Global economies are poised for a dynamic change as the recent US elections indicate likely tariffs, which would cause business tax implications and potential “trade wars.” The policy specifics could be rolled out as soon as the first quarter of 2025, and companies need to be prepared by investing in scenario planning and impact hypothesis studies. Planning should not only focus on China but also other high-probability countries and industries that will be targeted by the tariffs. A proactive approach will allow companies to understand and address tariff increases in ways that protect their bottom line, maintain customer satisfaction, and stay competitive in the global marketplace.

Anticipating tariff and trade impacts

Policymakers will probably enact widespread use of tariffs, aiming to reduce trade deficits, combat inflation, reshape relationships with trading partners, and boost US-based manufacturing. The likelihood of an all-out trade war is uncertain, but the tides appear to be trending that way. Some previously implemented tariffs are still in place today (such as the Section 301 China and Section 232 Steel and Aluminum tariffs), causing déjà vu—and lessons learned—for many company leaders. Companies with US presence, operations, suppliers, R&D, or customers should not delay their strategic and tactical planning efforts.

By planning ahead for tariff-related concerns, CFOs, COOs, and supply chain leaders can mitigate against impacts such as:

Cost increases are likely to arise related to raw materials, packaging, services, transportation, or labor, and it is unlikely these rising costs can be absorbed by businesses. Tariffs and related implications will present costs that must be passed on to customers, along with the risks of customer attrition and lost revenue.

Supply constraints can result from many factors, including when a company reprioritizes its customer segmentation because of the margin or profitability outlook, or if manufacturing or distribution changes lead to a capacity that is not optimized.

Geopolitical instability could result in retaliatory actions on tariffs and regulations making for a more complex cross-border operating environment. Much of this activity will be beyond an individual company’s control or influence.

Competitive pressures will vary depending on the landscape of the domestic industry, the nature of products, and the responsiveness of firms to these changes. In the short term, tariffs could reduce competition from international companies, but, in turn, competition might increase domestically.

Market volatility is an inevitable outcome when tariffs and trade war discussions take place, let alone when talks turn into reality. The key message that resonates through domestic and international markets is “uncertainty,” which then can create volatility.

Levers to pull across finance and operations

The good news is there are many ways companies can optimize. On global trade and supply chain fronts, finance and operations leaders can pull levers such as:

• Manufacturing and distribution network optimization (nearshoring, onshoring)
• Strategic sourcing and supplier management
• Trade preference/duty optimization programs
• Harmonized tariff code engineering
• Pricing/commercial strategies
• Policy advocation

These available levers range in terms of value, complexity, and time. By conducting scenario analyses and mapping out strategies and tactics early, leaders will be well-positioned to respond in 2025 and beyond.

Approaches for addressing tariffs

Knowing that solutions can be complex, tariff-related strategies and contingency planning should start now to give business leaders adequate time to implement. With tariff and trade impacts on the horizon, here’s how CFOs, COOs, and supply chain leaders can position their companies for success at each stage:

Recent history indicates that momentous change is ahead. How extreme? Only time will tell. Flexibility, strategic thinking, and staying prepared for market changes will be key to successfully navigating tariffs and other geopolitical challenges that will certainly affect businesses in 2025 and beyond.

Need guidance related to tariffs?

Today’s CFOs, operations, supply chain, and other business leaders can benefit from partnering with an advisor to anticipate and address the impacts of tariffs and trade disruption. Working with you to simplify complexities and tackle the most pressing needs of each business, the team of professionals at Riveron provide guidance across several areas of expertise:

• Supply Chain Strategy and Execution, including SKU profitability, network design, strategic sourcing, and inventory strategy
• Global Trade and Tax advisory, including trade preference optimization, HS code optimization, and regulatory technical guidance
• Financial Planning and Analysis across cash forecasting, financial modeling, long-range strategic planning, and more

Explore our related offerings:  Supply Chain | Tax Advisory  | FP&A | All Services

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