Navigating Tariffs (And Trade Wars): what YOU must KNOW, DO, and HAVE.

Foreword

Tariffs are currently a hot topic because of the U.S. elections. However:

1. The mentions of new or increased tariffs made during the campaign haven’t yet materialized and may never. They may have been just a way to pressure trade partners for upcoming negotiations and discussions, or new tariffs will be, in fact, implemented. This uncertainty explains that many have taken a wait-and-see attitude when others are taking action.
2. Tariffs are one example of the many flavors that unilateral measures and regulations in trade wars can have. Export/import controls, subsidies, and litigations are other weapons in a protectionist’s arsenal.

Therefore, the key is readiness and agility to respond to these measures. Procurement teams must not wait to ramp up capabilities (action plan and technology, as covered below).

It is less of an if or what question than one of when.

That being said, and considering the renewed and focused attention to tariffs, we want to use tariffs as a sort of “case study” to illustrate what procurement teams can do and how technology can support them.

Trade policies, specifically tariffs, are back in the spotlight. Whether they are measures to protect local industries, retaliatory moves in trade disputes, or efforts to reduce economic dependence on specific regions, these decisions ripple through global supply chains.

For procurement teams, tariff changes often mean sudden cost increases, disrupted supply routes, and reviews of sourcing strategies.

The question isn’t?if?tariffs will impact procurement but?how teams can adapt and thrive in this evolving landscape.

This "guide" unpacks tariffs, explores their implications for procurement and how technology can help teams navigate the challenges they bring.

This article is based on a mini-series available on Spend Matters that goes into more details (link at the end of the article).

What Are Tariffs?

They’re taxes that governments impose when goods cross borders—either coming in or going out. You’ve probably heard about import tariffs, which make foreign products more expensive to protect local industries. On the other hand, export tariffs are rarer, but they’re like a country saying, “Let’s keep the good stuff here.”

Why Do They Exist?

Governments use tariffs for a variety of reasons: to boost revenue, keep local businesses competitive, or regulate trade. For example, if a country floods the market with cheap steel, a tariff can act like a speed bump, slowing imports and giving local producers a fighting chance.

What’s the Catch?

While tariffs can protect jobs and industries, they also mean higher prices. The costs don’t stop at the border—they ripple down to businesses and, eventually, to consumers. Want a cheaper laptop or car? Tariffs might have other plans.

A Look Back

Tariffs aren’t a modern invention. Ancient traders on the Silk Road paid duties to cross borders, and in the 18th century, tariffs were the economic backbone for nations like the United States. Today, tariffs are less about funding governments and more about political chess games.

How Tariffs Impact Procurement

Procurement’s Frontline Role

If tariffs are the storm, procurement is the umbrella. When trade policies shift, procurement teams are often the first to feel the downpour, grappling with rising costs and disrupted supply chains.

Cost Implications

Tariffs directly increase the price of imported goods. Unless you’ve got a supplier willing to pay the extra cost (hint: you probably don’t), those expenses will roll downhill for you. And then it’s up to procurement to figure out how to keep margins intact.

Sourcing Dilemmas

Imagine that what you buy from a supplier in another country gets hit with a hefty tariff. Do you look for a local option? Switch to another country? Or just take the hit? None of these are easy answers, each with its own trade-offs.

Supply Chain Twists and Turns

Global supply chains make things even trickier. Suppose you import car parts from Country B, which faces new tariffs from your home country, Country A. What if you reroute those parts through Country C, where the tariff is lower? Sounds clever, but you’ll need to navigate something called Rules of Origin (ROO) to figure out if that’s even making a difference.

Building a Tariff Management Action Plan

Start with a Team Effort

Tackling tariffs isn’t a solo mission. You need a team that includes procurement, finance, legal, and logistics.

Crunch the Numbers

Mapping your supply chain is step one. You’ve got to know exactly where your materials come from and where costs might spike.

Smart Strategies for Survival

• Tariff Engineering: You might lower or even avoid the tax by reclassifying your product under a different tariff code.
• Use Trade Agreements:?If your supplier is in a country with a Free Trade Agreement, congratulations—you might have just dodged a bullet.
• Redesign Your Supply Chain:?Spread your sourcing across multiple countries to reduce risks. Yes, it’s complicated, but so is the alternative.
• Stock Up:?If you know a tariff hike is coming, consider buying extra inventory beforehand. Just don’t overdo it and end up with a warehouse full of stuff you can’t move.

How Technology Helps Procurement Teams

Tariffs cannot be managed with guesswork. Procurement technology offers tools to see the big picture, adapt to changes, and make data-driven decisions.

What’s in the Toolbox?

1. Supply Chain Mapping:?To know where every (sub)part of your product comes from and highlight risks.
2. Cost Intelligence:?To know the total cost of ownership for a product, including applicable tariffs.
3. Predictive Analytics:?To simulate “what if” scenarios so you can prepare for future changes and/or compare options.
4. Contract Automation:?To mine current contracts and update them when necessary.

A Practical Example

Say your business imports electronics, and tariffs on those components double overnight. Technology can flag the cost increase, suggest alternative suppliers in lower-tariff regions, and even update contracts with new terms—all before you finish your morning coffee.

Staying Ahead of Tariff Challenges

Keep Tabs on Changes

Tariffs don’t have a “set it and forget it” option. They evolve, and staying informed is non-negotiable. Technology can track real-time updates, ensuring you’re never caught off guard.

Strengthen Relationships

Good communication with suppliers, stakeholders, and even trade associations can make a difference. Advocacy might even get you an exemption.

Build Resilience

Diversify suppliers, negotiate flexible contracts, and keep your inventory strategy nimble.

Wrapping It Up

With preparation, adequate strategies, and the right technology, procurement teams can be better prepared to address the challenges ahead. It’s not easy, but who said that procurement is boring?

Want to go deeper on this topic? Follow this link.