Today’s global trade landscape is anything but straightforward. Beginning in February 2025, the US administration enacted tariffs on trading partner countries and several strategic sectors—with the primary goal being to protect domestic industries and promote the resurgence of American manufacturing.
These tariffs, which are essentially taxes on goods crossing borders, can have a ripple effect across everything from your sourcing strategies to your bottom line. For companies that depend on imported materials or international supply chains, getting a solid grasp on tariffs and learning how to respond strategically is critical.
This guide can help simplify the key elements of tariffs, and outline practical steps businesses can take to manage their effects with foresight and control.
Tariffs: What are they and why they matter
At their core, tariffs are duties charged on goods brought into a country, and importers face a higher cost when shipments arrive. While governments may use them to influence trade dynamics, businesses typically feel the pinch, especially those juggling inventory, pricing, or global logistics.
For organizations importing finished products or raw components, tariffs drive up costs. These price increases impact pricing structures, budget planning, and potentially lead times. Even if you’re not importing directly, tariff costs passed on by vendors can still affect your operations. In many cases, businesses are compelled to pass the cost of tariffs down to customers.
How tariffs commonly affect businesses
The scale and impact of tariffs depends on the nature of your business, sourcing methods, and vendor relationships, but common issues include:
- Higher input costs, especially on goods facing elevated duties
- Reduced margins, if cost hikes are not fully passed down to customers
- Uncertainty in forecasting, complicating pricing and inventory decisions
- Supply chain complications, particularly if alternative sources are hard to find
On top of this, the manual work of tracking tariff codes, managing documentation, and staying compliant with customs can weigh on already busy teams.
Five tactics to manage tariff-related challenges
Tariffs don’t need to catch your business off guard. A strategic, cross-functional response can help keep operations on track.
1. Keep tabs on trade policy
Tariff classifications and rates can shift quickly. Business leaders should stay informed by using credible resources such as the White House Executive Orders page or the Peterson Institute for International Economics.
A current understanding of applicable codes helps your team respond quickly to changes and avoid costly missteps.
2. Strengthen financial agility
- Manage cash flow: Effective cash flow management and forecasting are crucial to offset the impact of tariffs. Businesses should focus on key operational areas and increase their cash reserves. Financial tools are available to enhance cash flow visibility and forecasting.
- Credit options: Consider revolving lines of credit, long-term bridge loans, invoice financing, and other credit options to manage increased costs. Explore renegotiating credit lines and investigate state grants or low interest loans. Consult your accountant about potential funding opportunities.
- Cost management: Develop strategies to manage higher costs, including transparently communicating price increases to customers.
- Diversify revenue: If possible, diversify revenue streams to reduce reliance on any single market or product line.
3. Rethink your supply chain
- Widen your supplier base: Start exploring partners in regions with lower tariffs or those not subject to trade restrictions. Early action here can make your sourcing strategy more resilient.
- Reconsider local sourcing: Sometimes, domestic suppliers offer more than just speed. They might also help you avoid certain tariffs altogether. Be sure to weigh lead times, cost, and quality.
- Audit for compliance: Double-check that your goods are classified correctly. Even small mistakes can lead to overpayment or penalties.
4. Use tech to your advantage
Modern tools can take much of the legwork out of tariff management. Look for and invest in solutions that can help with:
- Calculating true landed costs, which are the total costs of a product once it has arrived at its designated facility (not just the price you paid the supplier)
- Analyzing sourcing data in real time to respond quickly to changes in cost, disruptions in supply, or changes in policy
- Forecasting demand with machine learning
- Integrating procurement with enterprise resource planning (ERP) systems to improve visibility, speed, and accuracy in supply chain decision-making
This technology can streamline workflows and make risk easier to assess and act on.
5. Tap into industry knowledge
Compare your business with similar businesses to identify solutions and scenarios. Collaborate and/or partner with other businesses in your industry for mutual benefit.
While tariffs can introduce uncertainty and add layers of complexity, with proactive strategies, diligent monitoring, and adaptability, businesses can better navigate the challenges posed by tariffs and maintain resilience in an uncertain economic environment.
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