Stories from the Field: How Our Water Filtration Business Is Adapting to Tariffs
What Now with Tariffs?
Our company has been at the forefront of water filtration technology for years, manufacturing reverse osmosis equipment that helps businesses and households access clean, safe water. Like many U.S.-based companies, we manufacture our components in China, where economies of scale allow us to keep costs competitive. We import these components into the U.S. for final assembly before selling to customers nationwide.? But every morning, something new pops up on tariffs.??
However, the rapidly evolving tariff landscape has forced us to rethink our approach. Tariff hikes on Chinese imports ranging from 10% to 25% have placed unexpected financial pressures on our business. These increases threaten our gross margins, supply chain reliability, and pricing strategy, forcing us to take a hard look at how we run our business.?
Rather than simply reacting, we made a plan. We recognized that tariffs—like any external risk—should be managed proactively.? Our goal was not just to survive the tariff environment but to emerge stronger, more resilient, and more competitive than ever.
This is the story of how we assessed, adapted, and mitigated risks—and how we are positioning our company for long-term success despite the uncertainties of global trade.
Btw, Here is a great background article on tariffs:?
Assessing the Financial Impact of Tariffs
When we first learned about potential tariff increases, our biggest question was: What will this cost us?
We broke the challenge into three parts:
Scenarios: The Good, The Bad, The Ugly
We ran multiple projections to understand the impact of different tariff levels on our business. Here’s what we found:
Even under the best-case scenario, tariffs would significantly affect our costs. Waiting to react was not an option—we had to act quickly to reduce our risk.
Reducing Dependence on China
We recognized that putting all our eggs in one basket—China—was risky. A sudden tariff hike or geopolitical shift could disrupt our entire operation overnight.
Finding Alternative Suppliers
We started searching for secondary suppliers outside of China. This meant exploring: Vietnam and Thailand: These countries have growing manufacturing capabilities and lower labor costs.
The good news is that inflation across Southeast Asia is easing as global food and oil prices trended downward, helping to stabilize costs across the region. Reflecting these trends, the inflation forecast for Southeast Asia has been revised downward by the Asian Development Outlook, giving us a sense that this might be a good place for us to source components and even consider a production plant.??
However, although Vietnam is not on the tariff crosshairs at the moment, there is quite a bit of trade imbalance (although much less than China).?
Mexico: Lots of opportunities here but Mexico right now is a political hot potato with tariffs on hold but immigration top of mind. So although the country has strong industrial hubs with good manufacturing opportunities, it’s not a place we would consider. ,?
U.S. Nearshoring: Increasing final assembly work in the U.S. to qualify for lower tariff rates.
Make a List
Using trade directories like D&B Hoovers and Thomasnet.com, we built a list of potential suppliers. Industry expos and trade shows helped us vet them in person.
Implementing a Dual-Sourcing Strategy
Once we identified promising suppliers, we didn’t just switch overnight—we took a gradual approach: ? Placed test orders with new suppliers to assess quality and reliability. ? Allocated 30% of our orders to secondary suppliers while maintaining our primary relationships. ? Monitored performance and cost structures to ensure a seamless transition.
Case Study: A major HVAC manufacturer reduced tariff exposure by moving 30% of its supply chain from China to Vietnam, cutting costs by 12% in one year. We are following a similar approach.
Optimizing Logistics and Inventory Management
Managing rising import costs is about more than just supplier selection—it also requires smart logistics and inventory strategies.
We identified three key levers to manage costs:
Pre-ordering inventory before tariff hikes took effect, locking in lower costs ahead of time. Optimizing freight routes to avoid higher-tax ports and reduce shipping costs by 5-7%. Implementing Just-in-Time (JIT) Inventory to reduce carrying costs and avoid excess stockpiling.
Case Study: A U.S. electronics manufacturer optimized its shipping logistics, reducing freight costs by 10%. We are targeting similar savings.
Leveraging Tariff Engineering & Trade Agreements
Beyond sourcing diversification and logistics improvements, we also explored strategic legal and financial moves:
? Tariff Reclassification: Adjusting HTS codes (Harmonized Tariff Schedule) to optimize duty rates while remaining compliant.
? Increasing U.S. Assembly: More work done domestically meant qualifying for lower tariffs.
? Using Free Trade Zones (FTZs): Leveraging bonded warehouses to defer duties until absolutely necessary.
Example: By modifying product assembly locations, a U.S. auto parts company cut its effective tariff rate from 25% to 10%. We are implementing a similar strategy.
Top 10 Supply Chain Software for Logistics & Operations
Supply chain management plays a crucial role in ensuring efficiency, cost-effectiveness, and seamless operations. Businesses rely on advanced supply chain software solutions to optimize processes such as procurement, inventory management, logistics, and demand forecasting.
The top supply chain software companies lead the industry with innovative technologies, AI-driven analytics, and cloud-based solutions that help organizations improve visibility, reduce costs, and enhance overall efficiency. From enterprise resource planning (ERP) systems to real-time tracking tools, these companies provide essential solutions for businesses across industries.
Below is a list of the top 10 supply chain software companies, known for their significant impact and cutting-edge solutions in supply chain management.
Financial Planning: Protecting Margins and Cash Flow
Since tariffs impact COGS and cash flow, we restructured our financial approach:
?Updated Pricing Models:
Cash Flow Strategies:
Case Study: A medical device company absorbed 10% tariffs by negotiating better payment terms while gradually adjusting prices. We are using a similar approach.
Staying Agile: How CFOs Can Lead in Trade Uncertainty
We recognize that tariff policies can change overnight. To stay ahead, we:
Track Regulatory Updates:
?Cross-Functional Collaboration:
Turning Challenges into Opportunities
Adapting to tariff volatility isn’t just about survival. It's about finding ways to thrive. In turning uncertainty into opportunities, we are building a stronger, more resilient business.
Here’s what Matters:
With these strategies in place, we’re not just reacting to changes we’re staying ahead of them.?