Tariffs are taxes imposed by a government on imported goods and services. In principle, they can be used to raise revenue, protect domestic industries or exert political leverage over other countries. By increasing the cost of imported goods, tariffs make them less attractive to domestic consumers, encouraging them to buy locally produced items instead of imports. While tariffs can promote certain industries, they raise prices for all domestic consumers and can ultimately cause the protected domestic industries to stop innovating due to the profits they make in the short  term behind the protective price wall.

For American companies, tariffs can have mixed effects. On the one hand, they can benefit from reduced competition from foreign imports, potentially leading to increased sales and market share. On the other hand, companies that rely on imported materials or components will face higher costs, reducing profit margins and/or driving price increases for their customers. Additionally, retaliatory tariffs from other countries can hurt American exporters by making their products more expensive and less competitive in foreign markets.

Due to the complexity and integration of the modern global economy, most U.S. firms will be increasingly stressed financially. To mitigate the risks associated with tariffs, our customers can consider using trade credit insurance. This type of insurance helps protect businesses from the risk of non-payment by their customers, helping ensure they receive payment even if a customer defaults due to insolvency or other financial difficulties. By covering outstanding receivables, trade credit insurance helps companies maintain cash flow and financial stability, even in uncertain economic conditions. This allows businesses to extend credit to customers with greater confidence, knowing they have protection in place against potential losses.

In summary, while tariffs can provide some protection for domestic industries, they also pose challenges for companies in virtually every sector of the economy. By utilizing trade credit insurance, businesses can help safeguard their financial health and operations despite the uncertainties introduced by tariffs. This proactive approach helps companies navigate the complexities of global trade and maintain a competitive edge in the market.

Property & Casualty Team