Understanding the Potential Tariffs Risks: Eight Strategies for Manufacturers to Mitigate the Impact

For the past several months, the topic of increased tariffs on goods from offshore suppliers has gone from a political debate to a nearly universal discussion about best practices for planning during a period of broad tariff uncertainty. This is putting unprecedented pressure on manufacturing companies to understand the potential tariff risks on their businesses as they evolve and quickly take action to mitigate their impact.

Fortunately, most manufacturers today are operating their businesses with the visibility and control of a manufacturing enterprise resource planning (ERP) system, putting the insights to anticipate and respond to tariffs at their fingertips. Let’s look at eight practical ways that manufacturers—including small to medium businesses (SMBs)—can use their ERP system to understand tariff risks, opportunities and contingencies.

1. Audit your unplanned, but already incurred tariff liabilities resulting from new tariffs imposed since February 2025.
   Tariffs can potentially double the price of goods, depending on the country of origin. Start by reviewing all of your open purchase orders and recent receipts and understand what unplanned tariff charges you may have incurred. For example. if you ordered a production tool from China for $50K and it was not in transit prior to the application of new tariffs, you could owe the new tariff. Even tariffs that were in effect for only a few days have to be paid if the goods reached a port of entry on those days. Goods in final transit when new tariffs were imposed are exempt. Understand that no tricks to avoid tariffs are worth the risk. Customs offices are strictly enforcing the letter of law.
2. Develop a best estimate table of tariffs for the products you buy and their country of origin.
   There is a lot of uncertainty, but having best estimates is much more proactive and actionable than taking a wait-and see-approach.
   • Review your supplier purchase history and make sure you have recorded the country of origin (COO), international product code, and best estimate tariff rate for at least 80% of your purchase dollars. See the Trade Compliance Resource Hub for current tariff situations by county. When a product’s COO is outside of the United States, you should determine its Harmonized Tariff Schedule (HTS) product code. You can easily find the product codes by Googling Product HTS code. For instance, the product code for PET is 3907. The combination of COO and HTS is what determines an item’s tariff rate.
   • Apply the tariff estimates to your purchasing history and develop an estimate of which tariffs will most impact your procurement spending. Remember, you may be sourcing from a distributor who is sourcing products offshore, so your prices may increase in lock step with your distributor’s costs plus the new tariffs. Know which products you buy are subject to tariffs even if they are bought through a distributor.
3. Determine the actions you can take to reduce tariff risks and related costs.
   Working from the most impactful to the least impactful tariff-driven purchasing cost increases, evaluate strategies for off-setting these expenses. This may include:
   • Negotiating with suppliers
   • Changing suppliers
   • Substituting products or components
   • Negotiating customer price increases
   • Abandoning projects that will become significant losses
4. Work with customers to understand how they believe their business will be impacted by tariffs and how that will impact you.
   Look at your sales history and finished goods shipments, and ask customers: How will their businesses be impacted by tariffs, and will it likely cause them to reduce or cancel orders? Will they accept tariff offsetting price increases from you? Will they be cancelling orders? You have to have the dialog with your customers. At the same time, be sure to research any contractual price flexibility or protection you may have in your sales agreements. Unless specifically stated, the impacts of tariffs are not triggers for ‘force majeure’ clauses.
5. Understand where you have capacity to produce repatriated parts.
   If large tariffs do become effective for the long term, there is certain to be increased demand to run existing tooling on domestic equipment. That is why it is important to run your capacity planning models with best case, worst case, and most expected case assumptions for a clear understanding of where, how, and to what extent you can profitably produce repatriated parts.
6. Actively market your capabilities and capacity.
   Reach out to your customers and prospects to see if they have work being done offshore that you could do for them onshore. Open your arms to repatriated tooling and associated projects.
7. Build a forecasting model to predict both short- and long-term outcomes.
   Create reasonable assumptions about price increases, lost business, and potential new business in order to build the forecasting model. Establish the baseline model with assumptions you feel comfortable with and a develop plan to remain profitable with those outcomes.
8. Continuously track and adjust to changing conditions.
   The next several quarters of tariff instability could make both the supply and demand side of your businesses very dynamic. Continue to gather information, monitor events, and work with suppliers and customers to fine-tune assumptions. Regular scenario planning will be essential to reduce tariff risks while maximizing profitability.

Conclusion

The rapidly evolving tariff policies of recent months have made it critical for manufacturers to put proactive mitigation strategies in place. Implementing the eight strategies here can help companies to get ahead of the curve to minimize the risks related to tariffs while maximizing customer loyalty and profitability—today and in the long term.