How Supply Chain Leaders Can Use a Tariff Exposure Index to Manage Risk

Article Highlights:

• A tariff exposure index can give businesses an organized, coherent way to differentiate between the parts of their supply chain that are negligibly impacted by tariffs, and those that stand to trigger hefty import costs. 
• A tariff exposure index doesn’t focus solely on tariff rates to assess threat levels—other factors include the criticality of the part, total annual spend, interchangeability and/or availability of crosses, and the tariff rate increase from 2024 to 2025. 
• After developing a tariff exposure index, organizations will be able to pinpoint the parts that most require mitigation, and begin implementing risk management measures accordingly. 

Tariffs have become a key concern for businesses with global manufacturing footprints in 2025. 

From sectoral tariffs on steel and aluminum to reciprocal tariffs that were imposed—and then temporarily suspended—on dozens of countries all over the world, U.S. tariff rules are changing at a dizzying pace—approximately every 19 days. 

To address this imposing new U.S. tariff regime, American businesses have begun devising strategies for navigating global supply chains hamstrung by these substantial new protectionist costs. Organizations are experimenting with foreign trade zones (FTZs), “tariff engineering,”

and other ad-hoc methods for mitigating the impacts of new duties. But the reality is that effectively carrying out strategies like these takes time, resources, and expertise, and most businesses can’t afford to start implementing these kinds of risk management measures throughout their supply chains. Before taking action, companies should consider establishing a tariff exposure index—a tool for assessing their vulnerability to tariffs, as well as the parts that are at the highest risk of incurring the Trump administration’s levies. 

A tariff exposure index can give businesses an organized, coherent way to differentiate between the parts of their supply chain that are negligibly impacted by tariffs, and those that stand to trigger hefty import costs. 

What Is a Tariff Exposure Index?

A tariff exposure index is a tool for measuring the relative risk posed by different parts based on their tariff rates. To understand a tariff exposure index, it helps to first know what a risk index is. A risk index is a table, often taking the form of a matrix, that assesses the relative threat of different types of risks. Risk matrices often combine probability with severity to provide individuals and businesses with an indication of the threat level of events like natural disasters, cyberattacks, geopolitical conflicts, and other supply chain disruptions.

A tariff exposure index functions in a similar way. By pulling together a range of different criteria, this tool can provide organizations with an actionable sense of what parts and/or corners of their supply chain pose the largest threat from a tariff perspective. It’s important to remember that a tariff exposure index doesn’t focus solely on tariff rates to assess threat levels, though. Other factors often loom just as large, including the criticality of the part, total annual spend, interchangeability and/or availability of crosses, and the tariff rate increase from 2024 to 2025. 

Step One: Gathering the Tariff Exposure Data

The first step in building and utilizing a tariff exposure index is pulling together all the necessary data. Before being able to assess risk and the threat posed by tariff exposure, organizations need to identify all their parts and obtain a range of crucial data points related to them. 

• Complete List of MPNs: Original equipment manufacturers (OEMs) and other businesses should start by creating a complete list of all the manufacturing part numbers (MPNs) for the parts used in their products. 

• Suppliers: Firms need to determine the manufacturers supplying all their parts. Because this data is being used to understand tariff implications, sub-tier manufacturers are generally not as important to this specific data-gathering process. 

• Manufacturing Sites and Country of Origin (COO): Given the purpose of this process, determining the factories and production sites where the parts were manufactured, along with their corresponding countries of origin, is a critical step. Many of the most consequential tariffs are country-specific, and organizations should be as diligent as possible when identifying the COO of their MPNs. 

• Tariff Rates: Finally, companies need to ascertain the requisite tariff rates for their parts. Because tariffs are both sector- and country-specific, firms should identify how tariffs from both categories impact their parts. 

It’s important to remember that many businesses don’t have the bandwidth or technological capabilities to effectively execute these steps on their own. While companies may be able to pull together and centralize all their MPNs, they may not be able to connect them to manufacturing sites, COOs, and tariff rates, among other supply chain variables. 

Companies draw on SCRM platforms like Z2Data to aggregate all the necessary data to run an effective tariff exposure index. Z2Data has internal databases that can link MPNs to manufacturers, sites, COOs, and tariff rates, streamlining what can otherwise be a highly arduous process. Further, the risk management tool’s data centralization capabilities make storing and analyzing tariff information easier and more intuitive than toggling between files, spreadsheets, and other ad-hoc sources. 

Z2Data has internal databases that can link MPNs to manufacturers, sites, COOs, and tariff rates, streamlining what can otherwise be a highly arduous process.

Step Two: Building the Tariff Exposure Index

After all the necessary data has been collected, organizations can actually move forward with creating their tariff exposure index. To do this, you’ll need to establish the criteria for evaluating what parts pose the greatest tariff threat. While there’s a relatively wide range of criteria companies can use for gauging tariff risk, here are some of the most widely-used factors:

• Component Criticality: Companies should categorize their parts based on how important they are to production, operations, and revenue. Components that are purchased in high volumes every year are more consequential—and carry higher potential risk—than parts used in small, selective quantities. 

• Increase in Import Costs: Though the media coverage may suggest otherwise, tariffs didn’t emerge for the first time in 2025. The U.S. was imposing sector- and country-specific import duties before the current Trump administration, and businesses should be looking beyond the current tariff rate and analyzing the overall rate increase from 2024 to 2025. The Biden administration, for example, implemented tariffs on Chinese semiconductors that started at 25% and jumped to 50% in January 2025. Given that context, the tariff increase for those goods may not be as significant as cost increases associated with imports from other countries. 

• Interchangeability/Availability of Crosses: Even if they’re exposed to high tariffs, parts with crosses available from other countries may not present the highest risk to companies. If the import levies persist and begin to eat into profits in a significant way, companies can swap in one of the crosses. Components that are less easily replaced and have fewer viable crosses, however, present a more daunting challenge. These parts should rank high on the tariff exposure index. 

Step Three: Implementing SCRM Measures on High-Priority Parts 

On its own, gathering the requisite data and then developing a tariff exposure index doesn’t lower tariff responsibilities or resolve sourcing issues. Rather, the index works as a clarifying tool, a mechanism for identifying what parts warrant intervention in the form of supply chain risk management (SCRM) measures. The final step, then, is for organizations to use the tariff exposure index to pinpoint the parts that require risk mitigation, and then take action on those imports. 

Rather, the index works as a clarifying tool, a mechanism for identifying what parts warrant intervention in the form of supply chain risk management (SCRM) measures.

There are a number of measures companies can take to reduce the tariff burden associated with specific parts, and recoup some of the financial losses triggered by the current trade environment. 

• Rebalancing Multisourcing: Many businesses regularly engage in the practice known as multisourcing—sometimes also called “splitting”—in which they order several different but largely interchangeable parts from multiple suppliers. This multisourcing approach helps firms bolster their supply chain resilience and maintain agility if one of their parts or manufacturers encounters disruptions. Multisourcing companies working to reduce the tariff costs associated with a specific part can initiate a “rebalancing” of these parts, reducing their total spend on the high-tariff part while ramping up their orders of other, less-impacted components. 

• Collaborating With Suppliers: Reaching out to suppliers and initiating in-depth conversations about how to mitigate trade expenses is a serious endeavor, one that requires time, time, and strategizing. Because of this, companies can’t reach out to all their suppliers to engage in these types of conversations; they need to identify the parts and accompanying suppliers that stand to benefit the most from collaborative problem-solving and target them. A tariff exposure index helps firms single out those components and their accompanying suppliers in an organized, systematic fashion. 

• Engaging in “Tariff Engineering”: This practice, which we’ve discussed in the past, involves tweaking different elements of a product—including HTS classification and country of origin (COO)—to secure a lower tariff rate. As with most of the other strategies listed here, it’s not a quick fix, though, and tariff engineering should only be carried out for critical parts with high spends, high tariff rates, or both. 

• Sourcing From Countries With Lower Tariffs: Something of a more drastic option, businesses struggling with the import levies associated with a specific part and manufacturer can always resort to modifying their supply chain. Swapping out a supplier in China for a manufacturer based in Malaysia or the Philippines, for example—where the Trump administration’s reciprocal tariffs are a relatively modest 24% and 17%, respectively—could significantly reduce import costs. Organizations should bear in mind, however, that the current trade environment, which leans heavily protectionist, is hardly guaranteed to be permanent. Trade deals, evolving diplomatic relationships, and the eventual turnover of the U.S. presidential administration could all rapidly reorient  current trade dynamics. Major actions, including significant modifications to an organization’s supply chain, need to be measured against the possibility that the current status quo is a transient one. 

An Effective Tariff Index Needs Clean, Centralized Data

Businesses in sectors like electronics, semiconductors, automotive, and aerospace and defense rely on hundreds of direct suppliers and tens of thousands of parts. Because of this complexity and scale, it simply isn’t feasible for firms to explore tariff mitigation strategies for all the MPNs in their products. Instead, they need to invest in targeted risk management strategies that extract the greatest value for their business—a goal that a tariff exposure index can help facilitate.

But tariff exposure indices are only as effective as the data that’s being fed into them. Companies that want to ensure they’re categorizing their parts and assessing risk as accurately as possible need to be leveraging the data, intelligence, and context provided by an SCRM platform like Z2Data. Z2Data draws from a proprietary database of over one billion electronic components—the highest quality and most comprehensive database in the industry. In addition, the software utilizes BOM mapping and related geographical data to trace parts to manufacturers, sites, and countries of origin, giving users all the intel they need to gauge tariff exposure for their components. 

To learn more about Z2Data and how it can help organizations build a robust, accurate tariff exposure index, schedule a free trial with one of our product experts.