The Big Picture: Why Tariffs Matter to YOU

As an entrepreneur, you might be in a situation where you’ve just secured your first big international client. Your products are ready, contracts signed, and you can almost feel the boost in revenue. But then a “tariff” you didn’t even know existed adds 20% to your costs overnight. Suddenly, your profit margin is gone, and your dream deal feels like a nightmare. For many entrepreneurs, especially SMEs venturing into global markets, tariffs are like hidden speed bumps—unexpected, expensive, and capable of throwing your growth plans off track. However, if you understand them, you can navigate them strategically—and even use them to your advantage.

What Exactly Are Tariffs?

At their core, tariffs are taxes on goods when they cross a country’s border.

• Import tariffs are charged when goods come into a country.
• Export tariffs are charged when goods leave a country (less common, but still used in some sectors).

They’re typically calculated as a percentage of the product’s value (ad valorem tariff) or as a fixed fee per unit (specific tariff). Think of tariffs as the toll booths of global trade—you can cross the bridge, but you have to pay.

Why Governments Use Tariffs

Governments don’t just impose tariffs for fun. There are strategic reasons, including:

• Protecting Local Industries – By making imports more expensive, tariffs give local producers a better chance to compete.
• Raising Revenue – Especially in developing economies, tariffs can be a key source of government income.
• Negotiating Leverage – Countries may use tariffs to pressure others into trade deals.
• Addressing Trade Imbalances – If a country imports much more than it exports, tariffs can slow that flow.

Tariffs are political tools as much as economic ones. A change in government policy or international relations can flip your cost structure overnight.

How Tariffs Impact Entrepreneurs & SMEs

Tariffs affect big corporations, but they hit small and medium enterprises (SMEs) even harder. Here’s why:

• Thinner Margins – SMEs have less room to absorb sudden cost increases.
• Limited Negotiating Power – Large companies can pressure suppliers to share tariff costs. SMEs usually can’t.
• Cash Flow Strain – Tariffs are often paid upfront, tying up working capital.
• Complex Compliance – Navigating customs paperwork and classification codes can be daunting.

A small electronics importer in Ghana saw a 15% tariff increase on circuit boards. The result? Prices to customers rose 10%, sales dropped, and inventory sat in warehouses longer—hurting cash flow.

Tariffs in a Globalized World: The Double-Edged Sword

Globalization has made supply chains more connected than ever. But it’s also made businesses more vulnerable to policy changes thousands of miles away.

• Supply Chain Costs – Even if you don’t import directly, your suppliers might—passing the costs on to you.
• Competitiveness Abroad – If your products face high tariffs in target markets, you may lose out to local competitors.
• Opportunity in Local Sourcing – Rising tariffs can make domestic products more attractive.

Kenya’s coffee exporters to the U.S. have benefited from favorable tariff arrangements under the African Growth and Opportunity Act (AGOA). But when similar deals expired for other sectors—like apparel—SMEs saw orders shrink overnight.

Navigating Tariffs as an SME: Strategies That Work

Here’s how savvy entrepreneurs adapt:

1. Know Your HS Codes – Every product has a Harmonized System (HS) code that determines its tariff rate. Misclassification can mean overpaying or facing fines. Work with a trusted customs broker to ensure correct classification.
2. Use Trade Agreements to Your Advantage – Many countries have free trade agreements (FTAs) that lower or eliminate tariffs for certain goods. Under the AfCFTA (African Continental Free Trade Area), tariffs on 90% of goods traded within Africa are being phased out. Even if you import raw materials from abroad, finishing the product locally may qualify you for tariff-free exports.
3. Rethink Your Supply Chain – Tariffs can make once-cheap suppliers expensive. Look for alternatives: Do local sourcing to avoid import tariffs. Engage regional suppliers in countries with favorable trade terms. Use nearshoring to reduce both tariffs and shipping times.
4. Factor Tariffs into Your Pricing Model – Don’t let tariffs eat into your profits unnoticed. Build them into your cost calculations and pricing strategy from the start.
5. Explore Duty Drawbacks – Some countries offer refunds (duty drawbacks) on tariffs paid for imported goods that are later exported. If you import raw materials, manufacture locally, and export the final product, this can be a game-changer.
6. Stay Informed and Agile – Tariff rates change due to politics, trade disputes, or new agreements. Subscribe to trade bulletins, join industry associations, and keep a “Plan B” supplier list.

Tariffs and E-Commerce: The Hidden Trap

If you run an e-commerce store shipping internationally, tariffs (or “customs duties”) can surprise both you and your customers.

• Low-Value Exemptions – Some countries waive tariffs below a certain order value—but these thresholds are dropping.
• Customer Experience Risk – Unexpected customs bills can lead to order cancellations or bad reviews.

Be transparent about possible import charges at checkout.

Looking Ahead: The Future of Tariffs for African SMEs

For African entrepreneurs, the tariff landscape is shifting fast.

• AfCFTA’s Promise: A single African market could make cross-border trade cheaper and easier for SMEs.
• Tech and Transparency: Digital customs systems can speed up clearance and reduce corruption.
• Climate and Sustainability Tariffs: Expect new tariffs linked to environmental standards (like the EU’s Carbon Border Adjustment Mechanism).

SMEs that adapt early to new tariff structures—especially green trade policies—can win contracts others can’t.

Key Takeaways for Entrepreneurs

• Tariffs are taxes at the border—and they can make or break your profit margins.
• Knowledge is leverage – Understand your HS codes and trade agreements.
• Flexibility beats rigidity – Be ready to pivot your supply chain.
• Use tariffs as a differentiator – If you’re less exposed, make it part of your value proposition.

Tariffs aren’t just for economists to worry about—they’re for entrepreneurs to master. The SMEs that win in a tariff-shifting world are the ones who stay informed, adapt quickly, and see opportunity where others see obstacles.

Audit your supply chain for tariff exposure. Research trade agreements your country has. Build a contingency plan for sudden tariff changes.