With new tariffs underway and trade policies evolving, companies are anticipating significant changes in 2025. Strategic planning is crucial to minimize risks and capitalize on opportunities. These considerations will help you navigate the emerging landscape.
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 their 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. 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 structures 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 structures 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 is essential to reacting swiftly to tariff shifts. For manufacturers, this should encompass a supply chain map that includes the following information for each supplier:
- The origin of each component or subassembly in the bill of materials. Include country of origin, customs and tariff classifications of materials and, if possible, the percentage of local value added.
- The volume and amount you’re spending on each component.
- The labor content in each component.
- The complexity of manufacturing the component.
- The criticality of the component to your operation.
It can be time-consuming and challenging to gather this data, and unfortunately, many organizations struggle from poor documentation and fragmented operational insights. As part of your mapping exercise, ensure your systems are equipped to deliver what you need for optimal visibility. If your company’s information is siloed in different functional areas such as procurement, engineering, finance, etc., anticipate a cross-functional exercise to gather the granular data you need.
Information is power; knowing your and your suppliers’ businesses inside out will position you to act decisively. Conduct due diligence on your suppliers’ value chain for a holistic view of the landscape. Review contracts to understand your level of protection or exposure to tariff-induced cost increases and sourcing and supply chain strategy changes.
4. Calculate your exposure and develop contingency plans
Once your fact base is in place, estimate your potential exposure to tariffs. Determine the total landed cost of your components and subassemblies, including manufacturing cost, transport cost, taxes and duties, insurance, and other fees. Calculate how tariffs impact your total landed cost.
Once you understand the potential impact of tariffs on your cost structure, run “what-if” scenarios for a variety of possibilities in the rapidly-evolving tariff landscape. This is different for every company, but your strategies might include shifting purchases from an existing supplier’s location on which the United States has imposed a tariff to a location where there is no tariff (or the tariff is less), or exploring new sourcing opportunities within the United States. The level of detail in your planning will also vary, potentially extending to everything you need to kick off a sourcing initiative. This could range from preparing lists of qualified suppliers to assembling complete documentation for sourcing, including materials specifications and engineering documents.
The considerations are vast and, in many cases, changing suppliers is a costly and time-consuming exercise. Knowing how various sourcing alternatives will impact your business can become a strategic advantage and enable rapid response once tariff announcements occur. Consult supply chain experts to bring critical insights into your decision-making process.
5. Maximize flexibility
As the global tariff situation plays out with United States and its trading partners, maintaining flexibility in production operations and contractual agreements is essential. Avoid knee-jerk reactions. With a structured 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 that depend on (or whose customer revenue depends 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.
Need assistance? Contact us
Our supply chain, tax, and international trade and policy experts are closely monitoring developments and will update this article as changes unfold. If you have any questions or need assistance, we’re ready to help you work through these actions and stay prepared to act.
