Navigating tariff turbulence

Tariffs have re-emerged in 2025 as a structural source of cost pressure for global businesses. As geopolitical tensions flare, new environmental and labor regulations emerge, and trade policies shift with little warning. Supply chains are under mounting strain.

Industries such as automotive, chemicals, electronics, and retail are particularly exposed, either due to reliance on imported components, new compliance costs or vulnerability to region-specific disruption. Evolving green trade rules are raising the bar for transparency, increasing reporting burdens and making global sourcing decisions more complex.

For management teams, this represents more than just margin pressure. Navigating tariff turbulence requires a combination of short-term mitigation tactics and long-term structural shifts. Those who act early and decisively can turn trade friction into a strategic advantage.

But companies should not act impulsively. The first task for chief executives will be to understand not just what is happening, but why. Some disruptive events may or may not be permanent or even long-lasting. A knee-jerk reaction might cause more problems than it solves.

A good starting point is a structured, analytical review of their own supply chain. Companies often focus on EBITDA and profit-and-loss implications—both are important for the long-term sustainability of the business—but in periods of disruption it is cash that is critical.

We are also helping clients model scenarios to determine how much tariff costs can be passed on to customers without damaging market share, with pricing elasticity studies helping identify which products can sustain price hikes.

There are proactive companies assessing how they diversify away from high-tariff countries too, particularly if they are only exposed to a single region. One of the most common strategies is to shift production away from China towards Southeast Asia, as part of a ‘China +1’ approach, or into traditionally lower cost regions such as Eastern Europe.

A much-cited example is Apple, which has shifted some of its supply chain to India. However, not all companies have the cash reserves to make such a swift switch. One manufacturer we are working with saw its business boom during the pandemic, but the market has since declined and, with half of its production still in China, tariffs now pose an existential threat to the company.

If sectoral tariffs are inevitable, product redesign or components and materials modifications may assist in achieving lower tariff classifications. At the same time, companies can stockpile critical components before tariffs kick in or reroute their shipments through lower-cost trade lanes. Another option is to lock in pricing with suppliers now to hedge against future tariff spikes, though this is not without risks. It is important to check with lenders first to make sure they provide the value of any inventory if it is held in a warehouse.

The key will be to remain flexible. Trade regulations will likely stay volatile for the foreseeable future and remain a disruptive part of the business landscape to contend with. AI and other digital tools will, of course, aid the monitoring of real-time regulatory changes, providing insights to adjust supply chains rapidly.

Finally, effective corporate communications will be paramount. Uncertainty breeds speculation, so leaders should avoid any periods of silence that may leave others to assume the worst-case outcome for their business. Clear messaging for investors, customers, and employees about their tariff mitigation plans and how these will be implemented will deliver the transparent communication that maintains trust during such uncertain times.