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Risk Management

A three-part plan for dealing with tariffs

Comply, forecast, and mitigate, one supply chain expert says.

An illustration shows a fence around the US and tariff percentages printed along its border.

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4 min read

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As you may have noticed, President Donald Trump announced sweeping new tariffs on April 2, with a 10% baseline rate to be slapped on imports from most countries, plus even higher rates for imports from the EU, China, and other nations. Regardless of how much Trump may be willing to negotiate, the coming tariffs will likely leave few CFOs unaffected. To learn more about what finance teams can do in response, we spoke with Charlie Clevenger, a principal specializing in procurement and supply chain management at UHY Consulting, which has many small- and mid-cap manufacturers as clients.

Clevenger has experience with tariffs from the other side of the desk as well: Before joining UHY, he worked for manufacturing companies supplying the automotive and defense industries. He told us about how he advises clients seeking advice about tariffs, and what strategies they’re using to mitigate them.

A three-step plan to dealing with tariffs. Clevenger and his colleagues advise clients to take a three-step approach to handling tariffs. First, CFOs and finance teams should be sure they’re compliant, something especially important given today’s “changing and more complex landscape,” he said. He advises they monitor the tariff landscape while staying in close communication with their customs brokers, and that their purchasing and supply chain teams frequently talk with suppliers and logistics providers. “Bringing the information from these sources together can provide a complete picture of the evolving tariff situation,” he said.

Second, finance leaders should be aware that tariffs are “becoming a significant component of cost that needs to be forecasted and managed” in the same way that other costs such as labor and materials are, Clevenger said.

Forecasting around tariffs can be difficult, he acknowledged. They can be volatile and shift with political winds. Clevenger says that looking back historically can give a sense of which tariffs are most likely to stick around long-term. For instance, the aluminum and steel tariffs that Trump levied in 2018 during his first term “were largely maintained during the Biden administration and they’ve continued on,” he said, because they affect “core industries” important to defense and other areas, such as aerospace and automotive. Likewise, the Section 301 tariffs on Chinese goods have been maintained since 2018 as well, due in part to concerns about “the massive trade deficit” with China, Clevenger said.

Another approach Clevenger used to manage the 2018 and 2019 tariffs was to forecast what would happen at both the high and low end to put some boundaries around potential outcomes.

Managing costs. The third step in responding to tariffs is cost and risk management, Clevenger said. Companies can first try to “minimize their exposure” to tariffs by “pushing that responsibility down the supply chain,” he said. If they’re not able to do so, they’ll need to absorb the costs or push them out to consumers, though he thinks it’s too early yet to say how the costs of the new tariffs will be distributed.

The fine-toothed comb approach. Companies can also examine their imports to find ways to reduce their exposure to tariffs, Clevenger said. For instance, they might look at the Harmonized Tariff Schedule—a database listing the tariff rates and categories for all imports to the US—and find more favorable ways to classify their imports. “A bolt, for example, could be classified as a bolt,” he said. “It could be classified as a form of a fastener. It could be classified as a machine component.”

Companies can also look at what countries their products or imports are “transformed” in (for instance, those bolts might be treated with corrosion protection in a different country from where they’re formed). Or, if appropriate, they could take advantage of free trade zones, he said.

Though some tariffs may be short-lived, anticipating outcomes can prove a long game. Manufacturers can use them as “an opportunity to reconsider their cost structure, reconsider their manufacturing footprint” and collaborate with suppliers and customers on improvements, Clevenger said. He advises companies to treat tariff mitigation as a “team sport,” not just a problem for the supply chain or procurement function to handle. “The best solution,” he said, “is going to be a collaboration involving your technical team, your engineers around the designs, [and] your finance team.”

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