The Reshoring Institute asked 18 executives how they are responding to tariffs: Here’s what they said

These are difficult times for businesses that import any finished products, parts, or raw materials. On-again, off-again tariffs, pauses, delays, and increases make business planning very challenging. So how are companies responding?

The Reshoring Institute recently conducted a series of interviews with 18 C-level executives across the country to ask how their businesses plan to respond to the Trump tariffs. Some of their answers were as expected and others were quite surprising. We interviewed executives from Upstate New York; New York City; Minneapolis; Toronto; Portland, Maine; Los Angeles; San Diego; and the Silicon Valley.  These executives represented diverse industries including semiconductors, machining, power generation, consumer electronics, audio equipment, medical devices, printing, fuel cells, and sports equipment.

These executives told us that their capital investment and hiring are mostly frozen until the tariffs and the economic outlook are stabilized. This is bad news for recession-watchers. Uncertainty in tariffs and geopolitics is creating chaos in global operations, especially in the electronics industry’s imports from China. One executive said that his company was not willing to make a billion-dollar investment in building a new factory in America when everything may change in 3 ½ years when a new president is elected. His company will continue to manufacture overseas or in Mexico.

Here are some of the aggregated responses:

94% of the companies are importing finished goods or intermediate goods/spare parts

Nearly every company was importing goods from China. Even the companies that told us they were not importing foreign parts were using test equipment and production machines made in China. They were importing from other countries too, including Mexico, Vietnam, Taiwan, and the Philippines.

Importing companies are mostly passing tariff costs on to customers through higher prices. Some are absorbing costs (82% and 74%)

Most of the companies were absorbing some costs from the older 2018 tariffs and passing the rest on to their customers through higher prices. They expected to do the same with the new tariffs. Some are increasing prices to cover all of the tariff costs, and not absorbing any.

67% are developing or identifying domestic sources

The majority of the companies are attempting to find domestic sources for parts and raw materials. Several people mentioned that the parts they need are not made in the U.S., so they have no choice but to import these parts.

28% are using Foreign Trade Zones to delay tariff payments

A smaller portion of the companies are using “Privileged FTZ Entries” to avoid paying higher duty rates that may be applied in the future. However, this tactic is temporary and requires a build-up of inventory that results in tying up working capital.

78% are seeking alternate supply sources—mostly in the U.S.

More domestic sourcing was a popular idea among the executives we interviewed. Instead of building new factories, most companies are trying hard to find or develop new suppliers in America and depend less on foreign suppliers. If this strategy works, we should see a real boom in domestic supplier manufacturing within 12-18 months.

44% are moving out of China—mostly to India, Mexico, and Vietnam

Nearly half of the executives said they are moving out of China, but they are looking for other low-cost countries to manufacture products, not the U.S.  These executives are still seeking low-cost manufacturing operations, as has been the case for the last 25 years. Alternatives to China that were often mentioned were Mexico, India, and Vietnam.

22% are redesigning their products to avoid foreign parts

Some executives have given a mandate to their design engineers to redesign products to eliminate the need for foreign parts. Some were skeptical that this could be achieved but thought it was worth a try.

Overall, the executives we interviewed were in a holding pattern until the tariffs and the economy stabilize. Meanwhile, they are planning alternative strategies for surviving in these turbulent times.

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