Nearly 200 companies that are part of the S&P 1500—spanning large, mid- and small-cap stocks—have mentioned “nearshoring,” “tariffs,” or “supply chain” in their discussions through January 2025, according to an article published by Reuters on January 31.

As global trade and supply chain dynamics continue to evolve, tariffs—taxes levied on imported or foreign goods and services—have become a key concern for global leaders, CEOs, CFOs, and corporate treasurers. This growing unease is largely driven by US President Donald Trump’s tariff gambit, aimed at raising government revenue, addressing trade imbalances, and protecting American manufacturers.

Since his inauguration on January 20, Trump has announced and later temporarily paused tariffs on imports from Mexico and Canada. However, a 10% ad valorem tariff on Chinese imports went into effect on February 4. In response, China imposed retaliatory tariffs on certain US imports, which took effect on February 10. A day later, President Trump escalated trade tensions by imposing a 25% tariff on all steel and aluminium imports into the US. On February 13, the President signed a plan for reciprocal tariffs to match the tax rates that other countries charge on US imports.

With uncertainty surrounding the extent, magnitude, and timing of tariffs in the days and weeks to come under President Trump—along with the risk of retaliatory measures from other nations—global corporations find themselves in a difficult position. To help business leaders, finance chiefs, and treasurers prepare for new or higher tariffs and navigate the challenges posed by likely trade disruptions, here are five important steps to mitigate their impact on the supply chain and bottom line:

Enhance supply chain visibility to identify key vulnerabilities

• Supply chains are at the heart of global trade, making a thorough understanding of your entire supply chain essential. To achieve this, companies must have complete visibility into all tiers (Tier 1, 2, and 3) of their supply chain to analyse and map sub-tiered suppliers, including their suppliers’ suppliers potential risk exposure to tariffs and retaliatory measures. Identifying vulnerabilities and complexities—such as high-risk suppliers, sourcing countries and manufacturers tariff exposure, affected products, parts, and materials, and overall landed costs —will enable you to craft an effective response strategy when faced with tariff-related challenges or trade restrictions.  

Strengthen supply chains by seeking alternative suppliers

“CEOs globally rank intensified trade wars as the top geopolitical risk to their companies”, according to a recent survey by The Conference Board, a global nonprofit think tank.

• In response to growing geopolitical and geoeconomic uncertainty, more CEOs are strengthening their supply chains. Among U.S. CEOs, 71% plan to alter their supply chains over the next three to five years, a significant increase from 54% in 2024. European CEOs are making similar moves, with 77% planning to adjust their supply chains—up from 61% in 2024, as per the survey.
• Changes to supply chains involve supplier diversification or sourcing from alternative suppliers with lower tariff exposure, reliable infrastructure, and political and financial stability. These modifications aim to enhance supply chain resilience and mitigate tariff impacts. In this regard, McKinsey & Company advises in a recent article: “Some potential new markets may offer incentives to defray switching costs, which will be important factors in cost analyses. Understanding available subsidies (for example, India’s “Make in India” initiative), eligibility for investment incentives, and the ease of doing business in other countries can help CEOs decide whether a new supplier will be viable for their business.”

Assess costs impacted by new tariffs

• To navigate the challenges of increasing tariffs, analyse the exact share of your product costs affected—down to the shipment level. Explore whether reconfiguring your supply chain to low-tariff regions could drive cost savings. Additionally, assess how increased costs will impact profit margins and cash flow while evaluating their effect on working capital requirements.
• Consider renegotiating supplier contracts or securing better terms to offset rising expenses. Moreover, weigh the feasibility of passing costs onto customers through price adjustments—ensuring demand remains steady. Equally important is addressing a critical question: Would absorbing these costs strengthen competitiveness and customer relationships, or would shifting them along the value chain risk potential volume loss?
• Based on a recent article by Boston Consulting Group’s (BCG), “Additional strategies may be available at the product level, such as making product-specific changes to reduce cost of goods sold (COGS) or optimizing product families around tariff criteria, although the potential benefits of these strategies should be balanced against the disruption to existing market strategies.”

Conduct scenario-based tariff planning

2025 may be the year of tariffs and trade wars, so organizations must seize the opportunity to proactively explore different tariff scenarios, evaluating their impact on lead times, inventory, operations, and finances to safeguard their interests.

Dr. Totis Kotsonis, Partner, Head of Subsidies, Procurement, Trade Agreements and Trade Remedies, at Pinsent Masons, advises businesses “To consider all possible scenarios that might arise, including the possibility that the new global trade war which the US tariff decision has ushered could escalate even further, and consider their options, for the short, medium and long-term.”

“For example, on a short-term basis they might decide to delay or even cancel further investment in markets where tariffs have been imposed or threatened until there is some greater clarity as to how long the higher tariffs are likely to remain and the extent of any retaliatory measures. On a medium-term basis, they might consider whether to service the US market through some other third country which is not the target of raised tariffs. However, choosing the right location takes time,” he said.

“Ultimately, what steps a business might be able to take would also depend on what they do and what resources they have – for example, if a company already has a presence in the US, they might find it easier to expand their operations there, assuming they consider that this is the right decision for them,” Kotsonis added.

Carefully assessing and preparing for various tariff outcomes allows organizations to mitigate risk, optimise resource allocation, and respond quickly to shifting trade dynamics. This foresight ensures financial and operational resilience while making risk mitigation measures both strategic and timely.

Create a cross-functional team for tariff readiness

BCG stresses the importance of breaking down silos by creating a cross-functional team that integrates expertise from critical business areas, including strategy, finance, treasury, legal and compliance, procurement, and pricing, along with industry-specific domains such as retail operations and assortment planning.

By establishing such teams and fostering enterprise-wide collaboration, corporations can leverage their collective intelligence to cushion the impact of changing tariffs, and more effectively monitor trade policies, geopolitical shifts, and economic factors that might affect future tariff levels.

Conclusion

Tariffs have taken centre stage in 2025, with President Trump’s trade manoeuvres set to reshape economic policy, global trade, supply chains, energy markets, and geopolitical dynamics.

While business leaders, finance chiefs, and corporate treasurers may not be able to fully escape the impact of new or higher tariffs, implementing the five strategic steps outlined above will help mitigate risks, help explore new markets and alternative supply chains. The key to resilience lies in proactive scenario planning, supply chain agility, and cross-functional collaboration—ensuring that your organization emerges stronger and more competitive in a growing protectionist global economy.