By Laura Dow
With many of the Trump administration’s tariffs now in effect, most businesses have moved past the point of wondering how these tariffs will affect them and focusing on minimizing their impact. Although few companies will remain completely unaffected by the tariffs, leaders can turn this challenge into an opportunity to make them stronger in the long run.
Many, including the Trump administration itself, have proposed several stopgap solutions that could alleviate some of the pressure from these tariffs. However, these “solutions” hardly address the issues plaguing businesses in the import/export industry, especially in the long term.
For example, many people have suggested ideas such as reshoring (bringing manufacturing industry jobs back to the U.S.) or nearshoring (bringing manufacturing to nearby countries, such as Mexico), but these approaches have their own shortcomings and challenges.
Rather than taking one of these short-sighted approaches, businesses would be better off looking at the big picture and seeking to build resilience in their supply chains. The tariffs are only the latest incident showing how fragile our supply chain ecosystem can be.
Other crises, such as the COVID-19 pandemic, have shown the industry how important it is to build resilience, ensure business continuity and minimize the risk of disruption.
How to build resilience
In the face of the new tariffs, businesses should conduct supplier audits to assess the impact of the tariffs on their trade relationships. Now is the time to reevaluate factors such as compliance with trade regulations, accurate product classification for tariffs, and potential supply chain disruptions.
By understanding these things, businesses can identify which relationships are still viable, which need to be reevaluated, and which may need to be paused altogether.
Supply chain resilience is not just about relocation, but also diversification. We’ve already seen how fickle the tariff situation has become, with President Trump pausing or reducing some tariffs while implementing or increasing others.
Pulling your supply chain out of one country for another because of the tariffs may not be wise, as we don’t know which countries will be affected next. You could relocate your supply chain to another country, only to be slapped with equal or higher tariffs. Dual sourcing — keeping your supply chain in China while adding a second sourcing partner as a redundancy — could prove a wise diversification strategy.
Alternatively, business leaders could use this situation to renegotiate with their suppliers. Most suppliers are willing to absorb some of the costs of tariffs to keep their business.
Furthermore, many U.S. businesses have canceled orders in China due to the tariffs, creating a surplus that suppliers may be willing to offload at lower prices. The goods can be purchased now and stored at a warehouse in China, and would only be subjected to tariffs upon arrival in the U.S. However, the tariffs could change while goods are en route from China to the U.S.
Another solution is using a bonded warehouse, where stored goods, even in the U.S., are not subject to tariffs until they’re removed. Businesses with overseas clients could also ship directly from the bonded warehouse to non-U.S. countries, avoiding the tariffs altogether.
Whether one stores goods in an overseas warehouse or locally in a bonded warehouse, the uncertainty factor still makes both options risky. Also, the cost of bonded warehouses is steadily increasing, while their availability is rapidly decreasing.
Getting support
Perhaps the most effective way to overcome the challenges of the tariffs is to enlist the help of a trusted supply chain management company. These companies often have decades of experience advising businesses on supply chain issues and navigating numerous obstacles, including geopolitical strife, pandemics and recessions. Because of this, they have the skills and background to develop the solutions any business needs to address its tariff troubles.
The tariffs understandably present a serious economic obstacle for many businesses in the import and export sector. However, as challenging as this can be, like any other obstacle, it can be overcome. By establishing resilience in your supply chain, auditing your suppliers and partnering with a reputable supply chain management company, you can come out on the other side stronger than before.
Laura Dow is the business director at CPG Sourcing, a full sourcing service provider and business adviser operating in China since 1978. Dow began working in China in 2006 as a Peace Corps volunteer in Sichuan province. She holds a master’s degree in international affairs and Chinese studies from the Johns Hopkins School of Advanced International Studies. Dow speaks English and Mandarin fluently.
Illustration: Li-Anne Dias
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