Trade positions are taking shape: What’s your next move

The tariffs whirlwind continues, and like everyone else, we don’t yet know how the Trump administration’s trade policy or any final details will take shape. But we do know that as more US importers take action to offset rising real costs, pressuring adjacent industries to do the same, options to shape your response will narrow.

PwC’s Industry Analysis of the US tariff landscape as of May 14 shows far-reaching impacts across a range of industries; total US tariff measures could increase 6.6-fold to nearly $505 billion per year, without taking any countermeasures into account. These are the rates for the 90-day pause for both China and reciprocal tariffs, which could increase if the two countries don’t reach an agreement by August 12.

While things continue to shift, the executive team should align around what a company can control when it comes to trade factors. This includes:

• assessing exposures and potential impacts on cashflow and profit margins
• setting the tolerance for price hikes and mitigation tactics, and
• understanding your financial capacity to act on divestitures, acquisitions or other strategic moves should your trade risk metastasize an opportunity emerge.

Some companies have put an executive on point to speed up coordination across the enterprise so that the finance team, product developers, purchasers, supply chain and logistics specialists, marketers and dealmakers are able to respond quickly, if required.

It’s a reality that all US business leaders should prepare for as global manufacturers grapple with rising trade risk and costs and look for opportunities to redirect global footprints and capital investment. For example, a manufacturer could shift US production for export out of the US to de-risk against retaliatory actions or geopolitical shifts and free up capacity in the US for the domestic market. It’s a relatively capital-light move for a time of high uncertainty that nonetheless can ripple out to suppliers and customers and the local employment pool.

Positioning your company to be ready and strategic for trade-driven pivots in the US market is a crucial undertaking for the months ahead. Here’s where the executive suite should strive for consensus now:

Exposures can be substantially higher than expected. Importers modeling tariff and retaliation impact scenarios are uncovering costs that in some cases are larger than current annual profits. They’re also discovering that modeling is not a simple ERP command. A granular view of import prices at the parts level is challenging for all companies even when border-crossing costs and multilateral trade rules are not volatile.

Know where you stand: Importers and purchasers should conduct an end-to-end tariff impact assessment to surface the financial and supply chain impact on operations, down to the individual import. Effective management of inter-company pricing can help address the conflicting priorities of tax and authorities and customs agencies.

Know your dependencies: Examine key dependencies of supplying and manufacturing countries, suppliers and products to help with planning and budgeting. For example, tech leaders – especially CIOs and CTOs – are having to revisit their 2025 technology budgets, many of which were already set, and build in buffers for surprises.

Know your impact story: Leaders should prepare to advocate for exemptions and consider near-term customs opportunities such as first sale for export or duty drawback. They should also try to get ahead of strategic discussions, such as with major suppliers and partners, as well as potential acquirers of a business. Trade risk is likely to factor more in US deals decisions as acquirers conduct trade diligence as a part of tax and integration considerations.

There are short- and longer-term steps that any company can take. 

Start implementing no-regret cost-cutting opportunities across the business. The companies that are the leanest will be better able to manage these cost increases and gain a competitive advantage, though it’s important not to lose sight of your long-term strategy and goals.

This is also an opportunity to test AI and other advanced tools to leverage your US customs data to quantify impact and assess alternative options quickly, such as which suppliers have capabilities in different countries. The analysis can serve as a powerful foundation to identify “no-regret” actions and to help mitigate risks.

Scenario plan your options across the four major trade touchpoints inside an organization: supply chain, tax, customs and commercial. These leaders and their data can reveal the contingencies, full risks and hidden opportunities to support major decisions.

Tax, supply chain and customs have levers across the enterprise that can contribute meaningfully to short-term commercial decisions to raise or hold the line on prices. For example: Tax may find an opportunity to reduce import value and duty cost by changing to a fixed/variable model for the importer. Customs could explore increasing the use of duty drawback programs or free-trade zones that might not have been worthwhile in the past.

The importance of a data-driven multidisciplinary approach becomes more apparent in medium- to longer-term strategic decisions. Knowing specifically where and how cost profiles change with a major decision, such as shifting product assembly to the US, can tighten the coordination to leverage existing options in tax, customs and supply chain ahead of any move. Pulling together to reduce overall trade cost and risk will be important for its success.

Consider your strategic options broadly

Major changes always create disruption, and when there's disruption, your leadership teams need to ask where and how the company could be disrupted. Or where the company can disrupt the market. This is a time to consider options for re-inventing your business model. 

Governments for years have been offering incentives to reshore and boost domestic production. These “carrots” are not likely to retreat as the US, Europe, Mexico and Canada position to safeguard critical industries and resources, and their supply chains. Tariffs, imposed-delayed-or proposed, are “sticks” that raise the stakes for staying put.

In the longer term, we fully expect that companies will enhance their supply chains to be more flexible and autonomous, which will enable them to respond more quickly and effectively to policy shifts, retaliatory measures, or supply interruptions. Operations and supply chain officers have told PwC their companies are actively investing in multiple technologies to reduce costs and support market expansion and customer improvements. These include using AI in demand forecasting, cloud-based inventory management systems and predictive analytics to reduce excess stock and decrease shortages.

PwC’s analysis shows that the implied average US tariff rate would jump to 32% from 2.5% on imports, but this figure tells half the story. The reality is that the tariffs — imposed, delayed and/or imposed — affect various industries very differently.

Add to these considerations: foreign revenue reliance, high/low value of imported goods and regulatory influence, and the need for the executive team to align around a perspective of trade impacts on their industry is clear.

For example:

Technology, media and telecommunications companies importing products from China are preparing for steep disruptions, despite a tariff exemption on key electronics like smartphones and laptops.

Industrial products, with components typically sourced from multiple countries, tariffs are likely to result in higher prices for business-to-business transactions and ultimately consumers for some period. Disruption to trade, potential shortages, or delays may occur, especially as many companies rely on just-in-time manufacturing processes.

Pharmaceuticals and medical devices companies, which were previously exempt from most tariffs, could have a large exposure given the expectation for future executive orders to impose tariffs on this industry and there are no carve-outs granted.

All of these types of factors will affect the timing and capacity of different industries to adjust to a world rapidly becoming more protectionist.

What’s your next move?

Is your executive team aligned and able to respond to trade-driven impacts on your business? Ask the right questions to see where you sit.

The basics:

1. You’ve assessed the potential direct cost increases and impacts on earnings-per-share.
2. You’ve modeled supply chain operations based on tariffs exposure.
3. Your executive team understands how tariffs are likely to affect your industry and has discussed potential moves.
4. You’re in discussions with the relevant federal agencies, national and state representatives and industry associations so you can tell your impact story.

Advanced:

1. You’ve implemented no-regret cost-cutting opportunities across the business.
2. You have an executive take ownership of your trade profile. This person pulls different parts of the business together to analyze impacts and sketch out strategic moves to mitigate risk and capitalize on opportunities.
3. You’re leveraging data to analyze and model different moves across supply chain, commercial, tax and customs.
4. You have a plan for the short- and longer-term, and you know who to involve cross-functionally.
5. Purchasers are aware of their targets and have the flexibility to negotiate with suppliers effectively.
6. The commercial side is aware of their flexibility to develop pricing strategies that can safeguard margins and grow share.
7. You’ve conducted your trade diligence and can credibly articulate your exposures to a potential acquirer as well as major customers and partners.

Next level:

1. You have sufficient visibility into tariffs exposure among second and third-tier suppliers to support your tariff-impact assessments and adjustments.
2. You have incorporated external data into your scenario models to understand how your competitors may be impacted differently than your company.
3. You can effectively and, in near real-time, model changes to tariffs and the impact of moves the company may make.
4. You have begun executing long-term strategies to mitigate impact and seize opportunities, such as M&A and reshoring.