How Can Your Company Stay Ahead As Tariffs Disrupt? Here Are Some Key Steps

President Donald Trump’s tariffs have been unsettling to many U.S. industries and consumers. And it’s even more nerve-racking when you consider that the who’s-going-to-blink game with our major trading partners is only in the early stages.

As threats and specifics change frequently, uncertainty reigns and rises daily. Anxiety for company leaders is sure to increase as they try to cope with a serious situation that has affected the stock market and has caused some consumers to pull back. Companies are warning they may have to raise prices, inflation is in danger of rising, and a recession may not be far away.

While it’s hard to stay ahead of a crisis that continues to evolve, CEOs might want to consider taking these steps to keep their business competitive in the wake of the tariff war:

• Review all existing contracts – This includes contracts with suppliers and customers as businesses try to determine the effects tariffs can have on pricing and delivery terms. From that review, leaders may conclude that they need to renegotiate contracts.
• Diversify supply chains – Relying heavily on a single country or supplier can expose companies to significant risks amid changing trade policies. Reduce that reliance by looking to move production to another country with lower tariffs, or to the U.S. Honda is an example of companies making the latter move. The Japanese automaker had planned to produce its new Civic in Mexico, but switched to Indiana after the proposed 25% tariff on Mexico.

  Also, businesses can mitigate the impact of country-specific tariffs by sourcing materials and products from multiple countries. One company adapting to new tariff regulations in this way is Inditex, which leverages a diversified production base across 50 countries. Look for a way to streamline the number of ports that products move through to reduce costs, improve speed to market, and beat the tariff game.

• Look at your pricing and overall cost structures – Before raising prices, review cost-cutting opportunities to protect consumers and see what happens in the next month or two. Sometimes raising prices is unavoidable, but look for opportunities to avoid passing the costs of the tariffs on to consumers. Chipotle, for example, is currently holding pricing constant.

  To understand how tariffs can affect profitability, companies should conduct a comprehensive cost analysis. That involves areas such as manufacturing, the cost of imported materials, and the supply chain. From that review, your business can make informed decisions about pricing. Know the exemptions that are in place and see if your products match these, or reclassify products to meet the current exemptions.

• Be transparent with your customers – If you have to raise prices, communicate to your customers why you are doing so, and reassure them that you will bring prices back to where they were post-tariff issues. When you’ve built trust with your customers, transparency about why prices are increasing can mitigate pushback from them and retain their trust. The opposite occurs if you just raise prices with no explanation, implying that they’ll just have to deal with it. That approach shows them disrespect.

  Trust is the theme here and it cannot be overstated. It is often hard to earn, yet it’s the easiest thing to lose. You earn trust by being consistent in what you do, by doing what you say you will do, and never wavering. As you continue to demonstrate results, you will continue to earn trust. And as trust is easy to lose, you need to avoid making missteps, but when they happen, and when forces outside your control that negatively affect your customers happen – such as tariffs – be transparent and own these, just as you do your successes.

• Keep your employees updated – As companies go through uncertainty, it is important to not only keep customers updated, but to also keep communication open to employees because they can be as unsettled as company leaders and customers. Trust is as important a factor in keeping your company together in adverse times as it is to keeping your customers connected with you during those times. There is a saying: In the absence of information, people will make up stories and those stories then become rumors. You want to have frequent and transparent communications with employees on the company’s plans and actions to avoid the spread of rumors. Transparent and frequent communication is critical during uncertainty, ensuring teams understand the strategy moving forward.
• Explore opportunities for innovation and transformation – Challenges businesses encounter provide opportunities to adapt, innovate, and show major improvement overall. On the positive side, tariffs present companies with the chance to do all those things, and even transform into a better version. In the process, they can grow, win more customers, and not only remain competitive but gain a competitive edge.

Innovation within a company starts with this: If people are going to think differently, they must have time to be able to think. Innovation doesn’t come from any one leader but from people who understand both the technology and the business. Your job as a leader is to find ways to tap into the incredible potential in your teams. The inspiration comes from the employee who understands the business and technology and has a passion for their ideas. That is where magic happens.

Leveraging technology can be a big factor in navigating the intricacies of tariffs. Investing in automation and digitalization tools can greatly enhance a company’s efficiency. Supply chain management software helps with visibility into inventory levels and transportation costs and leads to making informed decisions about sourcing and logistics.

Addressing these areas can help businesses mitigate the impacts of tariffs. Being proactive can position your company for sustainable growth in the global trade environment.

Written by Mamie F. Jones.
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