Tariff Turmoil: Tangible Levers to Strengthen Your Supply Chain and Business

John Fiorentino, Managing Director | Christopher Kulp, Managing Director | Harsha Koushik, Senior Director

Service / Industry: Supply Chain & Procurement Services, Supply Chain & Procurement Services

The Outlook For 2025 — A Year Of Tariffs

The speed of the U.S. administration’s actions has left many corporate leaders in the fray, struggling to quickly understand impacts and options within their supply chains. As of the writing of this article, Mexico and Canada have been given a one-month reprieve from President Donald Trump’s trade tariffs, but goods from China are now subject to new duties.

The trajectory of the new administration suggests these are initial steps towards a more comprehensive approach as it gains access to a broader range of tariff options. The use of the International Emergency Economic Powers Act (IEEPA), which allows the executive branch the ability to impose immediate tariff actions, was one of the few tariff actions available to the administration in their first week. The January 20, 2025, America First Trade Policy, which requests evaluations on trade policy to be submitted to the White House by April, would unlock access to a larger set of tariff actions (e.g., Section 301, 338, 232).

Leveraging the Whole Of The Business

In our many recent discussions across Fortune 100 companies, mid-cap enterprises, supply chain executives — as well as with our own advisory teams in tax and trade — it has become clear that the tariff issue may be a supply chain challenge but requires an integrated business response to best protect the bottom line.

The most effective solutions engage the entire company — sales, product development, distribution, and finance, along with supply chain management teams — to create options for the business.

The bottom line: a cross-functional approach will prove far more effective to pivot around tariff impacts than tackling the challenge in isolation.

Formulate a Response . . . With a Strategic Lens

Our most successful clients began with a focused rapid effort to understand their exposure and current baseline. Understanding your organization’s current exposure and implications, beyond tactical impacts to item landed costs, to include broader strategic perspectives is a crucial enabler. Key considerations that have guided our clients towards more effective solutions include dimensions such as understanding the tier 2 supplier exposure, reconciling how competitor supply chains may influence competitive pricing, and how customer/supplier initiatives may constrain or promote available options.

Typical impact areas to understand include:

Tariff Profile: Understand Harmonized Tariff Schedule (HTS) coding, Country of Origin, Value-Add segments, and exemption/exclusion coverage.
Secondary Tariff Exposure: Identify the extended supply chain risks from Tier 2 suppliers, such as sub-assemblies or distributor purchases.
Aligning with Existing Tariff Mitigation Initiatives: Assess and align with initiatives already underway with key suppliers and customers, including pricing, alternate production options and other actions.
Contract Exposure: Understand customer and supplier contracts for tariff-related clauses, pass-through cost clauses, force majeure and termination rights.
Commercial Pricing Impact: Determine impact and flexibility in customer pricing adjustments and timing to address shifts in cost basis.
Prioritize on Margin Impact: Understand margin impact to prioritize efforts on key products, suppliers and customers.
Understand Impact to Competitive Positioning: Evaluate how tariffs affect competitors pricing strategies, particularly where competitors may be more immune to tariffs with domestic capabilities and partners.
Supply Chain Team/Talent Readiness: Ensure Supply Chain Management and Procurement teams have the skills and tools to manage these complexities.

Take Decisive Actions to Mitigate Risk And Run the “No-Regrets” Plays

As the impact and degree of exposure becomes clear, companies are first looking to understand ‘no regrets’ moves given the uncertainty on tariff longevity while also consider longer term pivots. Given the highly volatile and uncertain duration of these tariffs, separating out these actions will allow the business to drive immediate impact as the larger strategic decisions can be evaluated.

We see four key themes on how companies are mobilizing, each of which offers both near-term and long-term solutions:

(Re-)Optimize the Supply Chain and Cost Basis — Fully explore pricing options with current suppliers, validate the full range of global re-source/insource options, harvesting margin and working capital improvements to offset tariff impacts.
Tariff Engineering — Reclassify or modify product classifications to reduce tariff exposure. Adjust product design, assembly or build processes and locations to optimize tariffs by shifting assembly work or testing to lower-tariff regions, for example.
Align Contracts: Structure future supplier and customer agreements to pass through, transfer or mitigate tariff-related costs. Build contract escape clauses or milestones that would trigger renegotiation or exit based on tariff impacts.
Leverage or Create Tariff Exemptions and Exclusions — Maximize the use of existing tariff exceptions, explore opportunities with industry peers to develop additional exclusions and understand free trade zone and duty drawback options.

A&M Is Here to Help

A&M is experienced in conducting rapid assessments for manufacturers, resellers and distributors across industrial, med tech, electronics, consumer goods, food/beverage and other related industries. That’s why we’ve developed our TRaCCO (Tariffs, Resiliency and Cost/Cash Optimization) assessment, which is designed to rapidly expose risks, identify opportunities and provide a roadmap to create competitive advantage.

We focus on key areas to help companies mitigate tariff risks, including: