American companies are contending with rising costs from three directions: tariffs, fuel prices, and interest rates. According to CNBC’s report of the September 20 issue, the first two have already forced manufacturers, transport firms and retailers to reconsider some aspects of their operations. Each factor alone presents a serious challenge to a company’s bottom line, and together their impact may prove to be overpowering.

Tariffs result in higher costs of imported materials and products, which make a direct impact on businesses buying goods from overseas suppliers. At the moment, companies are having to factor in additional expenses when choosing between substituting foreign products for domestic alternatives and paying higher prices for imported goods. According to Mary Buchzeiger, chief executive of Lucerne International – a manufacturer of automotive parts and suppliers, the tariffs have “upset the global supply chain and increased costs, especially for aluminum and finished products.”

Higher fuel prices present an additional challenge to businesses, as transport costs comprise a significant share of the expenditures for any transport company and any other entity which relies on transportation. The situation was exacerbated by the war with Iran, which raised the costs of producing goods, as well as their transportation. Thus, businesses are now faced with significantly higher expenditures for moving goods from one point to another. While rising fuel prices impact the cost of materials for manufacturers, they result in additional expenditures for leasing vehicles and transporting goods for shippers.

Higher interest rates pose the most serious challenge to businesses, as the costs of credit accounts for a significant share of any company’s expenses. Companies often buy materials and equipment with the money borrowed from lenders, committing to pay back the principal plus the interest. Thus, higher rates mean higher repayments due to lenders, which offset the value of cheaper loans. In addition, as far as small businesses and start-ups are concerned, their access to credit is limited compared to larger corporations, which makes any hikes in rates impactful.

CNBC’s report featured an opinion from JPMorgan Chase strategist Dubravko Lakos-Bujas, who stated that small businesses tend to utilize short-term debt, meaning that an increase in interest rates would affect them disproportionally.

The excerpt under review presents a vivid illustration of the fact that inflation is not exclusively a consumer phenomenon – it can and does impact businesses, presenting them with serious challenges. Businesses have to address the increasing costs of materials, distribution costs which are now higher due to tariffs, and higher costs of credit repayment.

While addressing one aspect, businesses often have to make concessions on the other, which worsens their financial gains. The example featured in the article underlines that the changes to the status quo may present serious difficulties to companies, especially small ones. However, as long as the companies are able to continue their operations and remain competitive despite the pressure, their financial prospects remain stable.

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