How Tariffs Impact Your Supply Chain and Costs
Part 2: How Tariffs Impact Your Supply Chain and Costs
The Ripple Effect of Tariffs on Your Supply Chain
You might not feel it right away, but tariffs can send shockwaves through your business, especially your supply chain. Here’s a closer look at how tariffs impact your costs and what you can do about it.
Direct vs. Indirect Costs of Tariffs
• Direct Costs: These are the obvious ones, like paying higher taxes on imported goods. If you source materials or products internationally, tariffs could significantly increase your expenses.
• Indirect Costs: These are less obvious but just as impactful. For example, your suppliers may pass on their own increased costs to you, or you may need to pay for alternative sourcing options.
Supply Chain Vulnerabilities
Tariffs can make your supply chain less reliable. For example, if a major trade agreement changes, you might face delays or higher costs as suppliers adapt. Worse, some products may become completely unavailable, forcing you to pivot quickly.
Case Study: A Small Home Goods Brand
Let’s say you run a home décor brand that sources ceramic vases from overseas. When new tariffs are introduced, your cost per vase goes up 20%. You’re forced to decide: Should you absorb the costs, pass them on to your customers, or find a new supplier? Each option comes with challenges, from thinner profit margins to customer dissatisfaction.
What’s Coming in Strategies to Mitigate Risks
• Diversify Your Suppliers: Work with multiple suppliers in different countries to reduce your dependence on any single market.
• Renegotiate Terms: Some suppliers are open to renegotiating contracts to help absorb tariff costs.
• Adjust Your Pricing: Strategically increase prices to reflect your higher costs without alienating customers.
What to Watch for in 2025
Keep an eye on industries and products that may be hit hardest by new tariffs. Staying ahead of trends and regulations will allow you to pivot before your competitors do.
Ready to future-proof your business? In Part 3, we’ll share actionable tips to prepare your business for 2025 tariff changes.
In harmony,
