Preparing Your Supply Chain for Tariff Changes: Key Actions for Business Owners
With the recent election results signaling possible shifts in trade policies, business owners need to brace for uncertainty—particularly in the realm of import tariffs and duties. A return to higher tariffs, especially on imports from China, appears imminent, along with changes to the de minimis value threshold. Business owners who prepare now will be better positioned to navigate these challenges, minimize disruptions, and protect profitability.
Here are essential actions to take now to get ahead of these anticipated changes and ensure your supply chain is resilient in the face of new trade policies.
1. Assess Your Overall Supply Chain Risks
The first step is to understand where your business might be vulnerable to trade policy changes. Specifically, consider these actions:
Identify Key Dependencies: Analyze where your supply chain relies heavily on imports, particularly from China or other countries likely to see increased tariffs. Conduct a risk assessment to identify high-cost or critical suppliers and any single points of failure.
Diversify Suppliers: To reduce dependency on specific regions, begin exploring alternate suppliers in different countries. Diversification can mitigate the risk of unexpected costs and delays, especially if your primary suppliers become subject to higher tariffs.
Scenario Planning: Prepare for potential tariff hikes by modeling different tariff scenarios. This helps you anticipate the impact of increased costs on your product prices, margins, and overall financial outlook.
2. Review Your Landed Costs and Pricing Structures
With potential tariff increases looming, it’s crucial to have a clear understanding of your landed costs to assess how new duties will affect your bottom line.
Calculate True Landed Costs: Beyond just product cost, your landed cost should include import duties, freight charges, insurance, and other costs to deliver goods to their final destination. At Supply Chain Shark, we work with businesses to fully understand these costs so they can make informed decisions.
Adjust Pricing if Necessary: Rising costs due to tariffs might require you to adjust your pricing structure to maintain profitability. Review your pricing strategy to determine if you can absorb the additional costs or if adjustments are necessary to safeguard margins.
Evaluate Contractual Terms with Buyers: For businesses with pre-established contracts, rising landed costs can create unforeseen expenses. If possible, negotiate contractual flexibility to adjust prices or pass on some of the increased costs to customers in case of tariff hikes.
3. Review and Confirm HTSUS Classifications
Correct Harmonized Tariff Schedule of the United States (HTSUS) classifications are essential to ensure compliance and manage costs effectively. HTSUS codes determine the duty rate applied to your imports, and any inaccuracies could result in unexpected costs.
Audit Current Classifications: Conduct a thorough review of your product classifications. Ensure they are accurate and up-to-date, as misclassifications can lead to incorrect duties, fines, and compliance issues.
Respond to Classification Changes Quickly: If tariff rates change, having accurate HTS codes ready enables you to quickly assess the impact and take action. This agility can be a significant advantage in responding to policy shifts without disrupting your supply chain.
Seek Expert Guidance: HTS classifications can be complex, and errors can be costly. Consider consulting with a customs broker or trade specialist to ensure your products are classified correctly and that your company is well-positioned for any regulatory changes. (See: Unlocking Savings: Why You Need a Tariff Consultant for HTSUS Classification).
4. Explore “Made in America” Opportunities
The “America First” approach suggests that domestic production may receive more favorable treatment. Assessing the potential for U.S.-based production or sourcing could be a strategic move, particularly if your industry has been impacted by tariffs in recent years.
Assess Onshoring Viability: For certain products, shifting some or all production to the U.S. can reduce exposure to tariffs, stabilize costs, and potentially qualify for “Made in America” incentives or tax breaks. Evaluate production costs, logistics, and market trends to determine if onshoring is feasible and financially advantageous.
Consider Complementary U.S.-Made Products: Many companies are adding “Made in the USA” products to their lines, especially in industries affected by tariffs on materials like steel or electronics. Not only can this help avoid tariff costs, but it can also be a powerful marketing angle, especially as consumers show growing interest in domestically produced goods.
5. Implement Proactive Communication Strategies
The impact of trade policy changes extends beyond just cost adjustments—it can affect lead times, product availability, and customer satisfaction. Effective communication can help you manage relationships with both suppliers and customers.
Engage in Open Communication with Suppliers: Regularly discuss your suppliers’ pricing policies and lead times so you’re aware of any adjustments they may need to make in response to policy changes. This transparency can also help you spot potential delays or cost spikes sooner, enabling a faster response.
Update Customers on Pricing and Availability: If tariff hikes or policy shifts impact pricing or lead times, communicate these changes to customers proactively. Set realistic expectations and offer transparency about why changes are occurring to maintain trust.
Plan for Increased Lead Times: Shifts in trade policy can lead to port congestion and customs delays. Include buffer times in your production schedule to accommodate potential disruptions and prevent customer dissatisfaction due to late deliveries.
6. Consider Joining Industry Discussions and Support Networks
Staying informed and connected to industry networks can provide valuable insights and resources. Additionally, participating in discussions on regulatory updates allows you to exchange knowledge and prepare strategies collectively with other business owners.
Join Trade Organizations: Trade associations often provide resources on regulatory changes and opportunities to connect with other business owners facing similar challenges. Staying informed through these networks can be crucial to adapting quickly and confidently.
Attend Strategy Sessions and Webinars: Events like our upcoming session on November 22 offer business owners an opportunity to discuss supply chain actions with experts and peers. These gatherings are a great way to share strategies and address challenges collectively. Register here to join us.
Expected Timeline for Trade Policy Changes and Tariffs
While precise timelines depend on new legislative decisions, we can anticipate certain shifts based on historical policy trends:
Early 2025: Expect initial policy announcements and potential legislative proposals that could affect de minimis thresholds and introduce new tariffs. Companies should begin implementing the above steps now to stay ahead of potential changes.
Mid-to-Late 2025: Tariff adjustments or new import restrictions may begin to take effect. By this time, businesses with well-diversified suppliers and established risk mitigation strategies will have a significant advantage.
2025 and Beyond: The impact of new trade policies will likely become clearer, with potential long-term changes in trade regulations. Companies that invested in supply chain resilience will benefit as they avoid unexpected costs and delays.
Final Thoughts
With higher tariffs and evolving trade policies on the horizon, business owners must take action to safeguard their supply chains. Implementing the above strategies—like diversifying suppliers, ensuring accurate HTS classifications, and exploring domestic sourcing—will not only help you withstand near-term challenges but also position your business for long-term resilience.
At Supply Chain Shark, we are committed to supporting business owners through these changes. If you have concerns or would like to discuss specific strategies, feel free to reach out for a one-on-one consultation, or join our November 22 session at 10:00am MT for insights and advice on navigating the evolving trade landscape. Sign up to join the call here: Join the November 22 Call
