Understanding New Tariff Laws Impact on Manufacturing Companies

The current tariff situation represents a significant shift in U.S. trade policy, with multiple overlapping measures that affect different industries and trading partners. 

Some of the main trade policies that have been discussed, enacted or temporarily paused include:

• Canada and Mexico Tariffs: A newly announced 25% tariff on all imports from these USMCA partners, representing a major shift in North American trade relations
• China Tariffs: Additional tariffs on Chinese imports, expanding beyond the measures implemented in previous years
• Steel and Aluminum Tariffs: Global tariffs of 25% on steel and 10% on aluminum imports, with country-specific exemptions being negotiated
• Timeline Considerations: Many of these measures are set to take effect within 30-60 days, giving manufacturers limited time to adjust

The motivations behind these tariffs vary, from national security concerns, like immigration, to addressing trade imbalances to supporting domestic manufacturing. 

Understanding these distinctions matters because they influence both the likelihood of policy adjustments and the potential for retaliatory measures from trading partners and countries. 

As it stands, the European Union, Canada, China and others have announced or are contemplating retaliatory tariffs on U.S. exports, creating a potential double impact for manufacturers who both import materials and export completed goods. 

This stark change in trade policy for the U.S. represents a departure from the more steady, rules-based trade system of recent decades and introduces greater unpredictability into global supply chains that were already dealing with major disruptions.

The initial effects of these tariff actions are already rippling through manufacturing supply chains. Many U.S. manufacturing companies are reporting some of the following concerns. 

Supply Chain Disruptions: Manufacturers who source components or materials from affected countries are facing immediate cost increases, delivery delays and in some cases, the need to quickly qualify alternative suppliers. 

For complex products with hundreds or thousands of components, this represents a significant operational challenge.

Small vs. Large Manufacturer Divide: Larger manufacturers often have more leverage with suppliers to absorb cost increases and greater resources to quickly pivot supply chains. 

Small to mid-sized manufacturers frequently lack both the pricing power and the inventory capacity to buffer against sudden cost increases.

“Whereas large enterprises may be able to swallow the higher costs or pass them on to consumers, this is often not an option for small manufacturers, who account for most of the sector in the USA,” wrote JAGGAER Vice President of Direct Procurement, Georg Rösch. 

For upstream producers like domestic steel and aluminum manufacturers, the tariffs potentially offer benefits through reduced competition. However, downstream manufacturers using these materials as inputs face challenges as they compete globally with producers who may access lower-cost materials.

Early market responses include price increases across affected categories, inventory stockpiling where possible and in some cases, production slowdowns as manufacturers reassess their options.

Initial disruptions are one thing to deal with, but manufacturers must also consider the long-term implications of tariffs and their effect on supply chains. 

In some cases, tariffs may be a simple political tool or ploy to persuade trading partners, but in other cases, the tariffs may affect costs and value chains for years to come.

Manufacturing Renaissance vs. Cost Reality: While tariffs may incentivize reshoring of certain production, this must be balanced against the higher costs that domestic production often entails. 

The reality is more nuanced than simple job repatriation, with automation often playing a larger role in new domestic manufacturing facilities.

Global Competitiveness: Manufacturers must consider whether higher input costs will reduce their competitiveness in export markets, especially when foreign competitors can access lower-cost materials. 

This balancing act becomes particularly challenging when retaliatory tariffs simultaneously close export opportunities.

Taking a balance sheet approach, manufacturers need to weigh potential benefits—protected domestic markets, reduced offshore risk—against drawbacks like higher input costs, retaliatory tariffs, reduced global competitiveness.

Despite the industry’s volatility and lack of clear answers, there are actionable approaches manufacturers can take to better prepare themselves for the economic twists and turns of the near future. 

Here’s a look at how some manufacturing firms are already starting to mitigate the long-reaching effects of tariff changes. 

Supply Chain Diversification

Rather than completely reshoring, many manufacturers are adopting a “China+1” or similar diversification approach, maintaining some production in affected countries while developing alternative sources. 

This might not be the ideal solution for some companies—other countries like Vietnam and Bangladesh may be the next tariff targets—but it does offer flexibility while maintaining some regional momentum. 

Product Redesign

Manufacturers can consider redesigning products to substitute non-tariffed materials or components where possible. 

If this sounds like a monumental task—it may well be. But with manufacturing PLM solutions, where product development processes are all hosted in one “single source” platform, making redesigns and revisions is simplified and accelerated between stages, from design and engineering teams to key stakeholders. 

Strategic Pricing

Companies with the right approach to data can analyze which products have the pricing elasticity to absorb tariff costs and which require reformulation or redesign. This cost-tracking capability is more efficient and accurate with a PLM foundation that prevents data silos and disconnected insights.

Inventory Management

Manufacturers must carefully balance the risks of stockpiling inventory—tying up capital, potential obsolescence—against the benefits, like avoiding immediate tariff impacts and ensuring continuity.  Smart inventory management systems provide visibility into material requirements across product lines, helping companies make data-driven decisions.

Improved Documentation Quality

Forward-thinking manufacturing firms implement rigorous systems for tracking and documenting country of origin, harmonized tariff schedule (HTS) codes and other relevant information. This supports both compliance requirements and enables strategic sourcing decisions that can mitigate tariff impacts.

Collaborative Approaches

Leading manufacturers establish platforms for collaboration with suppliers and customers, sharing information about tariff impacts and working together on solutions. This cross-company communication builds stronger supply chain relationships that can weather trade policy changes.

For most manufacturers, future success will come in building resilience against tariffs, supply chain disruptions and other major changes in global trade policies. While only some countries may be targeted with tariffs at the moment, companies should prepare and expect more volatility in years to come. 

Here are some ways U.S. manufacturing firms can build more resilience and agility that can help overcome some of the challenges presented by rising tariffs. 

Scenario Planning

Successful manufacturers develop and regularly update scenarios for different trade policy outcomes, maintaining flexibility to pivot as conditions change. Companies with advanced analytics capabilities can model potential impacts and prepare contingency plans before disruptions occur.

Automation Investment

Industry leaders consider accelerating investments in automation to offset higher labor costs associated with domestic production, making reshoring more economically viable. These investments often have dual benefits: reducing tariff exposure while also increasing productivity and quality.

Cross-Functional Teams

Forward-looking manufacturers establish dedicated teams spanning procurement, design, finance and compliance to monitor tariff developments and coordinate responses. These cross-functional teams can quickly evaluate options and implement changes to product designs, sourcing strategies, or manufacturing locations.

Economic Monitoring

Competitive manufacturers implement systematic tracking of policy announcements, trade negotiations and economic indicators that might signal shifts in tariff approaches. They integrate these insights into regular business planning cycles, staying ahead of potential disruptions.

Supplier Relationship Management

Even when shifting production to avoid tariffs, successful manufacturers maintain relationships with existing suppliers to preserve options as policies evolve. This strategic approach to supplier management provides flexibility to quickly pivot as trade conditions change.

Product Lifecycle Management systems offer a powerful framework for navigating tariff challenges, providing the visibility and analytical capabilities to make more informed and agile decisions.

Some of the ways PLM can help navigate the tariff landscape, both in the short- and long-term include the following.

Supply Chain Visibility

Modern product lifecycle management solutions connect product-related activities and data across the entire supply chain on a single cloud-based platform. 

This visibility allows manufacturers to quickly identify tariff exposure within their Bill of Materials (BOM) and supply networks. The first step to pivoting with tariffs is knowing where they affect your bottom line the most and having real-time supply chain visibility is the best way to get that data when it matters most. 

Scenario Modeling and Predictions

PLM enables manufacturers to model different tariff scenarios and their impact on product costs, margins and competitiveness. By creating digital twins of products and their supply chains, companies can test alternative approaches before committing resources.

BOM Cost Management

When material prices fluctuate due to tariffs, PLM systems provide real-time tracking of these changes and their impact on overall product costs. This enables more strategic decisions about design modifications, substitutions, or pricing adjustments.

Accelerated Product Development

PLM streamlines collaboration across design, financial planning, development, sourcing and quality control teams, making it possible to quickly redesign products to reduce dependence on tariffed materials or components.

Better communication and connection between teams means greater efficiency, less wasted time and resources and a focus on production speed that doesn’t cut quality or corners.

Country of Origin Tracking

PLM systems can maintain detailed records of component origins, supporting both compliance requirements and strategic sourcing decisions to minimize tariff exposure.

Data-Driven Supplier Decisions

With comprehensive data on supplier performance, costs and risks, manufacturers can make more informed decisions about maintaining, shifting, or diversifying supplier relationships in response to tariffs.

While tariffs present significant challenges for manufacturers, they also create opportunities for companies that are prepared to adapt. By leveraging all-in-one digital tools like PLM, manufacturers can gain the visibility, flexibility and strategic insights needed to navigate trade uncertainties and remain competitive.

For companies looking to strengthen their tariff response strategy, Centric Software® offers a powerful solution to streamline supply chain decisions, manage product costs and accelerate innovation. In a world where trade policies are constantly evolving, agility and data-driven decision-making are the most reliable keys to success.