Navigating the Tariff Maze: Strategic Insights for System Implementations and Supply Chain Management

Donald Trump, tariffs, and the future of global trade have quickly become some of the most hotly debated topics both locally and around the world. While most of us likely have opinions on tariff policy, the purpose of this series is to remain agnostic regarding policy. Prepare and proactively discuss large system implementation pivots and potential supply chain disruptions with your team.

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Pause and Effect: The Ripple of Project Decisions

The decision to pause a major enterprise transformation due to increased tariff costs versus continuing carries significant implications. Pausing the project can reduce the immediate financial burden and help avoid potential cost overruns. However, this approach has its downsides, as project restart costs and retraining requirements could lead to higher expenses in the long term. Training or skill decay is one of the largest challenges I see in large system implementations. This occurs when the time gap between the initial training and the actual application or execution of trained skills is too long, leading to a loss of knowledge or proficiency. Retraining can be costly and time-consuming.  

Considering momentum, pausing could allow for a reevaluation and strategic pivot, possibly leading to better-aligned objectives. On the flip side, it may result in a loss of internal confidence in the initiative, demoralizing teams and reducing productivity. Teams who see projects and expenditures being paused can begin to wonder if their jobs are secure.  

When it comes to competitive advantage, pausing the project might help the organization avoid further financial strain from tariffs. Still, this decision comes at a cost. There is a reason why the project was planned for execution to start with. There is some value that the project was intended to deliver. Consider opportunity costs or the cost of losing the first mover advantage. Will sales increase from continuing the project outweigh potential costs? Will your competitors now achieve economies of scale or other efficiencies before you?

Sunk costs also warrant consideration in this decision. Halting the project prevents additional sunk costs from accumulating. Nevertheless, resource availability and/or changes in resource costs could hinder future project execution if paused. A resource available today may not be available when the market stabilizes. Time, circumstances and the laws of supply and demand can impact your teams and key contributors.  

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Stock or Shop: The Inventory Dilemma

Preordering inventory, system hardware, etc. when tariff costs are palatable can lead to a more predictable cost curve. Is it better to order large quantities now or continue to ride the potential tariff wave? Let’s consider a few factors:  

1. Preorder Holding Costs- What is the holding cost at warehouses for a given inventory quantity if you preorder inventory? Inventory holding costs over a long-time span can sometimes exceed the overall cost of the inventory over time. These costs can add up quickly if inventory isn’t moved efficiently. Consider that preordered goods can help mitigate increased scrutiny and delays at customs that may disrupt the supply chain if sourced just in time. Preordering can ensure a steady inventory, with higher warehousing costs. Shipping costs will be higher than just-in-time in most cases due to the costs of shipping to a central warehouse and then to the destination where inventory is needed as opposed to direct shipment.  

2. Alternative Sourcing Options- Is your product unique and only produced in one location or can your inventory be sourced from multiple countries in different economic zones? What is the cost to change suppliers? Is inventory quality the same across alternative suppliers? What is the speed of the change if needed? Can you start sourcing small inventory quantities now for a trial run? Sourcing just-in-time inventory eliminates holding costs and extra shipping costs. Tariff negotiations could also remove tariffs all together, which makes this a higher risk, higher reward option.  

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Duty Dancing: Evasive Maneuvers Enter the Spotlight

As previously discussed, alternative sourcing can be a viable option companies use to reduce tariff costs. Another method to reduce costs is call transshipping. Transshipment involves making minimal value additions to goods to change their country of origin before they reach their destination. Inventory made in a high tariff country can be processed with a minimal value-added element to receive a more favorable tariff classification. While this can help reduce tariffs, it is important to ensure compliance with international trade laws and regulations. This option requires time to implement and cannot always account for an unpredictable tariff environment but can still be included as part of an ongoing continuity planning scenario.  

Tariffs are operated based on classifying types of inventory/imports. Different inventory classifications drive higher or lower tariffs. Tariff Engineering reengineers a product to alter its classification and lower tariffs. Costs of changing the product's components or design to fit a different tariff category should be closely analyzed. While businesses can potentially benefit from lower tariff rates, like transshipping, time to implement can be long. A thorough review of tariff schedules and product classifications is needed to ensure compliance and longevity of this strategy.

Finally, secondhand Goods offer another viable option to reduce tariffs. Using this option assumes quality goods are available in sufficient quantities within your country’s borders, making them exempt from import duties. Secondhand inventory prices can be unpredictable and cost prohibitive with tariff volatility but should still be considered.  

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Law of the Land: Upcoming USA Legislation Changes

In the United States, de minimis shipments are imports that fall below an $800 value threshold, which currently allows them to be imported with minimal or no duty. According to the U.S Customs and Border Protection (USCBP) website, the USCBP handled more than 1.3 billion de minimis shipments in 2024. On May 2, 2025, De Minimis shipments will be subjected to normal tariffs imposed on all shipments via executive order from Donald Trump. Shipments under $800 that were barely scrutinized prior to May 2, 2025, could cause further shipping delays for goods moving through USA customs.  

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That’s All Folks: Here’s to Being Prepared

Preparation for unforeseen market conditions or uncertainty must happen before the event occurs. Full supply chain pivots with new suppliers or engineering concepts do not happen overnight. Building continuity plans for system implementation and supply chain disruptions has never been more critical. Small batch inventory runs with proposed supply chain pivots can offer some security for market uncertainty. No one knows how long tariffs will last, but much like after Covid-19, markets and the geopolitical landscape will never be seen in the same light. The economic landscape continues to change due to tariff policies, whether we like it or not. With the recent election of Mark Carney in Canada and USA tensions with Xi Jinping in China, it is unclear what the immediate future of world trade looks like. Candid conversations irrespective of political allegiance create clarity, increase trust, and create a path forward in uncertain times.