Retail Industry's Approach to Tariffs Through Supply Chain Tactics
In the wake of the Trump administration imposing a 10% baseline tariff on nearly all U.S. imports, retailers and brands are scrambling to find ways to manage the surge in sourcing costs. One report, "Managing Tariff Turbulence in Supply Chains," outlines eight key strategies that companies are employing to build resilience and mitigate risks posed by tariffs.
- Nearshoring and Reshoring: By bringing production closer to end markets, companies can avoid or reduce tariffs on imports. This strategy is becoming increasingly popular, as companies look to reduce their dependence on tariff-affected regions.
- Supply Chain Diversification: Expanding supplier bases across multiple countries is another strategy for preventing dependence on any one tariff-affected region. Many companies are moving beyond basic diversification, building out multiple pre-vetted alternatives in each major category and negotiating capacity-sharing agreements.
- Scenario Planning and Advanced Analytics: Anticipating tariff changes and optimizing supply chain decisions dynamically is crucial. Companies are investing in advanced analytics to predict the impact of tariff changes on their operations and make informed decisions.
- Total Landed Cost Optimization: Instead of just focusing on unit price, companies are factoring in tariffs, transportation, and compliance costs comprehensively. This approach helps companies to make more informed decisions about their sourcing and logistics strategies.
- Strategic Inventory Repositioning: Building buffer stocks or shifting inventory geographically to navigate tariff fluctuations is another strategy. Companies are also exploring the option of front loading inventory to avoid future tariff increases.
- Investment in Supply Chain Orchestration Technologies: Enhancing real-time visibility and agility amid tariff uncertainties is essential. Investing in supply chain orchestration technologies can help companies to maintain control over their operations and respond quickly to changes in the tariff environment.
- Engagement in Trade Agreement Negotiations and Lobbying: Companies are engaging in trade agreement negotiations and lobbying to influence or adapt to changing tariff policies. This strategy is particularly important for companies that rely heavily on tariff-affected regions.
- Legal Risk Management: Companies are taking steps to mitigate their tariff exposure through legal frameworks. This can involve challenging tariffs through legal channels or adapting contracts to reflect the new tariff environment.
In addition to these strategies, some companies are exploring tariff engineering, modifying product design or classification to qualify for lower tariff rates. Regular auditing and staff training are also essential for accurate tariff classification.
The new normal will require long-term strategic adaptation for retailers. Companies that invest in flexibility, transparency, and cross-functional coordination will be best positioned to thrive in the shifting trade landscape. Real-time visibility into supplier capabilities and compliance metrics is critical for managing the volatility of today's new global trade order.
References: [1] TradeBeyond. (2025). Managing Tariff Turbulence in Supply Chains. [2] The White House. (2018). Statement on Section 301 Action: Trade Actions in Response to China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. [4] U.S. Customs and Border Protection. (2020). Harmonized Tariff Schedule of the United States. [5] Office of the United States Trade Representative. (2018). Section 301: Action Taken on China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.
- In response to escalating trade tensions, some businesses are engineering their products to qualify for lower tariff rates, seeking advantageous tariff classifications.
- Recognizing the importance of strategic adaptability in the era of volatile global trade, companies are investing in technologies that improve supply chain orchestration and enhance real-time visibility.
- As trade agreements are subject to negotiation and modification, leading players in the business sector are actively engaging in policy discussions and lobbying efforts to remain competitive within the increasingly complex trade landscape.
