Untangling tariff impact: Actions to navigate evolving U.S. tariff and trade policies

For decades, U.S. businesses operated under relatively stable trade conditions, where the role of tariffs was often a predictable factor. Companies with international operations could rely on the brokers who cleared goods across borders as a primary resource for understanding the customs impact on the cost and classification of products. These days are over.

In the emerging global environment, tariffs and trade policies are becoming significant aspects of overall international foreign relations policy — tools wielded not just for economic but also geopolitical objectives. The implication is clear: assume constant change, with greater public negotiation of trade agreements and time periods to solidify precise tariff and other trade-related restriction implementation, aiming to advance the new administration’s strategic goals. While this can introduce corporate instability, it can also bring opportunities for those that develop the necessary competencies to manage the evolving landscape. Here are five recommendations to consider as you plan for the future.

1. Create a business center of excellence dedicated to trade policy

To successfully manage continuous change, building a dedicated center of expertise on tariffs, trade policy, international finance, and U.S. public policy is indispensable. This group can serve as a strategic sounding board on customs, logistics and shipping, and international trade to assure factors such as foreign currency exposure, strategies on duty drawbacks, and alternative supply chain alignment are considered for strategic gains. Critical skills include analyzing currency fluctuations, understanding complex areas such as duty drawbacks, and expertise in generating alternative supply chain alignments for strategic gains.

Given the expectation of significant ongoing trade policy disruption, it’s important to assemble your resources now. In many cases, internal resources will need to be supplemented with expertise from outside consultants, specialized trade counsel, and industry trade groups.

2. Develop frameworks for decision-making

A center of excellence can ensure comprehensive frameworks for decision-making are built and integrated into your strategic processes. These frameworks should address key questions related to pricing, cost structures, logistics, and production adaptations, and provide insights into your competitive positioning. Your decisions should anticipate your competitors’ as well as your customers’ and suppliers’ reactions to the changing tariff environment.

A multidisciplinary approach to these frameworks from a center of excellence will ensure consideration of perspectives across departments, including finance, human resources, manufacturing, purchasing, and supply chain. This cohesive strategy will provide the ability to consider alternatives, allowing quick, informed decisions when tariffs and policies take effect, giving you an edge in a volatile market.

3. Establish your fact base

A deep understanding of your operations and complete supply chain are essential to reacting swiftly to tariff shifts, but unfortunately, many organizations struggle with poor documentation and fragmented operational insights. To shore up this critical weakness, establish a comprehensive and centralized fact base.

For manufacturers, the fact base should encompass a supply chain map detailing each supplier, including geographical location and customs and tariff classifications of materials and, if possible, the percentage of local value added. Identifying which suppliers and materials are vulnerable to tariffs can become a strategic advantage, enabling rapid response once tariff announcements occur.

Ensure your enterprise resource planning systems are equipped to deliver the data needed for optimal supply chain visibility.

Review contracts to understand your level of protection or exposure to tariff-induced or supply chain modification changes. Conduct due diligence on your customer’s value chain for a holistic view of the landscape. Information is power; knowing your and your customer’s business inside out will position you to act decisively.

4. Calculate your exposure

After establishing your fact base, estimate your exposure to potential tariffs across regions. This will help you anticipate cost implications and assess strategic vulnerabilities and opportunities. This foresight enables you to plan adjustments proactively and safeguard against making hasty decisions. It will also help you more accurately and competitively bid on new business.

5. Maximize flexibility

Flexibility in production operations and contractual agreements is essential. Avoid long-term commitments that can lock you into unfavorable terms. Avoid knee-jerk reactions. With a good fact base, you’re better prepared to wait for critical data you need to avoid reactive mistakes like unnecessary inventory buildups that might misjudge tariff impacts. By emphasizing flexible and informed decision-making, you can navigate complexities with minimized risk.

Impacts beyond manufacturing

A shifting tariff landscape impacts more than just the manufacturing industry. Service-oriented sectors and industries dependent on imported goods and materials — such as construction and energy — must also remain vigilant in their strategic planning efforts. Whatever your industry, you can adapt the five considerations outlined above to anticipate increased costs, delays, and operational challenges, which will be crucial to ensuring resilience in a world of changing rules.

Strategic foresight: A key advantage

The emerging era of U.S trade policy demands that impacts from tariffs and trade restrictions are embedded into your core planning processes. It’s not a one-time adjustment but will be a constant strategic consideration. By identifying a skilled team, building robust frameworks, establishing comprehensive fact bases, and committing to flexibility in your approach, you’ll be ready for whatever shifts may come your way.