Dr. David Lovett
Feb 23, 2025
As a business leader, navigating geopolitical shifts, regulatory changes, rapidly changing tariffs, and evolving economic policies demands a proactive approach that supports long-term strategic resilience.
Understanding the impact on strategic planning, industry stability, market confidence, and future risks is crucial. It involves mobilizing operational readiness, evaluating potential opportunities to drive sustainable growth, optimizing cash flow, and managing effective tax rates. Here, we highlight key considerations for assessing supply chain planning amid regulatory uncertainty, potential tariff changes, and potential retaliatory actions.
Navigating Supply Chain Strategies Amid Evolving Tariff Policies
Over the past decade, tariff policy changes and geopolitical tensions have significantly influenced the global supply chain. The Trump administration’s imposition of tariffs on Chinese goods in 2018, followed by the Biden administration’s enforcement and expansion of these tariffs, highlighted the need for resilient and flexible supply chains through diversification and regionalization. This resulted in reduced bilateral trade with China, increased exports from Mexico and Southeast Asia to the United States, and a growing interest in reshoring and nearshoring.
During the 2024 campaign, Trump proposed imposing across the-board tariffs of up to 20% and has suggested on several occasions that he may impose tariffs on semiconductor chips, pharmaceuticals, and automobiles, most recently suggesting these tariffs could be 25%. The United States announced tariffs on products of Canada (25% on most products and 10% for energy) and Mexico (25%), and a supplemental tariff on products of China (10%). The tariffs on products of China came into effect on February 4, 2025, while the proposed tariffs on products of Canada and Mexico have been postponed until March 4, 2025. Additionally, there has been a significant expansion of tariffs on all imports of steel and aluminum, set at 25%. The United States also announced its plan to implement “reciprocal tariffs” on imports originating from partners in the coming months pending the outcome of a review. These actions highlight the complexity and unpredictability of the current trade environment. This includes the possibilities for retaliatory tariffs or other actions beyond those already implemented by China.
Potential Effects: Manufacturers and Consumer Prices
Existing tariffs, proposed new tariffs, and retaliatory tariffs may potentially impact both importers and exporters in the following ways:
• Increased input costs, which could have an impact on profit margins depending on currency adjustments and the ability to pass costs on to customers.
• Delayed or reduced capital expenditures on new equipment, technology, and facilities.
• Higher logistics and transition costs for diversifying supply chains.
• Temporary increases in inventory levels and associated carrying costs.
• Changes to pricing strategies, which may affect consumer demand for price-sensitive products.
Importers and exporters affected by retaliatory actions must navigate these complexities by managing costs, diversifying supply chains, and adapting market strategies to maintain profitability and market position.
Retaliatory Tariffs and Global Implications
Potential tariffs and possible retaliatory tariffs imposed between the United States and its largest trade partners—Mexico, Canada, and China—could affect the future of trade. At the same time, many of those nations have implemented or announced retaliatory measures. To consider the financial, administrative, and operational impacts of tariffs on both inbound and outbound goods:
• Know your supply chain: Transparency through import transaction data, including values and duties by product categories, manufacturers, and countries of origin, is essential. This includes knowledge of your supply chain even for raw materials or inputs obtained from third parties.
• Quantify exposure: Scenario-planning for potential direct tariffs and additional retaliatory impacts is crucial. This includes understanding the exposure of tariffs to all affected markets.
• Determine feasibility of and design duty-reduction strategies: Companies may explore various duty-reduction strategies if they become available, including exemptions, exclusions, supply chain planning, transfer pricing, First Sale for Export, price unbundling, and other levers affecting duties owed.
Planning for a New Tariff Environment
Businesses should proactively plan for new tariffs by evaluating their impact on supply chains and exploring ways to build resilience, mitigate risk, and drive value. Digital transformation and artificial intelligence (AI) can enhance supply chain efficiencies and value creation. Companies should also consider the tax implications of these changes to ensure preparedness.
Future Considerations
As global trade and tariffs evolve, it’s imperative to remain agile and responsive. Future supply chain planning should include workshops, multi-tiered plans, technology, innovation, and collaboration. Business leaders should lead these initiatives to explore sourcing options, evaluate new production locations, adapt market strategies, and optimize value chains.
Conclusion
The dynamic tariff landscape presents challenges and opportunities. By staying informed and adopting proactive strategies, companies can build resilient, efficient, and compliant supply chains. Key actions include understanding tariff policies, leveraging new technologies, and aligning tax and customs strategies with business objectives. By focusing on these areas and utilizing services from advisers like Deloitte, your organization can be well-positioned to navigate global trade complexities and achieve sustainable growth.
Dr. Lovett has 30+ years experience in the accounting and finance fields. He is a noted author, columnist, speaker, and contributor to the financial success of multiple businesses and nonprofit organizations. Dr. Lovett can be contacted at dr.lovett@fl-business-consultants.com.