Tariffs and trade wars: how businesses can adapt and manage costs

ARTICLE | April 25, 2025

Authored by Schlenner Wenner & Co

Following recent announcements of broad new tariffs on imports—including universal tariffs and higher reciprocal tariffs for certain nations—businesses are facing an urgent question: how to adapt strategically amid uncertainty.

While headlines often focus on the political dimensions of trade policy, businesses must concentrate on practical responses. Trade conditions are evolving rapidly, and while specific numbers may shift, the underlying need for resilience remains constant.

In this article, we break down what tariffs mean in practical terms, who may be most affected, and the steps businesses can take to strengthen operations and manage costs effectively.

What are tariffs?

Tariffs are taxes placed on imported goods, typically paid by the importer of record at the point of entry into the country. In most cases, U.S. businesses importing goods bear the direct cost, which may then be passed along to American consumers through higher prices (CRS, 2024, CBO, 2024, WTO, 2024).

In practice, tariffs can influence supply chains, reshape pricing strategies, and lead to retaliatory measures by other countries.

While the specifics vary over time, tariffs have long been a fixture of global trade policy, with mixed historical outcomes. Some sectors have experienced temporary gains—such as increased domestic production—while others have faced higher input costs and market volatility.

It’s important to recognize that each situation is shaped by broader economic conditions, policy responses, and business adaptability. Historical patterns can offer valuable insights, but they do not guarantee specific outcomes. Instead of relying solely on past precedents, businesses are best served by scenario planning and preparing for a range of possible outcomes.

Who may be affected?

For many businesses, the impact of tariffs depends heavily on how reliant they are on imported materials, components, or finished goods. Even industries that appear domestically focused are often more globally connected than they seem. Manufacturing relies on foreign semiconductors and machinery; retail depends on imported textiles and electronics; construction draws heavily from international sources of steel, aluminum, and lumber. 

Although there is some U.S. production of these materials and components, domestic capacity is unlikely to scale quickly enough to fully offset near-term supply challenges. Building new facilities, ramping up output, and securing skilled labor all require time and significant investment—making immediate substitution difficult for many industries. 

Practical strategies to strengthen business resilience

In a shifting trade environment, businesses must take proactive steps to protect margins, stabilize operations, and position themselves for long-term success. 

Sell unaffected inventory

First, focus on strengthening immediate cash flow by maximizing existing inventory. When practical, prioritize selling products that were imported before new tariffs took effect. For example, dealerships holding vehicles or retailers holding inventory that entered the U.S. under lower-duty structures may be able to command better margins and generate early cash flow. Creating a financial buffer through promotion of current inventory can provide breathing room while longer-term strategies are implemented.

Assess supply chain exposure and identify alternatives

One of the most effective strategies is to reduce dependency on high-tariff countries. Start by mapping where critical supplies and imports are sourced, paying special attention to goods originating in countries subject to elevated tariffs. 

From there, evaluate alternative suppliers, focusing on domestic alternatives first. In some cases, domestically produced goods may become more competitive or even less expensive than imported options. If domestic sourcing is unavailable or cost-prohibitive, evaluate suppliers in countries subject to lower tariffs. 

This process requires rigorous cost analysis and scenario planning. Businesses should not only compare the base price of goods but also factor in tariffs, transportation, lead times, quality standards, and supply reliability. Running multiple supply chain simulations—comparing the costs and risks across different sourcing options—can help identify the least disruptive paths forward.

Supply chain diversification can also build long-term resilience. Companies that spread production and sourcing across multiple geographies are better positioned to navigate future shocks, whether from tariffs, geopolitical tensions, or natural disasters.

Negotiate with suppliers

Once exposure is understood, proactively negotiate with suppliers. Many U.S. businesses and their foreign partners are facing similar pressures. By approaching suppliers with data on tariff impacts and alternative sourcing options, companies can open constructive negotiations to share cost burdens. Suppliers may prefer to make concessions rather than risk losing long-term business. 

Before entering negotiations, review existing contracts for any provisions that could provide additional leverage. Clauses such as force majeure, material adverse change, or tariff escalation provisions may create opportunities for renegotiation. Be sure to consult qualified legal counsel to review contract language and ensure compliance with applicable regulations. 

In all cases, position these conversations as partnership efforts: both parties benefit from preserving the relationship in an evolving trade environment.

Review tariff classifications

Goods imported into the U.S. are classified under the Harmonized Tariff Schedule (HTS), a standardized coding system that determines the applicable tariff rate. Misclassifying products can lead to higher duties, delays at customs, and even fines.

Accurate classification can sometimes reduce duty rates, and companies should also monitor for any exemptions or product exclusions that may apply. For companies facing margin pressure, a detailed review of product classifications with a trade advisor could result in significant savings without shifting supply chains entirely.

Consider trade agreements and duty relief programs

Even when tariff policies change, the U.S. may continue to honor some existing trade agreements and maintain programs that can partially offset new duties. However, eligibility for these programs isn’t automatic. Businesses must proactively apply, maintain thorough documentation, and often work with legal or trade experts to ensure compliance. But the potential savings can be significant.

Free Trade Agreements (FTAs):
Goods imported under agreements like the USMCA or others may still qualify for preferential treatment if specific rules of origin are met. 

Tariff Exclusions:
In some cases, businesses can apply for product-specific tariff exclusions if they can demonstrate that the item is not available domestically or is critical for U.S. manufacturing or security. Currently, exclusion processes for the new 2025 tariffs have not yet been announced, but businesses should monitor the Office of the United States Trade Representative (USTR) and Customs and Border Protection (CBP) trade remedies websites for updates as policies evolve.

Duty Drawback Programs:
For businesses that import goods and then export them again—such as re-exporters or companies involved in international assembly—duty drawback programs may allow for a refund of some of the tariffs paid. This can be a major cost-saving tool for companies with global supply chains.

Foreign Trade Zones (FTZs):
Companies operating within a designated Foreign Trade Zone can often defer, reduce, or even eliminate customs duties on imports that are re-exported or used to manufacture goods for export.

Develop a strategic pricing plan

Tariffs can materially impact cost structures. Many companies will need to reassess their pricing strategies, but broad price increases come with risk.  Customers and partners are highly sensitive to cost pressures, and abrupt or poorly explained changes can quickly erode trust and demand.

Businesses should clearly link any price adjustments to the external factors at play. Framing the adjustment as a direct response to unavoidable trade policy changes can help preserve goodwill.

In some cases, businesses may also consider isolating tariff-related costs as a specific surcharge—similar to how some companies added COVID-19 surcharges during the pandemic. Labeling the additional cost separately on invoices or receipts (for example, as a "Temporary Tariff Adjustment") can make the pricing change more transparent and palatable to customers. However, companies should ensure that any additional fees are clearly disclosed to customers in advance. While no federal law currently prohibits tariff-related surcharges, certain states have strict consumer protection laws that require transparency regarding any additional charges. For instance, several states require that surcharges be disclosed upfront before consumers agree to a purchase and not just hidden on the final receipt. 

Consider supply chain technology

Digital tools such as supply chain management software, predictive analytics, and AI-powered forecasting can help businesses model different scenarios, identify vulnerabilities, and optimize logistics under changing conditions.

Modern supply chain visibility platforms can help businesses map their supplier networks down to the country of origin, allowing them to identify exposure to high-tariff countries and evaluate alternatives.

AI applications can rapidly analyze supplier data, optimize procurement strategies, and highlight cost-saving opportunities that might otherwise be missed. In addition, cost simulation engines allow businesses to run "what-if" models to predict how sourcing changes could impact profitability and supply chain stability.

Charting a path forward

Tariffs are a powerful lever in global trade policy, but they bring complexity and uncertainty. 

Companies that take steps to diversify supply chains, manage costs, and adapt strategically will be in the best position to weather potential disruption—and even uncover new competitive advantages.

If your business is facing uncertainty in light of these new tariffs, now is the time to consult with experienced advisors to identify adaptive strategies. 

This article is provided for general informational purposes only and does not constitute legal, tax, or investment advice. Always consult qualified professionals and review current regulations before making business decisions. The trade and regulatory environment can change rapidly. No guarantee is offered regarding the eventual enactment, timing, or effect of any proposed measures or legislation.