Preparing for Changes in Tariffs

With the coming changes in tariffs, now is the time to assess how these changes could impact your business so that you’re ready to pivot if needed. Steel and aluminum tariffs, new tariffs on chips, copper, pharmaceuticals, semiconductors, and things needed for the military are all on the docket for the current administration.

To prepare your company, thoroughly review your supply chains, identify potential impacts on imported materials, and explore alternative sourcing options, including domestic production. When possible, renegotiate contracts to build in flexibility to help mitigate cost fluctuations caused by tariff changes. 

KEY STEPS TO TAKE 

Stay Informed and Assess Business Impact

1. Analyze your supply chain — Map out the origin of all materials used in your production process to understand which components could be significantly impacted by new tariffs. First and foremost, take a close look at the materials your company imports and identify where these products are coming from. Assess how their costs could be impacted by increased tariffs.
2. Evaluate potential cost impacts — Calculate how different tariff rates could affect your production costs and pricing strategy. 
3. Monitor trade policies closely — Stay informed about current trade negotiations and potential tariff changes through industry updates and government sources. 

Optimize Supply Chain and Sourcing Strategies

• Diversify sourcing options — Explore suppliers in different countries with potentially lower tariff rates or consider domestic sourcing to reduce reliance on heavily taxed import regions. Make a list of sourcing options for any materials you import—across all supply tiers—from countries that may have increased tariffs.
• Build inventory strategically — Depending on the situation, consider building up inventory of key materials before potential tariff increases take effect to avoid higher costs on future shipments. 
• Engage with customs brokers — Develop a strong relationship with customs brokers to navigate complex tariff regulations and ensure compliance. 
• Consider reshoring or nearshoring — Evaluate the feasibility of moving production closer to your primary market to minimize tariff impacts. 

Manage Pricing and Customer Expectations

• Review / renegotiate contracts – Part of assessing your options involves checking with your suppliers to see if they will be impacted by tariff pricing. At the same time, review your supplier contracts to determine if they will be able to pass this cost directly onto you. If so, you may need to consider other sourcing options or be ready to adjust your pricing. Depending on your contract terms, you may be able to negotiate with your current supplier. If possible, update supplier contracts to include price adjustment clauses that allow for price adjustments based on tariff changes. 

Be sure to also review your contracts with your customers and keep this in mind: If you have a fixed contract, you might not be able to pass on any costs.

• Communicate with customers — Inform your customers about potential price changes due to tariffs and discuss mitigation strategies. 

Plan for Long-Term Market Shifts

1. Run financial models — Although it’s tempting to put off preparing for a potential change, no one wants to see their profit margins eaten up by tariff hikes. To give yourself a road map regardless of what happens, consider drafting two budgets:  one that accounts for increased tariffs, and one for if the status quo remains. 
2. Understand how tariffs could impact your competitors — The onset of new tariffs could disrupt the marketplace. As such, be sure to assess how your competitors will be affected. Consider their location and how this may impact their need to raise prices. If your competitors are more greatly impacted by tariffs, this could place your company in a better position.
3. Refine go-to-market approaches — Whatever happens with tariffs, the impact will be shared by manufacturers, importers, retailers, end buyers, foreign exporters, and ultimately, consumers. Pricing can be a key mitigation lever. The most straightforward solution to higher tariffs is to pass the added costs through to customers, which can be challenging but is often achievable with disciplined, analytical approaches and good change management.

Pricing factors to consider: How much price elasticity is there in your product mix? How far can you raise prices without a significant impact on sales volume? Product differentiation and market concentration are key determinants as you answer these questions.

Dealing with a new tariff also is also a good time to rethink product assortment. What are the high-margin or high-growth products you want to prioritize? These merit extra hard work to mitigate the impact of new tariffs. In turn, tariffs could expedite decisions to deprioritize or phase out other products.

The important thing to remember is that’s it’s better to be proactive, rather than reactive. Manufacturers can’t afford to wait for policy shifts. By staying informed, optimizing supply chains, maintaining customer trust and engaging in advocacy, manufacturers can navigate the impact of tariffs effectively while ensuring long-term resilience.

The good news is that taking these steps now to prepare for the possibility of increased tariffs can give your company an important and timely strategic edge.

References:

1. https://www.bcg.com/publications/2025/prepare-for-new-tariffs
2. https://abdosolutions.com/4-ways-to-prepare-your-manufacturing-business-for-potential-tariff-hikes/
3. https://windsorstar.com/news/national/what-are-tariffs-how-does-canada-hit-back-at-u-s
4. https://www.whitecase.com/insight-alert/president-trump-expands-steel-and-aluminum-tariffs-all-countries-effective-march-12
5. https://www.thefabricator.com/thefabricator/blog/metalsmaterials/what-you-need-to-know-about-the-latest-steel-and-aluminum-tariffs
6. https://www.avalara.com/blog/en/north-america/2025/01/how-to-prepare-for-trump-tariffs.html
7. https://www.mdm.com/article/research/economic-trends/brace-yourself-how-the-2025-tariffs-will-impact-distributors/
8. https://www.ppai.org/media-hub/navigating-tariffs-strategies-for-distributors-and-suppliers/