More Tariffs Are Coming
Is Your Supply Chain Ready for the Impact?
With the results of the November 5th election, it’s clear that changes to global trade are on the horizon. While the exact nature of new tariffs and the direction of the trade war remain uncertain, one thing is for sure—businesses need to prepare for potential increases in tariffs, especially on imports from China. Experts predict that we could see global tariffs rise by 10-20%, which will inevitably affect the cost structure of companies across the U.S.
For any business involved in global trade, now is the time to dust off—or create—a comprehensive supply chain strategy focused on agility and resilience. This is no longer just about surviving a trade war or dealing with tariffs in isolation; it’s about adapting to an evolving trade environment that’s increasingly unpredictable.
The Aftermath of Previous Trade Wars and the Pandemic
The trade war of 2018, coupled with the COVID-19 pandemic, has already taught companies valuable lessons in how to mitigate risk and adapt to sudden disruptions. Many larger companies, with more resources and supply chain flexibility, have already moved away from China or diversified their sourcing strategies. But for the majority of U.S. businesses—particularly smaller or mid-sized ones—the threat of higher tariffs still looms large. Increased costs will likely force these companies to raise prices, which in turn could erode profit margins and impact long-term competitiveness.
Moreover, some businesses are attempting to "buy time" by ramping up imports ahead of tariff hikes, attempting to shield themselves from the immediate impact once the new administration takes power. But waiting may not be a viable long-term strategy. Preparation is key. Companies need to act now to avoid significant disruptions to their bottom lines.
Short- and Long-Term Strategies for Mitigating Tariff Impacts
Here are some practical strategies to help your business weather the coming tariff storm, both in the short and long term:
1. Wait and See
The rhetoric from past trade wars was often harsher than the final outcomes. In some cases, exceptions were made, and tariffs were applied more selectively rather than across the board. Some businesses may choose to "wait and see" how the situation unfolds, monitoring any changes in the policy landscape before making significant adjustments. However, this strategy comes with the risk of being unprepared when tariffs are implemented.
2. Frontloading Inventory
One effective tactic is to frontload inventory—bringing in more materials now before tariffs are applied. This strategy buys time and allows businesses to adjust their long-term supply chain strategies, giving them the flexibility to make informed decisions once the tariff landscape becomes clearer. However, not a desirable strategy with businesses that have high variable demand or tight cash flow.
3. Map Your Supply Chain
Understanding your supply chain’s vulnerabilities is more important than ever. This includes mapping out all key suppliers and sources of raw materials, identifying regions that may be most affected by tariffs. If you don’t already have full visibility into your supply chain, now is the time to develop it, so you can assess where to focus and reduce exposure.
4. Stakeholder Engagement
Engage with your suppliers and customers to discuss their plans for managing tariff impacts. Many suppliers have already begun planning for potential tariffs, and you may be able to adopt or align with their strategies. Building stronger relationships with your stakeholders can also lead to collaborative solutions to mitigate risks.
5. Diversify Your Supply Chain
Supply chain diversification is often a longer-term process, but it can be an effective way to reduce risk. If moving away from China entirely isn’t feasible in the short term, consider sourcing from other regions or countries with lower tariffs or fewer trade restrictions. This may also involve working with partners who have existing global supply chain strategies in place. Countries like Vietnam, Indonesia, Malaysia, Mexico and India have already positioned themselves to take on China business if exits accelerate due to increasing tariffs. Ashish Yadav of Metrics-Mint in Bangalore has already seen a shift; “India continues to invest in manufacturing infrastructure and logistics to increase exports to both Europe and the US”.
6. Review HTS Codes
It’s essential to work with import/export compliance experts to ensure that you are using the correct Harmonized Tariff System (HTS) codes. Proper classification of goods can help reduce exposure to higher tariffs by ensuring that your products are categorized correctly and potentially qualify for tariff exclusions.
7. Explore Value-add options
In some cases, it may be possible to add value to products in a different country to change the country of origin. This process, known as substantial transformation, can sometimes help reduce the impact of tariffs, although it can be complex and requires careful planning.
8. Localization and Onshoring
Consider evaluating opportunities for onshoring (bringing production back to the U.S.) or nearshoring (moving production to nearby countries like Mexico). These strategies could help you avoid tariffs and benefit from reduced lead times and transportation costs. Additionally, focusing on offshore sites that cater to non-U.S. markets could be a viable option for certain products.
9. Evaluate the True Cost of Tariffs
In some cases, paying the tariff may be the most cost-effective solution. Conduct a landed cost analysis to determine the true cost of importing goods versus the cost of adjusting your supply chain. This analysis will help guide your decision-making process and ensure that you’re making the most economically viable choice.
10. Leverage AI for Sourcing Decisions
Artificial intelligence (AI) can be a game-changer for making faster, more informed sourcing decisions. With integrated AI tools, you can quickly adjust sourcing strategies based on updated tariff logic, supplier availability, and demand fluctuations, improving overall decision-making efficiency.
Mitigation Steps: How to Be Best Prepared
To prepare for the looming tariff changes, follow these key steps:
Map Your Supply Chain: Identify all sourcing channels impacted by potential tariff increases.
Conduct a Risk Assessment: Assess which imports will be most affected and determine whether you can absorb the cost, pass it onto customers, change product classifications, or move sourcing to other regions.
Collaborate with Suppliers: Work with your supply chain partners to understand their mitigation plans and potential contingency measures.
Scenario Planning: Develop scenarios to analyze the impact of different tariff levels and policies, and assess their effects on your business operations.
Allocate Resources: Assign dedicated team members to oversee tariff mitigation efforts, both internally and externally.
Implement the Plan: Execute your mitigation strategy and monitor its effectiveness over time.
Regular Updates: Regularly review and adjust your plan based on changes in tariff policies, every 3 to 6 months.
Looking Ahead: A New Era of Trade Protectionism
The global trade landscape is shifting, and protectionist policies could significantly impact the flow of goods and services worldwide. However, complete disengagement from global supply chains isn’t a realistic option for most businesses. Whether due to product availability, labor costs, or maintaining a competitive edge, international trade will remain critical to success.
The disruptions we’ve seen over the last few years have underscored the importance of building an agile and resilient supply chain. By taking proactive steps now, businesses can not only mitigate the impact of tariffs but also position themselves for long-term success in an increasingly unpredictable global trade environment.
Prepare now, and your supply chain will be ready to weather whatever comes next. Need help? Let HMC guide you to an efficient and proactive playbook to be prepared for all potential disruptions including tariffs.
Conclusion: Preparing for the Storm Ahead
The prospect of increased tariffs and ongoing trade uncertainty means businesses can no longer afford to be reactive. The lessons learned from previous trade wars and the pandemic highlight the importance of building a resilient, agile supply chain that can weather disruptions. By mapping your supply chain, engaging with stakeholders, diversifying sourcing strategies, and leveraging technology like AI, you can mitigate the risks posed by higher tariffs.
While it may not be possible to fully avoid the impact of tariffs, proactive preparation is key to minimizing their effects on costs, profitability, and competitiveness. Now is the time to refine your strategies, assess your risks, and implement mitigation plans. The businesses that adapt early and strategically will be the ones that thrive in an increasingly unpredictable global trade environment.
Ready to Future-Proof Your Supply Chain?
Don’t wait until tariffs disrupt your operations—start preparing now. Hoagland Management & Consulting (HMC) specializes in creating resilient, agile supply chain strategies tailored to your business needs. Let us help you navigate uncertainty and position your company for long-term success.
Contact us today to schedule a consultation and ensure your supply chain is ready for whatever comes next.
About the Author
Anthony Cardinale is a seasoned supply chain expert with over 35 years of experience in high-tech manufacturing across industries such as Aerospace, Electronics, and Telecom. Specializing in optimizing sourcing strategies, team leadership, and cost efficiency, Anthony has successfully managed supplier transitions, reduced inventory, and implemented lean, compliant processes.
Read Anthony’s full bio to learn more about his background and expertise.