Tariff(ic) Counterwinds Ahead, Are You Ready?

By Paul A. Myerson Adjunct Professor,
Supply Chain Management, Kean University and author of books on Lean and the Supply Chain for McGraw-Hill, Pearson, and Productivity Press
732-441-3879
[email protected]

Companies that aren’t prepared for these events will face a variety of possible consequences such as significant price increases, stockouts or overstocks, tariff retaliations, and labor shortages, all of which may lead to an economic downturn.

Proactive companies are already prepared in some degree for the potential disruptions that tariffs could trigger. They adapted their supply chain and logistics strategies to be more lean and agile, enabling them to better cope with disruptions.

This preparation includes diversifying supply and customer bases, building more domestic supply chains, or investing in software or financial tools to help manage uncertainty.

As far as a more long-term trend in reshoring, only high-value goods manufacturing is most likely viable in the United States due to complex supply chains and high labor costs.

We could see pressure on labor both through the inflationary pressures that come in general with tariffs and a conservative immigration policy that further reduces the labor force. This could also be an incentive for greater automation in manufacturing and processing facilities.

Trade Diversion Strategy

When direct imports from China to the United States decreased during tariffs by the previous administration, trade diversion became a prominent strategy and will likely be again. Countries such as Vietnam and Mexico saw increases in imports of Chinese components, which were then assembled into final products and exported to the United States.

One supply chain trend in the past 10 years or so has been a balance between efficiency and resiliency. Companies want to have flexibility by sourcing from different suppliers, but don’t necessarily want to hold extra inventory at a higher cost, thereby risking excess waste of inputs.

Forward-thinking companies should try to mitigate and manage cost, time, and labor pressures by continuing to make—and rely on—greater investments in supply chain planning, data and analytical tools, and automation.

Rather than just ordering more of everything ahead of time, which some have already done, it would be wise to use more of an analytical approach. Consider these steps:

• Map supply chains to understand product origins and assess tariff exposure.
• Model what-if scenarios to quantify potential business impacts.
• Prepare detailed data for exclusion requests and to support rapid adjustments.
• Evaluate supply chain diversification options, and balance risks and benefits by region.
• Anticipate potential shifts in consumer behavior and financial impacts.
• Monitor announcements on tariffs and exemption procedures.

To summarize, the most important step companies can take to prepare for the likely upcoming volatility is to map their supply chains, identifying where their products and components originate, determine which could be affected, and plan accordingly.