How can you mitigate the risks of tariff changes with suppliers and customers?

1 Assess your exposure

The first step to mitigate the risks of tariff changes is to assess your exposure to them. This means identifying the sources and destinations of your imports and exports, the tariff rates and regimes that apply to them, and the potential scenarios that could affect them in the future. For example, you should monitor the trade agreements and disputes that involve your trading partners, the political and economic factors that could influence tariff decisions, and the market conditions that could affect demand and supply. By assessing your exposure, you can anticipate the possible impacts of tariff changes on your margins, cash flow, and market share.

2 Negotiate with suppliers and customers

The second step to mitigate the risks of tariff changes is to negotiate with your suppliers and customers. This means exploring the options and alternatives that can help you share or reduce the tariff burden, or pass it on to the end consumer. For example, you could negotiate for lower prices, longer payment terms, or flexible contracts with your suppliers, or offer discounts, incentives, or value-added services to your customers. You could also consider switching to different suppliers or customers that offer more favorable tariff conditions, or diversify your sourcing or distribution channels to reduce your dependence on a single market.

3 Optimize your logistics and compliance

The third step to mitigate the risks of tariff changes is to optimize your logistics and compliance. This means finding the most efficient and cost-effective ways to transport, store, and clear your goods across borders, while complying with the relevant rules and regulations. For example, you could use different modes of transportation, optimize your shipment size and frequency, or consolidate or deconsolidate your cargo at strategic locations. You could also leverage the benefits of free trade zones, duty drawback schemes, or preferential trade agreements that can lower or eliminate your tariff obligations, or use the services of customs brokers or freight forwarders that can facilitate your customs clearance.

4 Hedge your currency risk

The fourth step to mitigate the risks of tariff changes is to hedge your currency risk. This means protecting yourself from the fluctuations in exchange rates that can affect your profitability and competitiveness. For example, you could use forward contracts, futures contracts, options, or swaps to lock in a favorable exchange rate for your future transactions, or use a currency account or a multicurrency card to pay or receive payments in different currencies. You could also monitor the trends and forecasts of the currency markets, and adjust your pricing and invoicing strategies accordingly.

5 Review your contracts and policies

The fifth step to mitigate the risks of tariff changes is to review your contracts and policies. This means ensuring that your agreements with your suppliers and customers reflect the current and potential tariff scenarios, and that you have the necessary clauses and safeguards to protect your interests and rights. For example, you could include force majeure clauses, tariff adjustment clauses, or termination clauses that allow you to modify or cancel your contracts in case of significant tariff changes. You could also review your insurance policies, credit policies, and risk management policies to cover the possible losses or liabilities that tariff changes could cause.

6 Stay informed and flexible

The sixth and final step to mitigate the risks of tariff changes is to stay informed and flexible. This means keeping yourself updated on the latest developments and changes in the tariff landscape, and being ready to adapt and respond to them. For example, you should subscribe to reliable sources of information, such as trade associations, government agencies, or industry publications, that can alert you to any tariff changes or opportunities. You should also maintain a close communication and collaboration with your suppliers and customers, and seek their feedback and suggestions on how to cope with tariff changes. Finally, you should be flexible and open-minded, and explore new markets, products, or partnerships that can help you thrive in a dynamic and uncertain trade environment.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?