Preparing Your Business for the Impact of Import Tariffs?

As global trade dynamics continue to evolve, import tariffs are once again a topic of significant concern for businesses. When tariffs hit, they create a ripple effect across industries—affecting costs, supply chains, pricing, and profitability. At Kaplan CFO Solutions, we understand that these changes can feel overwhelming, but preparation is key to minimizing disruption and maintaining financial stability.?

Here’s what to expect when import tariffs are introduced—and how businesses can adapt proactively.?

What Happens When Import Tariffs Are Introduced??

Import tariffs are taxes levied on goods entering a country, often intended to protect domestic industries or address trade imbalances. However, the impact of tariffs extends far beyond the initial cost increase. Here are the primary effects businesses can expect:?

1. Increased Costs? Tariffs raise the cost of imported goods, which directly affects businesses that rely on these materials. From raw materials to finished products, companies may face higher expenses, which can erode margins if not managed effectively.?

1. Supply Chain Disruption? Companies relying on international suppliers may encounter delays and increased complexity as suppliers adjust pricing or pivot to alternative markets. This can lead to disruptions in production timelines and inventory shortages.?

1. Pricing Pressures? Businesses may need to increase prices to offset higher costs. This could reduce customer demand, especially in price-sensitive markets, and strain relationships with long-time customers.?

1. Competitive Shifts? Domestic companies may benefit from reduced competition as imported goods become more expensive. Conversely, businesses reliant on imports could struggle to compete with domestic suppliers offering lower-cost alternatives.?

1. Market Uncertainty? Tariffs often lead to volatility in the marketplace, making it harder for companies to plan long-term strategies. This uncertainty can impact investment decisions, hiring plans, and overall confidence.?

How to Prepare Your Business for Import Tariffs?

While the impact of tariffs can be significant, businesses can take proactive steps to mitigate risks and adapt to the changing landscape. Kaplan CFO Solutions recommends the following strategies:?

• Review Your Supply Chain? Assess your reliance on imported goods and identify areas where tariffs might increase costs.? Work with suppliers to understand potential price changes and explore alternative sourcing options, including domestic suppliers.? Between tariffs and freight costs, domestic suppliers may begin to look competitive.?

• Forecast Financial Impact? Model different tariff scenarios to understand how increased costs will affect margins, cash flow, and pricing strategies.? Work with your CFO to create a detailed financial plan that accounts for potential tariff-related expenses.?

• Revisit Pricing Strategies? Determine whether you can pass tariff-related costs onto customers without losing competitiveness.? Consider tiered pricing models or value-based pricing to minimize customer churn.?

• Diversify Supplier Relationships? Avoid over-reliance on a single supplier or region by diversifying your supply chain.? Negotiate longer-term contracts to lock in prices and reduce exposure to future volatility. ?The foreign supplier may help offset some of the tariff costs to stay competitive. ?It is better for both parties to negotiate now rather than lose the business completely.?

• Strengthen Operational Efficiency? Look for ways to reduce costs in other areas to offset the impact of tariffs.? Optimize inventory management, improve operational workflows, and eliminate inefficiencies.?

Leverage Duty Drawbacks to Reduce Costs?

One often-overlooked strategy for mitigating the financial impact of import tariffs is leveraging duty drawbacks. ?A duty drawback is a refund on Customs duties, taxes, and fees paid on imported products that are subsequently exported, either in their original form or as part of a finished product after being used in manufacturing. For example, a U.S. manufacturer that imports raw materials or components (subject to tariffs), assembles or produces a finished product domestically, and then exports a percentage of its sales to foreign markets may be eligible for a duty drawback. This program allows businesses to recover a significant portion of tariff-related costs, improving cash flow and profitability.?

How Duty Drawbacks Work?

• If your business imports raw materials, components, or finished goods that are later exported, you may be eligible for a refund on the tariffs paid at the time of import.?

• Drawback claims can apply to various industries, including manufacturing, automotive, pharmaceuticals, and electronics.?

• There are different types of duty drawbacks, including unused merchandise drawback (for goods exported without use) and manufacturing drawback (for goods used in exported products).?

Steps to Take Advantage of Duty Drawbacks?

1. Assess Eligibility – Determine if your imported goods qualify for duty drawback refunds.?

1. Maintain Proper Documentation – Ensure you have detailed records of import duties paid, export documentation, and proof of compliance.?

1. Work with an Expert – The duty drawback process can be complex. Consider consulting a trade compliance specialist or working with a CFO to streamline claims and maximize refunds.?

1. File Claims Promptly – The U.S. Customs and Border Protection (CBP) allows businesses to file drawback claims retroactively for up to five years from the date of import, but the initial process takes a lot of time.?

By incorporating duty drawback programs into your tariff mitigation strategy, you can recover some costs and maintain a competitive edge, even in an unpredictable trade environment.?

Monitor Policy Developments?

• Stay informed about changes to trade policies and tariff announcements.?

• Work with a trusted financial advisor to understand how these changes impact your business and adjust strategies accordingly.?

How Kaplan CFO Solutions Can Help?

At Kaplan CFO Solutions, we specialize in helping businesses navigate complex financial challenges, including those posed by import tariffs. Our team of experienced CFOs can:?

• Conduct a thorough financial assessment to evaluate tariff-related risks.?

• Develop strategic plans to protect profitability and optimize operations.?

• Provide insights into global trade developments and how they affect your industry.?

• Work closely with your leadership team to implement proactive solutions that support long-term success.?

Adapt and Thrive Amid Uncertainty?

Import tariffs may create challenges, but with the right strategies in place, businesses can adapt and emerge stronger. By taking a proactive approach, you can protect your margins, maintain customer trust, and position your company for resilience in a rapidly changing global market.?

If you are concerned about how import tariffs might affect your business, Kaplan CFO Solutions is here to help. Contact us today to discuss how our team can support your financial planning and strategy during this critical time.?