In today’s global economy, suppliers stretch across the world. Business owners rely on the easy movement of goods and materials. However, international trade policies — specifically tariffs — can disrupt these flows.
As political tensions rise and new policies emerge, understanding the role tariffs play in global supply chains is important for business owners.
What Are Tariffs?
Tariffs are taxes implemented by a country’s government on goods that are imported into that country.
The intent behind tariffs is to protect domestically grown industries from cheaper competitive markets outside of the country and generate revenue for the government.
While tariffs can create temporary benefits for domestic manufacturers, tariffs can potentially create a negative domino effect that extends beyond the original policy’s intention. These impacts can include decreased economic growth, decreased productivity and damaged trade relationships with other countries the government has imposed tariffs on.
How Tariffs Affect the Supply Chain
1. Increased Costs for Manufacturers and Consumers
Tariffs on foreign goods will increase manufacturer input costs. These increased costs are inevitably passed down the supply chain. If your suppliers are dealing with extra costs because of tariffs, there’s a good chance they’ll raise their prices to make up for it, meaning you pay more. For example, a bottling manufacturer that imports aluminum abroad will incur higher material costs as the aluminum tariffs become more commonplace.
2. Supply Chain Disruptions and Rerouting
Tariffs can push companies to seek new suppliers or transfer their manufacturing operation to cut down on increased costs. But switching things up isn’t quick or easy. It might take several months to find and introduce new partners, renegotiate contracts or transfer production to a different area. All of that can lead to added complexity, delays in production and further economic uncertainty.
3. Uncertainty and Planning Challenges
As trade policies change, it’s tough for businesses to plan for the long-term. Manufacturers must stay informed on global events and be resilient to likely changes in the supply chain. Political and economic unpredictability can make businesses think twice about investing in international partnerships or expanding into new markets.
Since President Trump took office in early 2025, he’s signed several executive orders impacting federal funding for certain programs, tariffs and other government initiatives. Right now, it’s hard to measure exactly how these changes will affect your organization’s financial health, day-to-day operations or cash flow.
4. Pressure to Localize Supply Chains
To minimize the impact of tariffs, some companies are shifting their operations back to the U.S. to avoid import taxes. The tradeoff? It usually comes with higher labor costs. Still, more businesses are going this route, focusing on stability and being able to adapt quickly, rather than just chasing the cheapest option.
Industry-Specific Impacts
Manufacturing
Impact: Sensitive to tariffs, especially if materials or components are imported from other countries where tariffs have been implemented
Result: Production costs will rise, inevitably affecting the end consumer
Construction
Impact: Construction contractors rely on a tremendous amount of imported goods like lumber, steel and aluminum
Result: Delayed projects and raised prices for clients because the price of imported goods is more expensive due to tariffs; commercial and residential building costs will increase
Navigating a Tariff-Heavy Landscape
To remain competitive, businesses must stay resilient, and consider the following:
Diversifying supplier bases across multiple regions — This will reduce the reliance on a singular country and diversify your portfolio of suppliers, ultimately giving you more leverage among suppliers.
Investing in supply chain flexibility and risk management tools — This will allow quicker response to policy changes or price fluctuations. It also results in greater confidence in what to do when a typically reliable supply chain gets disrupted, and a company needs to pivot to a backup plan.
Pass on costs strategically — One option is to raise prices selectively on top-of-the-line products or in areas with less competition. This allows a business to protect its profit margins while not scaring off customers.
Tariffs aren’t just about trade policy. They can seriously shake up supply chains. While some companies might benefit from these tariffs, most are left dealing with higher costs, shipping delays and great economic uncertainty. As global trade continues to change, it is more critical now than ever to reinforce current supply chains and develop relationships with alternative suppliers.
Need Help?
Contact us here or call 800.899.4623.
