected, representatives are likely to be beholden to insiders who select them rather than to voters. Still, nothing is lost by a letter or two.

The threat of goods no longer crossing the border is real in the U.K. and the U.S. — even if it’s temporary. Again, Brexit is the threat in the U.K. In the U.S., it’s tariffs and, also, a border closing with Mexico. It is unlikely that trade would stop for an extended period. For the sake of argument, let’s assume two weeks.

How would your business survive the disruption? First, look at your product suppliers. Try to quantify the risk of the supply being disrupted. For items purchased across borders, the risk is high. For purchases within the country, the risk may be lower, but it is still there, especially if the supplier depends on the cross-border trade.

Second, it is not just stock to worry about, although that it is the obvious problem. There may be supplies, such as packages, bottles, ink, and toner, that are affected. Sometimes you are surprised by what can stop you trading.

Once you have a list of products that are at risk to be disrupted or in short supply, develop a plan. Are there alternatives that do not rely on trade? Do you need those items? Can you afford to stock up and, if so, how much would it cost? It may be a worthwhile investment to temporarily overstock.

An opportunity?

There may also be an opportunity here. For example, if you stock an imported item, what will happen to that supplier if the border closes? It would be unable to sell the stock to you and other domestic businesses as it cannot ship it across the border. What if you offered to store the inventory for the supplier, and then forward the stock to other domestic sellers (for a fee)?

Then there are sales. How much of your sales cross the border? Would your customers be prepared to wait? Are there reasonable (and legal) ways to ship to your customers without crossing the closed border, such as via a third country? Or are there freight forwarders on the other side of the border that could warehouse some of your best-selling stock?

In short, develop a plan and make sensible provisions. Try to take advantage of the political instability. You may be in a position to guarantee delivery and hence increase your price while your competitors are scrambling, looking for that vital product or paying double.