As US tariffs once again become a central topic in international business discussions, the global trade landscape is facing heightened uncertainty. Even those without direct exposure to US tariffs cannot afford to ignore the ripple effects. Supply chains are increasingly global, and a tariff imposed on one country or industry can create shockwaves across the market.
Companies producing in regions subject to tariffs face immediate cost increases, making their products less competitive in the US market. Meanwhile, US firms importing goods from tariffed regions may face higher costs and be forced to seek alternative suppliers or raise prices. In contrast, competitors sourcing from unaffected regions gain a significant edge. Industry-specific tariffs, such as those imposed on steel and aluminum, also can dramatically alter the competitive landscape. This depends on the degree to which the US relies on imports versus domestic supply.
- Country-specific tariffs: If the US imposes a country-specific tariff on European or Chinese goods, exporters from those regions immediately face a competitive disadvantage compared to rivals outside the affected areas. This is particularly risky for international producers reliant on the US market for growth.
- Industry-specific tariffs: When tariffs target specific industries, such as steel or aluminum, the implications depend heavily on whether the US can meet its domestic demand. If imports make up a significant portion of consumption, costs will likely rise across the board. However, in cases where the US has sufficient domestic supply, companies exporting to the US will face reduced demand, and the playing field will shift accordingly.
In such scenarios, the location of production and sourcing becomes a decisive factor in a company’s competitiveness. Those who are unprepared for these shifts may find themselves at a disadvantage, as power dynamics between competitors are reshaped virtually overnight.
The changing balance of power
Tariffs have the potential to upend the competitive status quo in any given industry. When production costs in a tariffed region surge, companies must quickly adjust their go-to-market strategies or risk losing market share.
Several factors will influence the actions companies should take:
- Level of exposure: Is the manufacturer highly dependent on the US, exporting a majority of its goods there (e.g., Canada, Mexico, and China)? The greater the exposure, the more difficult it will be to redirect goods to other markets.
- Nature of competition: Is the competition mostly international or local? If it is primarily international, prices across the category may increase as competitors are confronted with price hikes. If mostly local, absorbing the tariffs rather than passing them on may be necessary to maintain competitiveness.
- Market stability: There may also be disruption in previously stable markets. For example, Chinese exporters, less competitive in the US due to tariffs, may pivot their supply chains toward Europe, intensifying competition for European businesses.
- Adjacent categories porosity: If consumers have alternative product choices at lower prices, they may switch. If substitutes are limited, demand may remain stable despite price increases.
- Price positioning as a competitive advantage: If price is the primary differentiator, companies will be more vulnerable. In contrast, those with strong brand equity, technological edge, or loyalty programs will be better positioned to navigate price increases. High-priced, luxury products are less likely to be impacted, while mass-market or low-price-positioned goods will be under greater pressure.
Action vs. inaction: The risk of waiting
Given the uncertainty surrounding US trade policy, many companies are adopting a "wait and see" approach. While understandable, this strategy is inherently risky. Tariffs can take effect with little warning, and companies that delay preparation may find themselves scrambling to adapt.
As the specter of additional US tariffs looms (25 percent of tariffs on EU goods), sectors like agriculture, industrial technology, and consumer goods could face widespread implications. If the EU retaliates with tariffs on US imports, European businesses that rely heavily on US goods may see increased costs. This could create additional pressure on pricing for companies importing from the US. Companies may need to identify alternative suppliers or sources and work closely with partners to mitigate the impact of retaliatory tariffs.
Forward-thinking organizations are already engaging in active scenario planning. For example, we recently developed a scenario-based model for a Swedish industrials firm, enabling a five-day global portfolio response to various potential situations. Such speed takes preparation and consistency in execution.
Such organizations are identifying potential vulnerabilities in their supply chains, evaluating alternative suppliers, and exploring mitigation measures. They are considering shifts in materials, sourcing, or routes to market that could reduce their exposure to tariffs. And most importantly, they are building agility into their operations, ensuring they can pivot quickly if tariffs are enacted.
Strategic options in response to US tariffs
Strengthened connection between procurement and sales
In many organizations, procurement and sales often operate in silos. Procurement focuses on securing materials at the best cost, while sales crafts go-to-market strategies based on static inputs. But tariffs force these worlds to collide, creating an urgent need for a more integrated dialogue.
What to do next:
- Build task forces that bring together procurement, sales, revenue growth management (RGM), and go-to-market teams. These groups should meet regularly to exchange insights and craft integrated responses. Other responsibilities include drafting the “what-if” scenarios and also keeping them updated and relevant over time.
- Encourage procurement to go beyond cost reporting and play a more active role in informing commercial strategies. If switching to alternative materials can avoid tariffs, ensure sales teams understand how these changes will affect customer expectations and product appeal.
Pricing adjustments
Deciding whether to absorb the new cost, pass it to consumers, or find cost-saving alternatives involves trade-offs that can significantly impact your competitiveness, profitability, and long-term market position.
What to do next:
- If your company holds a dominant position (premium price, strong market share, limited adjacent categories, international competition, and low exposure), price increases may be easier to implement.
- If exposure is high, a mixed approach may be necessary: raising prices selectively on less visible products while absorbing tariffs on high-volume, critical items. Some price increases may even exceed tariff costs to mitigate profit risks.
Geographical expansion
Tariffs may require you to explore entry into new markets or accelerate your presence in existing ones with strong growth potential. This requires market analysis on growth, size, local competition, and profitability per unit. Tariffs can shift the competitive landscape, making some regions more attractive while limiting opportunities in others.
What to do next:
- Conduct a detailed tariff impact assessment to determine which regions offer the best balance between cost efficiency and revenue potential. Consider local trade agreements, production costs, and supply chain feasibility.
- Strengthen partnerships with local distributors and suppliers to navigate regulatory challenges and establish a cost-effective presence. Leveraging regional manufacturing or sourcing can help mitigate tariff-related expenses and improve pricing flexibility.
Product and customer mix management
Adjusting the product mix to emphasize offerings that are less tariff-sensitive can help manage costs while maintaining profitability. This might mean prioritizing products with lower import duties, sourcing alternatives, or shifting focus to premium or value-driven options that better absorb cost fluctuations. Additionally, optimizing customer mix by targeting more profitable channels and retailers can help offset tariff-related pressures.
What to do next:
- Assess product portfolios to identify items with lower tariff exposure or greater pricing flexibility. Consider reformulating, resizing, or bundling products to maintain margin while keeping prices competitive.
- Strengthen relationships with high-margin customers and channels that can accommodate price adjustments. Where feasible, shift distribution to domestic or tariff-favorable markets to sustain profitability.
Product expansion
Expanding your product portfolio with strategically positioned offerings can help counteract tariff pressures. Introducing premium products with no prior price reference points allows for greater pricing flexibility, while value-engineered alternatives can appeal to cost-conscious consumers. In some cases, shifting production to the US or tariff-friendly regions may also provide long-term benefits.
What to do next:
- Explore premiumization strategies that justify higher pricing through innovation, branding, or enhanced features. Products without direct price comparisons offer more room to absorb costs without eroding competitiveness.
- Assess the feasibility of domestic or regional production shifts to reduce tariff exposure. If relocation isn’t viable, consider supply chain optimizations that minimize cost increases while maintaining product appeal.
Prepare and lead with agility and speed
US tariffs represent not just a challenge but an opportunity to build competitive resilience. Acting now, rather than waiting for clarity, will better equip your business to navigate these changes, protect your market share, and capitalize on emerging opportunities. Even if tariffs do not materialize, the exercise of planning strengthens resilience to future disruptions.
- Elevate tariff planning to the executive level. Make it a standing agenda item in top management meetings, supported by regular updates from your task force.
- Invest in tools and platforms to monitor tariff developments and analyze their potential impact in real-time.
- Create a centralized platform for tariff-related decisions, ensuring all departments are aligned and ready to execute when scenarios unfold.
The hallmark of a strong organization is its ability to respond quickly. Supply chain disruptions driven by tariffs can feel like a crisis, but they also present an opportunity to rethink and future-proof your strategy. The time to prepare is now. Because when tariffs come, agility and preparation will define who thrives and who falls behind.
