Fluctuating economies are nothing new to business owners. Since President George Washington signed the Hamilton Tariff of 1789 to address a trade imbalance with England, our country’s business owners have had to adjust to ebbing and flowing revenue based on government decisions.
Our best advice for mitigating the impact of tariffs is to employ measures that are currently within your control. Resilient and flexible businesses can take this opportunity to build a smarter and more agile supply chain. Being proactive is the name of the game in any economy to turn challenges into competitive advantages. This includes reviewing and adjusting supply chains, exploring alternative suppliers, or considering domestic production. Here’s a breakdown of how to approach what may be ahead for your business.
Review and Adjust Supply Chains
The goal of reviewing and adjusting supply chains is to understand where vulnerabilities lie and reduce exposure to tariffs.
- Conduct a supply chain audit: Identify which components, raw materials, or finished goods are subject to tariffs and pinpoint affected imports.
- Map the full chain: Look beyond Tier 1 suppliers — examine Tier 2 and Tier 3 providers to ensure a complete view.
- Risk assessment: Rank suppliers based on cost, geographic location, tariff exposure, and ease of replacement.
- Inventory strategy: Consider building buffer stocks of tariffed goods if short-term price increases are inevitable.
Explore Alternative Suppliers
The objective of exploring alternative suppliers is to reduce your business’s reliance on regions affected by tariffs.
- Look to free trade partners: Source goods from countries with more favorable trade agreements.
- Negotiate flexibility: Talk to current suppliers about shifting production to lower-tariff locations.
- Dual sourcing: Build relationships with two or more suppliers for critical goods to avoid disruption if one region becomes less viable.
Consider Domestic Production
Eliminate exposure to tariffs by bringing part or all of the production process back within the United States.
- Run cost comparisons: Evaluate total landed costs (including duties, shipping, and delays) of imports vs. domestic production. Tariffs often tip the scale toward local manufacturing.
- Look for contract manufacturers: Instead of investing in your own facilities, partner with U.S.-based contract manufacturers to keep capital expenses lower.
- Leverage incentives: Check for federal, state, or local tax incentives, grants, or financing available for reshoring or expanding domestic operations.