Industry Voices | How Complex U.S. Manufacturing Can Prepare for Upcoming TariffsIndustry Voices | How Complex U.S. Manufacturing Can Prepare for Upcoming Tariffs

The new year has brought newly proposed U.S. economic policy to the forefront of business discussions. The proposed tariff changes set to take effect Feb. 1 present significant implications for U.S. manufacturers.

Manufacturers with complex supply chains that depend on components of their American-made products from countries around the globe will be particularly impacted. The first tariffs likely will impact Canada, Mexico and China — the three most significant trading partners of the U.S. In addition, if retaliatory tariffs from other countries are implemented against the U.S., American manufacturers’ ability to compete globally will be at risk. 

Industries dependent on global supply chains are threatened with long-term competitive challenges. Tariffs can hinder innovation and economic growth while straining international relations and triggering retaliatory trade measures. The stakes for high-tech industries are especially concerning due to their reliance on specialized components from worldwide suppliers. Two obvious examples are the aerospace and automotive industries.

Most aerospace companies import a significant number of components for various reasons, such as cost, economic offsets or to integrate the intellectual property of components owned by companies located in another country. If any of these parts protected by patents became prohibitively expensive, the manufacturer would need to develop competitive new technology, set up local manufacturing and then likely endure the expense of recertifying the impacted aircraft.  A situation like this would take years to resolve. 

Automotive companies and suppliers in Detroit have supply chains that routinely go back and forth across the border to Windsor, ON, Canada, trying to increase margins in a very competitive business. Tariffs like those being discussed would be a disaster and force immediate changes, driving up prices for both manufacturers and consumers. Recent history has shown that the existing tariffs on Chinese imports raised electronics, steel and aluminum costs. These increased costs eventually were passed along to American consumers. 

Sudden resourcing efforts to combat these new tariffs will exacerbate capacity constraints, increasing costs, decreasing supply and making supply chains more fragile. Many sourcing and make-buy decisions will need to be reevaluated, leading to added overhead and non-value-added work that will impact company profitability. 

While acknowledging the clear challenges and consequences of imminent tariff additions, there are also important steps that complex manufacturers can take now to react and prepare for future economic uncertainty.

Recalculating Total Landed Cost (TLC) and Sourcing

Tariffs directly impact the cost of imported parts, necessitating recalculations of TLC and the potential resourcing of materials from alternative regions.

Manufacturers can flag affected suppliers and materials using their enterprise resource planning (ERP) tools or other planning technology, enabling dual sourcing as a mitigation strategy. Companies can investigate dual-sourcing strategies to mitigate the risk of cost fluctuations caused by tariffs and to protect material availability. 

Managing Proprietary Parts and Intellectual Property (IP)

Tariffs on proprietary parts often leave manufacturers with limited options, such as passing costs to customers or absorbing reduced margins. Developing alternative sources involves significant time and certification costs. Reliance on foreign IP can introduce risks tied to currency fluctuations and tariff exposure.

Companies must weigh the time and expense of developing in-house alternatives versus remaining competitive in high-tech industries. Constraining your product development to in-house designs slows innovation and will make countries with fewer tariffs more competitive in the global markets.

Make-Buy Decisions and Investment Implications

Tariffs force manufacturers to reassess make-buy decisions, weighing the costs of in-house manufacturing against outsourcing. Investments in tooling and raw material supply chains require long-term commitments that are complicated by the uncertainty of future tariff policies.

Diversifying supplier bases minimizes exposure to tariffs and reduces supply-chain risks. However, reshoring production or transitioning to new suppliers often requires significant time and capital investment. Idling plants located in regions with tariffs would trigger a huge write-off of both capital and natural resources.

Leveraging ERP and Project Management Tools

Advanced ERP capabilities enable manufacturers to filter by material group or commodity code, identify alternative suppliers and automate notifications for impacted parts. These tools support more intelligent decision-making and enhance agility. Visual project management tools streamline timeline management and stakeholder communication, offering a clear roadmap for phased transitions and risk mitigation.

To mitigate tariff impacts, manufacturers must take proactive measures, including TLC analysis, make-buy evaluations and strategic planning. By leveraging modern tools and prioritizing resilience, companies can balance short-term risk management with long-term strategic goals.U.S. manufacturers must act quickly to navigate these challenges, leveraging available technologies and insights to future-proof their supply chains. Flexibility and adaptability will remain crucial as the industry continues to evolve in response to global trade dynamics.