The shifting landscape of tariffs: Strategies for supply chain resilience

Tariffs and trade restrictions are introducing new complexities into global supply chains, requiring businesses to rethink sourcing, logistics, and cost management. As tariffs evolve, companies must proactively mitigate risks and optimize supply chain operations to maintain efficiency and profitability.

To navigate tariff uncertainty, businesses should adopt a multifaceted approach that integrates supply chain optimization, legal compliance, and financial strategies.

1. Supply chain optimization: Enhancing flexibility and resilience

Reshoring and nearshoring. Bringing production closer to key markets reduces tariff exposure and enhances supply chain resilience. While this transition requires upfront investment, it improves lead times, operational control, and long-term cost efficiency.

Diversification of suppliers. Overreliance on suppliers from a single region exposes businesses to sudden tariff changes. Diversifying sourcing across multiple countries helps mitigate risks and provides greater flexibility in shifting operations when needed.

Tariff engineering. Modifying product designs or sourcing alternative materials can lower tariff obligations. Collaborating with trade experts ensures compliance with classification regulations while optimizing cost structures.

2. Legal and regulatory strategies: Leveraging trade agreements

Utilizing Free Trade Agreements (FTAs). Many FTAs provide opportunities for reduced or eliminated tariffs. Businesses should closely track changes to agreements such as the United States-Mexico-Canada Agreement (USMCA) and other regional trade deals to optimize tariff benefits.

Foreign Trade Zones (FTZs). Companies can use FTZs to defer or reduce tariff payments by storing or assembling goods before they officially enter the domestic market. This approach enhances cash flow and reduces import costs.

Duty drawback programs. Manufacturers that import materials for products ultimately exported can recover duties through drawback programs, lowering overall tariff expenses. Proper documentation and compliance with program guidelines are critical for maximizing these benefits.

3. Financial strategies: Managing cost impact and supplier relationships

Pricing adjustments. When tariffs increase costs, businesses must carefully evaluate price adjustments to maintain profitability without alienating customers. Transparent communication about price changes helps retain customer trust.

Supplier negotiations. Strong supplier partnerships can help offset tariff-related cost increases. Exploring alternative suppliers, bulk purchasing, or renegotiating contracts can provide cost relief.

4. Future-proofing supply chains against tariff volatility

To stay ahead of potential tariff changes, businesses should implement long-term risk management strategies:

• Scenario planning: Regularly assess how different tariff scenarios could impact costs and supply chain operations.
• Stakeholder engagement: Collaborate with industry groups and policymakers to stay informed on regulatory shifts.
• Technology integration: Leverage supply chain analytics and automation to improve visibility and decision-making.

Conclusion

Tariff volatility is now a permanent factor in supply chain strategy. By taking proactive steps to optimize sourcing, leverage regulatory frameworks, and manage financial impacts, businesses can build resilience and maintain competitiveness in an uncertain trade environment. The key to success is agility—companies that adapt swiftly to changing tariff policies will position themselves for long-term success.

About the author:

Jonathan Colehower is managing director, global supply chain management, at UST. Over a 20-year career, he has worked with leading global companies to solve complex business problems. Colehower is responsible for developing high-performance teams that deliver lasting impact for UST clients.

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