Navigating Tariff Challenges

Given the flurry of news articles about different responses to tariffs (especially as the end date for the 90-day pause on reciprocal tariffs approaches), I'm sure many folks (both in industry and academia) are struggling to wrap their heads around this topic. To aid in developing collective understanding, Yao J., David L. Ortega, and I worked together to coauthor a study titled, "Shock and Awe: A Theoretical Framework and Data Sources for Studying the Impact of 2025 Tariffs on Global Supply Chains" that can be freely downloaded from Journal of Supply Chain Management at this link: https://lnkd.in/gFHEpsdp. Below I've reproduced the diagram central to the framework we advance. A few words: •The crux of our framework is that changes in tariff levels cause firms to experience demand or supply shocks, which in turn can trigger a variety of behaviors (e.g., exporters reducing prices or shifting goods to other markets). These behaviors can be legal or represent misconduct (e.g., falsifying country of origin). While certainly not encouraging such behaviors, they will need studied (e.g., as in https://lnkd.in/gw5gQtPH). •Different actions result as importers make tradeoffs between (i) adjustment costs [e.g., the cost of shifting tooling from one country to another], (ii) transaction costs [e.g., the cost of teaching new suppliers how to produce your goods], (iii) adjustment costs for early action [e.g., reduced conformance quality while new suppliers move down the learning curve], and (iv) opportunity costs for late response [e.g., failing to shift production results in available capacity in alternative sourcing locations being captured by rivals]. •In general, I've been very pleased with how well subsequent news stories (e.g., https://lnkd.in/guMCCgrm) can be mapped to the theory we advanced. Implication: For anyone interested in understanding how firms are responding to tariffs in industry or academia, I suggest giving this paper a read. It's nontechnical and provides, to the best of my knowledge, the most holistic framework yet advanced for understanding this complex topic. #supplychain #shipsandshipping #supplychainmanagement #markets #economics #logistics #transportation

The "Liberation day" tariff announcements have amounted to the market's worst-case scenario. As the macro and market impact shakes out in the coming days and weeks, we have some top through-lines: - Tariffs are both an opening bid for negotiations and a policy approach in themselves. Though targeted concessions are likely for some countries, we expect the average effect tariff rate to be significantly higher. - These announcements pressure inflation meaningfully to the upside, and growth meaningfully to the downside. This puts the Fed in a bind – and likely on hold – unless employment deteriorates meaningfully or tighter financial conditions (widening credit spreads and/or an equity selloff) threaten growth. - The risks of both higher inflation and lower growth are now significantly higher. Before this news we had the risk of recession at 15%; that risk is now 45%, and would rise if these tariffs stick or escalate. Investors have options in how to adapt to the new policy environment, shared here:

"Your iPhone might cost $300 more next year." Heard during JP Morgan's investor webinar I attended today. Their Chairman of Market Strategy wasn't sugar coating anything: We're facing the biggest tariff spike since 1910. Supply chains imploding. Possible recession. But while hundreds of investors are losing their minds... There's also a massive opportunity that most are ignoring. (And no, I'm not talking about "buying the dip") Here's my summary of the call: THE RISKS 1. We're looking at the highest tariffs since 1910. That's not a typo. And last time companies faced tariffs like this... They just passed those costs straight to customers. 2. Other countries are probably not gonna just sit there and take it. They might hit back at our tech and financial services... Where we actually make good money. 3. The stock market could get ROCKED even further. And despite what some fancy advisors say about "only the rich own stocks"... 62% of American households have market exposure. So yeah... that matters. 4. Supply chain costs could explode since half our imports are parts for making other stuff. BUT... (and this is important)... Every crisis creates opportunity. THE OPPORTUNITIES: 1. "Made in America" could become the golden ticket When foreign products get expensive... American manufacturers get competitive. 2. Near-shoring becomes the move Mexico and Canada are exempt from these tariffs. Think about THAT for a minute... 3. Local supply chains will strengthen Less overseas reliance = more domestic suppliers needed. 4. Innovation gets forced. When you can't compete on price... You gotta get creative. MY RECS: Audit Your Supply Chain • Map EVERYTHING • Calculate tariff exposure • Find domestic alternatives • Start negotiations early Look for Strategic Partnerships • Find domestic manufacturers • Partner with logistics companies • Join forces with complementary businesses Turn This Into Marketing Gold • Highlight "Made in America" status • Show how you're creating American jobs • Build community around local business Chase Government Incentives (There's gonna be more money available for domestic production.) Consider Vertical Integration Maybe it's time to own more of your supply chain... HOW THIS MIGHT PLAY OUT: Best Case: Countries negotiate deals, tariffs get rolled back, but domestic manufacturing gets stronger anyway. Middle Case: Extended uncertainty while everything gets figured out. Smart companies adapt and thrive. Worst Case: Full trade war triggers recession... but remember: • Markets usually recover way BEFORE the economy • The biggest opportunities come during chaos • Being early > being right THE BOTTOM LINE: Yes, these tariffs are a massive economic experiment. Yes, there are serious risks. But sitting around crying about it won't help. The founders who win will be the ones who: - Face reality - Move FAST - Position for multiple scenarios - Build stronger domestic ops Do it.

🥊 Our margins just got punched in the face. But we’re not taking it lying down. The new tariffs hit us with a 15% increase on all materials sourced from China. We’re all feeling the pain. Margins are under attack — and no one’s coming to save us. So I opened up Notes on my phone and started writing. Let me walk you through the Obvi Tariff Survival Plan: 1. Moving 25% of production to Mexico Zero tariffs. 3-week lead times. Lower currency risk. We’re shifting a quarter of our production within 90 days. 2. Front-loading Q2 inventory We’re placing bigger orders now to blend costs across Q2–Q3. Cash flow takes a hit short term, but it buys us time to optimize SKUs without a margin cliff. 3. Renegotiating every supplier Lower MOQs. Net-60 terms. Freight support. We’re offering longer-term commitments in exchange. 4. Testing SKUs with Supliful No upfront inventory. No cash tied up. Just fast tests on upsell SKUs to boost AOV with zero downside. 5. Cutting low-margin SKUs If a product doesn’t drive profit or repeat purchases, it’s gone. We’re being surgical — focus beats optionality when under pressure. 6. Redesigning packaging to cut DIM Slimmer scoops. Compact containers. Thinner seals. Targeting a 15% reduction in shipping costs with no drop in CX. 7. Simplifying bundles The bells and whistles (shakers, scoops, freebies) looked nice but killed margin. We’re trimming bundles down to what customers actually value. 8. Testing small price increases with smarter messaging +5–7% pricing paired with added perks (free shipping, loyalty points).  Perceived value > price. 9. Re-examining HTS codes We’re reviewing every import classification with our broker. Looking for reclassifications and filing exclusion applications. Don't just eat the tariff — challenge it. 10. Diversifying supply in Vietnam & Thailand We’ve got samples in motion for 2025 SKUs. China still plays a role, but single-source manufacturing is too risky now. 11. Exploring bonded warehouses Why pay duties before fulfillment?  Bonded warehouses let us delay those costs and manage cash flow more strategically. 12. Scaling international with OpenBorder Intl customers = higher AOVs and lower CACs. OpenBorder helps us scale globally without operational chaos. 13. Moving to domestic 3PLs  We’re in RFPs with two U.S.-based 3PLs. Avoiding double-duty, speeding up shipping, and reducing customer tickets. 14. Being radically transparent with customers We’re updating PDPs, emails, and SMS to explain changes. Customers stick with you if you give them the “why.” Trust > Transaction. 15. Get leaner The tariffs weren’t just a problem — they were a wake-up call. This was the push we needed to trim fat, tighten ops, and rebuild for what’s next. 💬 What’s your go-to play for defending margin in 2024? Drop it below — let’s build the DTC Tariff Survival Guide together. Know someone struggling with tariffs? Share this post. Hopefully it helps.

I just got a bill for $23k in tarriffs thanks to your boy. "China is going to pay!" No, they don't. This is how tariffs work: Let's say I am a US consumer electronics company (I am) and I work with China based contract manufacturers to assemble our products (I do). When I need more product I issue a purchase order to our CM partner. They build the product and get it ready for shipment. (It's never this simple but this boy can dream) To move the goods out of China or HK, the shipper requires documentation including battery certification, commercial invoice, packing list ,and more. No docs = no ship. The commercial invoice is exactly what it sounds like. It states exactly how much I paid the CM for each product and the HS code for each. HS Code? What's that?? The HS code is a hyperspecific category of goods used internationally that Customs uses to determine the tariff rate. We research this ahead of time and claim the goods fall under a specific HS code category. But what is a tariff? A tariff is a tax paid by the importer that is a % of the value of the goods. For example, a 20% tariff means my thing that was $100 is now $120. But it doesn't change how much I pay the seller. I still pay them $100. The US Customs and Border Protection, aka the CBP, aka the US Government, get the $20. How does this all go down?? When my goods arrive, doesn't matter if they come by air or sea, I get an Entry Summary from the CBP via my customs broker. This document has all the details of the shipment including all the charges that need to be paid including duties (i.e. tariffs), Merchandise Processing Fee, etc. In summary, I pay my CM the same amount but now I have to pay the tariff as a tax back to the US government for the privelege of importing those goods. How does this affect the consumer? Eventually these cost increases get translated into retail price increases. Some companies may eat the margin compression initially but over time the market will trend back towards standard cost/price multiples. There is no way around it. Hello inflation!

One stated rationale for the new Trump tariffs on Canadian, Mexican and Chinese goods is to reinvigorate manufacturing in the U.S.... but I don't see it happening for the outdoor industry. Why? 𝟭. 𝗨𝗻𝗽𝗿𝗲𝗱𝗶𝗰𝘁𝗮𝗯𝗶𝗹𝗶𝘁𝘆 Onshoring manufacturing could take years to reestablish expertise, infrastructure and supply chains, but the Trump administration is highly unpredictable and subject to whims. The new 25% tariffs on Canadian and Mexican goods break the United States-Mexico-Canada Agreement (USMCA) negotiated by Trump's own administration in his first term. Companies made major investment decisions based on that agreement. They are unlikely to risk being fooled again. 𝟮. 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹 𝗖𝗼𝘀𝘁𝘀 The new tariffs also apply to the materials needed to produce products in the U.S. For example, the last round of tariffs on aluminum extrusions actually caused one of my clients to OFFSHORE their product assembly because tariff rates were lower on assembled goods. Outdoor apparel brand Youer® onshored sewing only to face a 47% tariff on the Polartec fleece they had to import from China... and that was before the current round of tariffs. 𝟯. 𝗟𝗮𝗯𝗼𝗿 𝗖𝗼𝘀𝘁𝘀 The labor costs that originally drove offshoring manufacturing are still a challenge. That challenge is only going to get worse with tightening on all forms of immigration. We lack skilled labor for cut-and-sew, and what exists is primarily from Asian and Central American immigrant populations. 𝟰. 𝗥𝗲𝘁𝗮𝗹𝗶𝗮𝘁𝗼𝗿𝘆 𝗠𝗼𝘃𝗲𝘀 The countries impacted aren't just going to stand still. Retaliatory tariffs will hurt U.S. manufacturing. In addition, a stronger U.S. Dollar or intentional currency devaluation can offset the cost of increased tariffs, lowering the need for companies to act. 𝟱. 𝗢𝘃𝗲𝗿𝗮𝗹𝗹 𝗣𝗿𝗶𝗰𝗶𝗻𝗴 𝗜𝗺𝗽𝗮𝗰𝘁 While the tariff numbers are attention grabbing, the actual impact will be a lot lower. Many outdoor brands had already diversified away from China in recent years. Also, tariffs impact the FOB price from the factory -- usually 20-25% of the retail price -- so the actual impact is 2-2.5% of the retail price. A small(ish) bump on a portion of a brand's total production won't be enough to drive onshoring production. Follow me for #OutdoorIndustry news and analysis: Eoin Comerford

Tariff Terror The two major surveys of consumer attitudes, the Conference Board Survey of Consumer Confidence and the University of Michigan Consumer Sentiment Index have both deteriorated sharply since November 2024. The losses were due to a toxic mix of rising uncertainty on the trajectory for inflation - expectations are moving up - and an erosion in job prospects - they are moving down. The deterioration is broad based, hitting all income and wealth levels, ages, races and party affiliations. Headlines regarding tariffs and high profile layoffs no doubt fueled those concerns. The problem is that those concerns are starting to show up in the hard data. Consumer spending, which is the single largest driver of overall growth in the US, slowed markedly in the first quarter. The slowdown in spending, notably on leisure and hospitality coupled with a rise in the saving rate, suggests that consumers are hunkering down. That is to be expected in a highly uncertain policy environment. This is the same time that the PCE measure of inflation, which the Fed targets, accelerated in February. Other input prices have risen ahead of tariffs as firms scramble to front run tariffs. Investment is rising for the moment, as firms stockpile ahead of tariffs. Those shifts are borrowing from the future. The trade balance is widening on the front-running of tariffs. That is a drag on growth. Those figures include a surge in gold bullion, which is not included in the GDP data. No matter how the data is cut, we are seeing a slowdown in overall economic growth that is punctuated by rising prices. Employment has held up but is looking much weaker in March. That gets us edging closer to a mild bout of stagflation - rising inflation and unemployment. The rise in unemployment is limited by a loss in participation in the labor force. Foreign born workers participate ar higher rates than native born and older workers. The result represents a conundrum for the Federal Reserve. Much of the Fed’s leadership has evoked the 1970s as a cautionary tale. A failure to eradicate inflation and stimulate too soon triggered a vicious cycle of inflation and unemployment, or stagflation. One Fed leader has suggested that it might need to hike rates. When were tariffs deflationary? The Smoot Hawley Tariff Act of 1930 tipped off a trade war with 25 countries and a 67% drop in global trade, which plunged the global economy deeper into the depths of the Great Depression. That was chilling. Our analysis suggests that the effective tariff rate will easily lapse the peak of the 1930s by year-end. We have retaliation and a mild bout of stagflation. No rate cuts in such a scenerio.

Tariffs, while unpleasant, are just another challenge that business leaders face in the quest to guarantee the best possible performance of their companies. This weekend's #tariffs on Canada (25%, 10% on oil), Mexico (25%), and China (10%), while surprising to many business planners due to their targets, severity, immediate enforcement, and justifications, are no different. Work the problem: 🧠 Assess the immediate impact on your #costs, #profitability, and #pricing. If you haven't done so previously, engage in direct, honest, and transparent conversations with your teams, suppliers, and customers to develop a strategic response. Roll out the plan as quickly and efficiently as possible. 🗺️ Consider the medium-term and long-term implications of protectionist trade policies on your business and explore a comprehensive list of tariff mitigation strategies, including: •Strategic sourcing •Product exclusion requests •Country of origin adjustments •Value reduction/first sale tactics •Foreign trade zones and bonded warehouses •Special Harmonized Trade Schedule (HTS) provisions •Duty drawbacks 💡 Normalize a robust #risk assessment and planning process for your organization. Continuously evaluate diversification of suppliers and manufacturing locations. Conduct financial modeling of all inputs. Evaluate manufacturing process changes. Explore vertical integration and ways to eliminate intermediaries. Assess technology adoption and real time tracking of your supply chain. Don't be tariff-ied - you've got this! 💪

Unpopular Opinion: We Have an Import Addiction! "Liberation Day" or whatever you want to call yesterday Is making us all panic and focus on the wrong things. News stories with fear-inducing headlines: "Sweeping Tariffs Debilitating Stocks!" "Tariff Wars & Instability Intensify!" "What You Need to Know Now!" "Everything Will Cost More!" I spent a good two hours this morning, Searching for and analyzing data on goods From companies and countries, we trade with. My biggest takeaway from all the data was bleak. We don't have a #tariffs problem (despite the new ones). We have a problem with how our trade policy works. We have a problem of importing much more than What we export to 80% of our trade partners. Our imports are 48% higher than exports. We are being charged heavy tariffs by Developing countries for our goods. Now, that's not a problem by itself. It is a common phenomenon. The problem lies at the core: Demand elasticity of goods. Our imports fall into three major categories: 1. Critical goods with inelastic demand. --> Tariff increases will not reduce demand. --> Prices increase; suppliers don't lose much. --> Tariffs on many of these products unchanged. --> Fairly urgent need to find domestic producers. 2. Regular goods with normal elastic demand. --> Tariff increases will affect demand of these. --> Suppliers and buyers both need to negotiate. --> Cost differences may end up splitting equitably. --> Many export & import exchanges will occur here. 3. Non-essential goods with highly elastic demand. --> Tariff increases are hitting these goods the hardest. --> Suppliers stand to lose a lot more than consumers do. --> Quantity demanded of these goods will drop significantly. --> Key aspect of our import addiction comes from these goods. Actionable Insights: 1) Domestic producers should focus on the inelastic items. 2) Products: 9/10 imports are also our top export items. 3) Exporters from the USA: recalculate the real costs. 4) Importers in the USA: renegotiate the contracts. 5) Short term discomfort is almost guaranteed. 6) Give up the reliance on "cheap" imports! Follow Dr. Kruti Lehenbauer & Analytics TX, LLC for #PostitStatistics #PostitSaveit #Economics #DataScience Insights to grow and manage SMBs and your career!

Tariffs Don’t Break Retail. They Reshape It. The tariff economy is exposing a truth: disruption doesn’t hit everyone equally. Walmart absorbs costs and leans into groceries. The TJX Companies, Inc. (MARSHALLS LLC, TJ Maxx & HomeGoods) turns competitors’ mistakes into inventory “buying opportunities.” Amazon reinvents its delivery network, driving +11% online sales. Meanwhile, Target’s sales are falling. Its incoming CEO, Michael Fiddelke, inherits a consumer perception problem: shoppers believe Target is more expensive. In today’s market, perception is price. And then there’s Macy's and Kohl's—both challenged in the middle, squeezed by off-price value on one side, digital convenience on another, and vertical retailers on a third. #Tariffs don’t create their pain, but they accelerate it. Consumers aren’t stopping—they’re shifting. They’re trading down, cross-shopping, buying essentials over “nice-to-haves.” They’re more informed, more deliberate, and less forgiving. The winners? Retailers with scale, agility, and the nerve to absorb pain today to earn loyalty tomorrow. The losers? Those with rigid supply chains, thin value propositions, or brands built on “nice-to-have” indulgence. For brands and vendors, the mandate is clear: Follow the shopper. Needs before wants, value before vanity. Partner with winners. Align with the retailers gaining share. Stay flexible. Tariffs reward adaptability, punish inertia. Tariffs aren’t a storm to wait out. They’re a sorting mechanism—deciding who adapts, who fades, and who thrives. #businessmodels #strategy #retail #brands