Tariffs and the Supply Chain: Turning 5 Key Challenges into Opportunities

The global marketplace already presents myriad challenges in supply chain management: complex regulatory environments, geopolitical shifts, international trade policies, inclement weather, and more. Now, with increasing amounts of tariffs, a new set of challenges may soon be coming. Here we explore potential shifts tariffs may create in the supply chain and how businesses can adapt.

Specific challenges tariffs pose for supply chain management

Global tariffs can significantly disrupt the intricate workings of the global supply chain. Here are five key challenges:

1. Increased import costs

Increased import costs due to tariffs can significantly impact businesses, forcing them to either absorb these additional expenses, which can erode profit margins, or pass them on to customers, leading to higher prices. Navigating this challenge requires a nuanced pricing strategy that balances the need to cover increased costs with the imperative to maintain a competitive edge in the market.

2. Changes in demand

Changes in pricing can also influence demand, as end buyers may have evolved preferences or may see their purchasing power reduced, affecting their willingness to buy at the same rate.

3. Supply chain disruptions

New tariff policies can lead to ongoing supply chain disruptions, forcing companies to quickly adjust their sourcing strategies. This can lead to changes in trade flows, causing congestion at ports and other transportation hubs. Increased customs inspections and processing times can also create delays, drive up cost of goods, and disrupt supply chains, leading to higher prices for consumers and potential shortages of essential products.

4. Uncertainty and volatility

Tariff policy shifts can introduce significant uncertainty for businesses, complicating long-term planning, demand forecasting, and inventory management. The risk of retaliatory measures from other countries only exacerbates this volatility, making the business environment even more unpredictable. This also impacts compliance with international trade laws and the accurate reporting of tariff-related expenses, adding another layer of complexity to the challenges businesses face.

5. Disruption of established supplier relationships

Global supply chains are built on complex networks of suppliers. Tariffs may force businesses to break these established relationships, potentially leading to disruptions in the availability of raw materials and components and affecting product quality. Moreover, the sudden shift to new suppliers can result in longer lead times and increased costs, as businesses need to vet and integrate new partners into their operations.

In essence, global tariffs introduce a layer of complexity and cost that can ripple throughout the entire supply chain, impacting everything from raw material sourcing to final product delivery.

How businesses can mitigate the impact of tariffs on the supply chain

Challenges always present opportunities. As the COVID epidemic showed, companies that continued to move forward in times of trouble by investing in new technology, are now thriving.

Instead of seeing tariffs as a roadblock, view them as an opportunity to reassess supply chain strategies and optimize operations. Here are a few tools, tactics, and technologies that can help keep your business moving onward and upward — regardless of how tariffs may impact the global supply chain.

1. Keeping costs low: Analytics and AI

By properly leveraging AI-fueled analytics to forecast tariff impacts and optimizing sourcing, a business can create a more future-proof expense model. This approach requires implementing advanced supply chain management systems for real-time visibility:

• Implement spend control and analysis to gain real-time visibility into costs and ensure compliance with budget constraints. Surface insights around spending patterns to identify optimization opportunities like supplier consolidation.
• Improve planning and forecasting by using advanced analytics to anticipate supply chain disruptions and adjust procurement strategies accordingly
• Leverage advanced technologies such as digital twins, for example, to simulate and optimize new supply chain configurations  

2. Supply chain optimization and diversification

It is critical to get ahead of the curve on this and embrace the solutions and tools today that you will need to enable these capabilities:

• Optimizing purchasing decisions: Evaluate potential tradeoffs, for example determining whether to increase stock before tariffs take full effect or when there is advantageous pricing and absorb the inventory holding costs or adjust to a Just-In-Time (JIT) purchasing model acknowledging the potential for disruptions that may lead to delays and unhappy customers.
• Alternative Sourcing: Another approach is to avoid tariffs by shifting sourcing and production to onshore/local or different countries, establishing new supplier relationships, and reorganizing logistics networks, which can be complex and costly endeavors.
• Analyzing trade agreements: Identify favorable pricing and suppliers that can reduce overall tariff exposure.
• Utilizing cloud-based SCM platforms: Leverage advanced solutions to quickly identify and onboard alternative suppliers or substitute goods.

3. Model "what-if” scenarios, reducing uncertainty and mitigating risk

The cornerstone here is, once again, data, analytics, and organizational agility. Your business needs the data and analytics tools that will enable you to monitor trade policy changes and market fluctuations and also employ predictive modeling to better forecast potential costs, risks, disruptions, and demand shifts. With a cloud-based analytics platform, you can improve scenario planning and rapid response while concurrently identifying and reducing (or even eliminating) potential vulnerabilities.

4. Uncorking bottlenecks

Your business can address logistics bottlenecks by utilizing AI-powered route optimization and real-time tracking systems to minimize delays and costs. Additional tools are available to automate customs and documentation platforms, thereby expediting clearance. Predictive analytics may also help you avoid issues such as port congestion and drive more flexible sourcing or raw materials.

How can a technology solution provider help?

Understanding the complexities of navigating tariff changes and their impacts on businesses, a technology solution provider can deliver valuable expertise and advanced solutions to streamline and optimize your operations within the following areas:

• Unified data integration: Leverage advanced solutions to connect data sources, such as import records, supplier invoices, and market analytics, into a unified system. This centralization ensures easy access to tariff information, enabling informed decisions.
• Real-time visibility: Advanced analytics, dashboards, and reporting tools provide a comprehensive view of tariff impacts. This transparency allows businesses to take proactive measures to mitigate risks and optimize the supply chain.
• Scenario analysis: Comprehensive data integration enables detailed scenario analyses. By predicting tariff impacts, businesses can make strategic, long-term planning decisions and effectively manage risks.
• Compliance and regulation: Integrated systems ensure up-to-date records, helping businesses comply with customs and trade regulations and avoid penalties.

While there are countless tactics and technologies a business can use to stay ahead of challenges that may come as a result of global tariffs, it starts with a plan.

Argano has helped businesses thrive during the last major upheaval in the global marketplace, and we can help you fare even better during current challenges and those to come. With industry-specific and technology-specific teams, we help ensure strategic alignment between your business goals, technology, and a fluctuating global economy.

Contact us for a free assessment of how “tariff-ready” your business may be. We can help you build a better tomorrow no matter what today may bring.

Want more? Watch our webinar ‘Navigating Manufacturing Challenges in 2025: Strategies for a Resilient Future.​’