Five Strategies for Minimizing the Impact of Trump’s Tariffs for Manufacturers

Article Highlights:

• Despite the extreme volatility of the current trade landscape, there are still a number of meaningful strategies businesses can implement to mitigate the impact of President Trump’s tariffs on their supply chains. 
• Organizations should explore dual and alternative sourcing outside of China if they haven’t already. 
• A relatively obscure feature of U.S. ports of entry until recently, foreign-trade zones (FTZs) are increasingly viewed as a key mechanism for mitigating tariffs. 
• As companies have scrambled to find ways to reduce tariff responsibilities in recent months, many have zeroed in on the outsized power of country of origin (COO).
• Without reliable access to comprehensive data on suppliers, market availability, and subtier relationships, U.S. firms will struggle to launch mitigation strategies effectively. 

The first quarter of 2025 was a difficult one for U.S. manufacturers. The new presidential administration quickly began sowing uncertainty in global supply chains with a flurry of tariffs that were threatened, implemented, and rescinded in February and March. As it turned out, those developments were just a precursor to a larger, more monumental set of trade actions in April. On april 2, President Trump unveiled his “Liberation Day” tariffs by rolling out plans for import taxes on nations from China and India to Madagascar and the Marshall Islands. 

While the Trump administration has since pared back its initial tariff proposal—which roiled international markets and sent stocks plummeting—the president’s tariffs remain a transformative new variable in global supply chains. As of April 17, the U.S. has:

• A 125% reciprocal tariff and a 20% “fentanyl tariff” on Chinese imports
• 10% baseline tariffs on dozens of major trading partners around the world
• Sectoral tariffs on goods like steel, aluminum, and semiconductors

Many businesses are struggling to find effective ways to navigate this turbulent new trade landscape, in no small part because of the overwhelming uncertainty around all these novel factors. Will China continue to have prohibitively high import taxes on its goods? Will the suspension of major tariffs on other large-scale manufacturing nations like Vietnam, Malaysia, and Indonesia be permanent—or just a temporary reprieve? 

Despite the extreme volatility of the situation, there are still a number of meaningful strategies businesses can implement to mitigate the impact of President Trump’s tariffs on their supply chains. Targeted measures may require adjustments to longstanding procurement practices—and demand significant attention and expertise from employees—but they can also make a major difference in reducing risk, protecting continuity, and avoiding explosions in costs. 

Tariff Management Strategy #1: Diversify Supply Chains 

It should come as no surprise that diversifying one’s supply chain is an effective way to mitigate tariff impacts. U.S. companies that have become heavily dependent on Chinese manufacturing are now facing an existential threat to their business models, with tariffs totalling 145% or more seriously threatening the viability of importing goods from China. 

To combat risks of this magnitude, organizations need to explore dual and alternative sourcing, identifying suppliers and manufacturing sites in new countries and regions. This type of optionality is critical to supply chain resilience, as it gives businesses the agility to respond when their existing supply chains are complicated by tariffs and other trade restrictions. Fortunately, searching for alternative suppliers is not nearly as time-consuming as it once was, and firms can now leverage supply chain risk management (SCRM) software and technology to efficiently seek out new suppliers based on factors like country of origin, cost, and inventory. 

Fortunately, searching for alternative suppliers is not nearly as time-consuming as it once was, and firms can now leverage supply chain risk management (SCRM) software and technology to efficiently seek out new suppliers based on factors like country of origin, cost, and inventory. 

Supply Chain Diversification Measures for Manufacturers 

• Leverage supply chain risk management platforms to search for alternative manufacturers.
• Vet potential new suppliers by evaluating risk based on factors like financial health, geography, manufacturing locations, and ESG performance.
• Examine all the variables associated with taking on a new supply chain partner, including not only risks but cost, manufacturing capacity, logistics, and expertise. 

Tariff Management Strategy #2: Practice Effective Inventory Management

In the 10 weeks between Trump winning the U.S. presidential election and being inaugurated as the 47th president of the United States, many American manufacturers engaged in a preordering frenzy. Seeing an era of tariffs written on the wall, they strove to import as many products, components, and materials as possible before doing so became significantly more expensive. The result was massive import figures in December 2024—so much so, in fact, that the U.S. experienced the largest monthly trade deficit in its history ($122 billion).

Though the preordering fever might have been an extreme example, these U.S. businesses were practicing a version of inventory management. By filling out their inventories in the months leading up to the installment of the Trump administration, they maximized the amount of time they could go before starting to pay tariffs on foreign materials and parts. Manufacturers can still take advantage of this strategy now, as the dynamic new trade environment continues to offer windows of opportunity in the form of temporary pauses and signals to the media. The current 90-day pause on almost all reciprocal tariffs, for example, may be a good time for businesses to load up on imports from countries like Vietnam and Malaysia. 

By filling out their inventories in the months leading up to the installment of the Trump administration, they maximized the amount of time they could go before starting to pay tariffs on foreign materials and parts.

Inventory Management Measures for Manufacturers 

• Establish a procedure and system for raising inventory levels when tariffs on key manufacturing countries are paused, lowered, or temporarily rescinded.
• Calculate how long inventory levels can last in high-tariff environments, when the price of importing goods is prohibitive. 
• Companies in industries like automotive that rely on hundreds, if not thousands, of foreign suppliers may want to consider the impact increased prices will have on demand. Manufacturers expecting to pass some tariff costs on to consumers should anticipate reduced demand and should manage inventory levels accordingly.

Tariff Management Strategy #3: Experiment With Foreign-Trade Zones (FTZs)

A relatively obscure feature of U.S. ports of entry until recently, foreign-trade zones (FTZs) are increasingly viewed as a key mechanism for mitigating tariffs. According to the International Trade Administration, FTZs are “designated sites licensed by the Foreign-Trade Zones (FTZ) Board at which special customs procedures may be used.” These procedures, ITA goes on, “allow domestic activity involving foreign items to take place prior to formal customs entry.” 

According to the International Trade Administration, FTZs are “designated sites licensed by the Foreign-Trade Zones (FTZ) Board at which special customs procedures may be used.”

In other words, U.S. importers can leverage FTZs to temporarily shelter foreign goods from customs obligations. Arguably more important, however, is that businesses can also use FTZs to engage in the aforementioned procedures for the purposes of making a “substantial transformation” to their imported items. These modifications can actually change the Harmonized Tariff Schedule (HTS) code and Customs and Border Protection (CBP) classification of the import, potentially altering the tariff rate. 

When executed efficiently, systematically, and with authorization from the FTZ Board, use of FTZ zones can be another tool to reduce the burden of tariffs. 

FTZ Measures for Manufacturers 

• Use the U.S. International Trade Commission HTS code database to understand the specific tariff rate of different imported products and parts. 
• Investigate whether these imports can undergo any type of substantial transformation in an FTZ that will trigger different CBP classifications with lower tariff rates. 
• Work with procurement professionals and engineers to brainstorm ways to utilize FTZs effectively, and identify all the moving parts required to make manufacturing changes to imports in these specially designated sites. 
• Explore whether the re-exporting and tariff deferral capabilities available in FTZs can be leveraged in an effective, ongoing way in your supply chain. 

Tariff Management Strategy #4: Restructure Manufacturing Processes to Modify Country of Origin (COO)

As companies have scrambled to find ways to reduce tariff responsibilities in recent months, many have zeroed in on the outsized power of country of origin (COO). The COO of an import is the strongest determining factor in its tariff rate—especially for Chinese imports—and organizations should focus on how they can make strategic adjustments to their manufacturing processes to alter them. 

The COO of an import is the strongest determining factor in its tariff rate—especially for Chinese imports—and organizations should focus on how they can make strategic adjustments to their manufacturing processes to alter them. 

These measures are not the equivalent of “manipulating” the country of origin, per se, but rather applying targeted modifications to alter the last place where a product or part underwent a substantial transformation. This is not a process in which corners can be cut, however: as the International Trade Administration lays out, any substantial transformation must be a “fundamental change in form, appearance, nature, or character,” one that “adds to the good’s value at an amount or percentage that is significant.”

Specific COO Measures for Manufacturers 

• Businesses should map their supply chains to understand the existing COOs of their imports and what potential modifications are available to them. 
• Collaborate with suppliers to determine if the final location of substantial transformation can be modified.
• Bear in mind that, while tariffs on countries like China may be prohibitively high at the moment, the trade landscape remains extremely dynamic and subject to change. Major, costly adjustments to manufacturing processes have to be weighed against the possibility that tariff rates will come down over the course of 2025. 

Tariff Management Strategy #5: Negotiate With Foreign Suppliers 

The state of negotiations between importers and foreign manufacturers has varied greatly over the past few months and depends on factors like industry, country, and even individual suppliers. There have, however, been plenty of reports of suppliers granting cost reductions. 

While there’s no guarantee that manufacturers will be willing to help share the cost of tariffs, U.S. importers should be prepared to open that discussion. Communicating with foreign suppliers about the cost and burden of tariffs brings them into the conversation, significantly increasing the chances that they’ll perceive their own business to be at risk and respond accordingly. These companies may not have any legal responsibility to share tariff costs, but it could be a shrewd business decision for them to help their customers and protect the health and viability of their supply chain partnership. 

While there’s no guarantee that manufacturers will be willing to help share the cost of tariffs, U.S. importers should be prepared to open that discussion.

Specific Negotiating Measures for Manufacturers 

• Be transparent with suppliers about tariff rates, total import fees, and how those collective costs are eating into profits. 
• U.S. importers should consider explaining to foreign manufacturers that the economics of the current situation may not be sustainable in the long-term. Suppliers resistant to helping absorb tariffs need to understand the risk they’re taking on by standing on the sidelines. 
• Remember that the U.S. is by far the world’s largest importer, bringing in over $3 trillion dollars’ worth of imports every year. Foreign suppliers rely on their U.S. customers to keep their businesses profitable and thriving. An honest conversation about the stakes of the current trade environment may help supply chain partners move toward a compromise that’s more satisfying to all stakeholders. 

Mitigating Tariff Impacts Demands Data Visibility 

Whether a business is attempting to diversify their supply chain, modify the COO of imports, or leverage inventory management to their advantage, data is an essential ingredient in their operation. Without immediate, reliable access to comprehensive information on suppliers, market availability, and subtier relationships—among many other data points—U.S. firms will struggle to launch these mitigation strategies effectively. 

Supply chain risk management (SCRM) software can serve as a differentiating asset when carrying out these damage-control measures. SCRM platform Z2Data allows customers to:

• Examine hundreds of data points related to every part, including manufacturer, site, compliance status, and material composition.
• Analyze relevant aspects of current and prospective suppliers, including financial metrics, ESG practices, geographical locations, market availability, and risk. 
• Lean on industry-leading expertise to pull actionable data that helps drive strategic decision-making. 

No matter what mitigation technique companies are considering deploying, the expansive data visibility offered by a tool like Z2Data is going to make it more precise and efficient. To learn more about Z2Data and how it can help organizations effectively mitigate the impacts of tariffs and other trade restrictions, schedule a free demo with one of our product experts.