Tariffs: What you need to know
Everyone needs guidance. The complexity of trade laws and frequent changes in tariffs—especially those impacting aluminum, steel, and automobiles—have left many companies uncertain about how to proceed. In many cases, these are companies with limited infrastructure to manage trade logistics independently.
There also tends to be a lack of experience navigating trade regulations, which often pushes these firms to seek outside expertise. Like many of you, I've had to research the tariff issue and relied on our in-house experts for guidance as well. In this article, I'll share some tactics to help you navigate and mitigate tariffs moving forward.
But first, the basics. Tariffs aren't one-size-fits-all. Depending on what's being imported, where it's coming from, and the goals of trade policy, different kinds of tariffs come into play. For manufacturers, knowing the differences can have a big impact, whether you're sourcing parts globally or trying to forecast costs and risks.
Ad Valorem Tariffs: These are the go-to format for many tariffs. Ad valorem tariffs are calculated as a percentage of a product's declared value.
Specific Tariffs: Instead of being value-based, specific tariffs charge a flat fee per unit, whether that's by item count, weight, or volume. These tend to show up on bulk goods or raw materials and can especially impact low-cost imports.
Compound Tariffs: As the name suggests, compound tariffs mix both percentage-based and per-unit charges.
Some tariffs aren't tied to standard pricing models, but serve broader trade or policy objectives. These often emerge during trade disputes or to level the playing field.
Reciprocal Tariffs: Imposed in direct response to tariffs placed on a country's own exports.
Retaliatory Tariffs: Aimed at pressuring another country by hitting them with targeted tariffs in response to perceived trade violations.
Universal Tariffs: A blanket tariff rate—say, 10%—applied to nearly all imports from a specific country or group. These are typically used for strategic or political reasons rather than product-specific concerns.
In 2025, much of the news has focused on using tariffs as a tool to strengthen U.S. manufacturing. Despite the challenges tariffs introduce, I'm optimistic that in some cases, we're in the process of seeing a resurgence of U.S. manufacturing.
I'm also aware that while the idea of reshoring manufacturing to the U.S. is gaining traction, the process to make that happen is both complex and time-consuming. You can't change a supply chain or rebuild domestic capabilities overnight—especially in terms of labor, education, and automation.
Take raw materials like aluminum: The U.S. currently has limited domestic production capacity compared to global leaders like China. These supply constraints could shape future policy decisions, particularly as the government investigates the security of strategic minerals under Section 232. But overall, I'm bullish on U.S. manufacturing and optimistic about what we can accomplish in the next 3-5 years.
SMART STRATEGIES FOR TARIFF MITIGATION
Regardless of where you choose to source your goods, minimizing tariff impacts involves thoughtful coordination across multiple business functions: supply chain logistics, manufacturing operations, and trade compliance. Several proven strategies can help mitigate some of these pressures.
Optimizing Product Classification: Precise classification using the harmonized system (HS) code can help avoid overpaying duties or facing delays.
Participating In Tariff Rebate And Exemption Programs: Refund mechanisms such as duty drawback offer relief when imported components are later re-exported as part of finished goods.
Strategic Sourcing Of Materials: Another path to tariff reduction lies in sourcing raw materials or parts from countries with low or no tariffs for the destination market. Where possible, substituting high-tariff materials (e.g., steel, aluminum) with alternatives such as composites or less regulated metals can lead to significant savings.
Geographic Diversification Of Manufacturing Operations: Adjusting the geographic footprint of production can shield companies from trade-related risks. Nearshoring production to countries with trade advantages or distributing assembly across multiple regions can limit duty exposure and maintain operational flexibility.
Tariff rates vary significantly based on material type. Natural materials like wood, cotton, or leather often face lower duties compared to synthetics. Some governments also promote the use of sustainable or recyclable materials by offering preferential tariffs. Conversely, inputs such as steel, aluminum, and plastics may carry higher tariffs due to anti-dumping or national security measures.
Understanding country-of-origin rules is key. Materials from free trade agreement-aligned countries may qualify for lower rates, provided local content requirements are met.
By understanding and applying a range of mitigation strategies—especially those linked to material selection, geographic sourcing, and regulatory programs—manufacturers can enhance their global competitiveness and protect margins amid a volatile trade environment.
IT'S THE SUPPLY CHAIN AFTER ALL
Now more than ever, it's critical to examine your supply chain strategy. Many manufacturers built their supply chains over decades under the assumption of stable, tariff-free trade in regions like Mexico and Canada. Those assumptions no longer hold. And reconfiguring those networks demands not only financial resources but also long-term planning.
A new generation of manufacturing and supply chain solutions is emerging to meet these needs. Powered by artificial intelligence and supported by a global footprint of manufacturing centers, these solutions provide a comprehensive end-to-end approach to product development, from initial prototyping through full-scale production and final delivery.
If you've already built a multi-country manufacturing network, you're in a good position to weather today's volatility. With a globally diverse, agile supply chain already built out, it's easier to pivot production between countries in response to changing trade policies. With tariffs not applied uniformly across countries, this agility has become a competitive advantage. In other words, there's incredible value in 'China plus two or more.'
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