How Manufacturers can Adapt to Tariffs

I have a new first question for every CPG founder I speak to: How are you (or might you be) affected by the tariffs? Unacceptable answers: ❌ "We're not worried about it." → You should be. Tariffs impact pricing, margins, and supply chain risk. If you haven't analyzed them, that's a red flag. ❌ "I don't know yet." → You don't need perfect answers, but you should be able to estimate based on your current materials and supply chain, and you absolutely must have a plan to get them. ❌ "We'll figure it out if/when it happens after the 90 days." → That's reactive. Investors fund proactive founders who get ahead of problems. ❌ "Our manufacturer/distributor/importer/supplier will handle that." → You're responsible for your unit economics. Push for real answers. You can't wave this away. Acceptable answers are: SOURCING MATERIALS: -My raw materials are sourced from [country], and the current tariff is X% and possibly going to Y%. This will change my margins from A% to B% in a worst-case scenario. - I source my materials from an importer/distributor/supplier, and I've asked them for exact figures. Early calculations show a decline in my gross margin from X% to Y%. MANUFACTURING: - We manufacture in the US and aren't directly impacted, but our packaging components are sourced from [country] and will increase costs by $C. - We're currently offshore. We've run models on relocating to a US partner. Costs would rise by $C per unit and delay production by 4–6 weeks. - We manufacture offshore and plan to continue doing so. Our landed cost will increase by $C per unit due to new tariffs. We've modeled this into our margin assumptions and adjusted pricing, sourcing, and volume targets accordingly. EFFECT ON RETAIL PRICE: - We're raising prices to protect margin, and we believe we can hold demand because we are a premium product/were low to begin with/have a sticky customer base. But we're reducing forecasted units by X%, and we'll hit profitability Y months later. - We're holding prices and accepting lower margins. It's going to slow our path to scale by Z months, and I've updated our capital plan accordingly. ALTERNATIVES: - We've researched new suppliers/manufacturers in A, B, and C. Our best options are [A, B, or C] in the short term and [A, B, or C] in the long term. We've implemented a quarterly sourcing review process to avoid surprises and stay proactive. CASH FLOW IMPACT - Tariffs increase our landed cost by X%, which changes our inventory strategy. We now need $Y more in working capital per order cycle. This shortens our runway by Z months and changes our next raise to A. Of course, these aren't the only acceptable answers, but please note what the acceptable answers have vs. the unacceptable: - Detail - Specific Data - Research-Backed Estimates If you haven't done this work, I suggest preparing this before pitching. PS - Reach out if you need a good fractional CFO recommendation to help you with this. I have several.

𝗖𝗠𝗢’𝘀 𝗣𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲: 𝗖𝗮𝗻 𝗖𝗣𝗚 𝗯𝗿𝗮𝗻𝗱𝘀 𝗽𝗿𝗼𝘁𝗲𝗰𝘁 𝗺𝗮𝗿𝗴𝗶𝗻𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗻𝗲𝘄 𝘁𝗿𝗮𝗱𝗲 𝗿𝗲𝗮𝗹𝗶𝘁𝘆? (Welcome to 2nd Trump Tariffs Era) Tariffs are back, and they are hitting the bottom line harder than ever. With new trade barriers on China, Canada, and Mexico, CPG brands face a triple threat: rising costs, shrinking consumer demand, and disrupted supply chains. But here’s my question: Are we playing defense, or are we strategically pivoting? From what I can see, data tells us a clear story. Historically, high tariffs = lower trade competitiveness. Let's take a look at the U.S. Average Tariff Rates (1821-2016) and trade balance trends: ✅ When tariffs were high (pre-1940s), trade was limited, and the U.S. maintained a surplus. ✅ Post-1945, lower tariffs (via GATT & WTO) fueled economic expansion and trade growth. ❌ After the 1971 Bretton Woods collapse, trade deficits deepened as low tariffs persisted. 🚨 Today, reintroducing high tariffs could lead to cost-driven inflation, supply shocks, and loss of global competitiveness. ++ 𝗪𝗵𝗮𝘁 𝗧𝗵𝗶𝘀 𝗠𝗲𝗮𝗻𝘀 𝗳𝗼𝗿 𝗖𝗣𝗚𝘀 & 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗖𝗼𝗺𝗺𝗲𝗿𝗰𝗲 ++ - Higher Input Costs → Tariffs on raw materials (aluminum, steel, packaging) increase COGS, cutting into margins. - Consumer Price Sensitivity → Higher shelf prices = lower demand. Consumers switch to private labels, local substitutes, or DTC (Direct-to-Consumer) models. - Erosion of Market Access → Retaliatory tariffs make U.S. brands more expensive abroad, favoring European and Asian competitors. - Disrupted Global Supply Chains → Companies must rethink sourcing, warehousing, and last-mile logistics. ++ 𝗖𝗠𝗢 & 𝗖𝗙𝗢’𝘀 𝗣𝗹𝗮𝘆𝗯𝗼𝗼𝗸 𝗳𝗼𝗿 𝗡𝗮𝘃𝗶𝗴𝗮𝘁𝗶𝗻𝗴 𝗧𝗮𝗿𝗶𝗳𝗳𝘀 ++ 1️⃣Pass-Through Pricing? Be Selective. Don’t just raise prices. Instead, optimize pack sizes, value-tiered offerings, and bundling strategies to maintain affordability. 💡Data-driven pricing elasticity is key—test price sensitivity before making abrupt hikes. 2️⃣ De-Risk Your Supply Chain Nearshoring & Friendshoring → Reduce tariff exposure by shifting suppliers to Mexico, Vietnam, and Eastern Europe instead of China. 💡Dual-sourcing strategies ensure supply continuity amid trade wars. 3️⃣ Digital Commerce is the Safety Net DTC & eCommerce are the antidotes to tariff turmoil. 💡Selling via Amazon, Shopify, or localized fulfillment centers avoids tariff-heavy distribution routes. 💡Localized production + micro-fulfillment hubs = reduced cross-border shipping costs. 4️⃣ Work Capital & FX Strategy Matters More Than Ever Hedging currency risks & cash flow forecasting is critical when tariffs disrupt inventory costs. 𝗧𝗼 𝗮𝗰𝗰𝗲𝘀𝘀 𝗮𝗹𝗹 𝗼𝘂𝗿 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗼𝗹𝗹𝗼𝘄 ecommert® 𝗮𝗻𝗱 𝗷𝗼𝗶𝗻 𝟭𝟯,𝟱𝟬𝟬+ 𝗖𝗣𝗚, 𝗿𝗲𝘁𝗮𝗶𝗹, 𝗮𝗻𝗱 𝗠𝗮𝗿𝗧𝗲𝗰𝗵 𝗲𝘅𝗲𝗰𝘂𝘁𝗶𝘃𝗲𝘀 𝘄𝗵𝗼 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲𝗱 𝘁𝗼 𝗲𝗰𝗼𝗺𝗺𝗲𝗿𝘁® : 𝗖𝗣𝗚 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗚𝗿𝗼𝘄𝘁𝗵 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿. #tariffs #CPG #FMCG #CMO

Yesterday’s tariff announcements changed the game—on production, fulfillment, and even the design and commercial viability of products. Here’s how we’re adapting across the full product lifecycle: 📦 Product in Inventory → We just wrapped a warehouse sale to reduce on-hand inventory (and pass savings to customers) as we transition from our cross-border setup to a new ShipMonk warehouse in Pennsylvania. 🚢 Product in Transit → Working with our partners at Flexport to accelerate vessel and air shipments ahead of the April 5 cutoff—routing goods directly to our new PA warehouse to avoid delays and double handling. 🏢 Product in Production → With Lever Style and Tailored Industry Inc., we’re evaluating not just duty rates, but how MoQs, lead times, and payment terms affect cash flow. Domestic 3D knitting is on the table for high-duty categories, helping us stay nimble with an asset-light model. 🧪 Product in Development → Re-costing at the material level, since fiber content determines duty class. Surprisingly, once “expensive” materials like merino now offer better landed cost economics. We’re leaning into low-MOQ, high-flexibility, digital-design-forward partners like Knitup to future-proof our development cycles. This is a different plan than we had 4-5 months ago. But this shift made me think about Formula 1—every few years, the formula changes: new regulations, new constraints, new opportunities. The best teams aren’t just the fastest in a static environment—they’re the fastest to learn, adapt, and iterate when the rules change. Geraldo Aldarondo said something today that really stuck with me: “When the rules change in a game, people who play by the old rules will definitely lose. But if you keep playing—and changing your strategy—you’ll get to see another hand. And maybe that’s the one that changes everything.” To our fellow brands out there—keep adapting. Play the next hand.

The new U.S. tariffs on Canada and Mexico mean manufacturers face brutal choices in the weeks ahead. Absorb the costs? Pass them to customers? Rethink supply chains entirely? For manufacturers, this isn’t just about higher prices. It’s about navigating uncertainty, protecting margins, and making the right moves before the market forces your hand. Here are five places to start: 1. Reassess your supply chains—Know where your vulnerabilities are and start exploring alternatives. 2. Lock in supplier contracts—Before price hikes ripple through the system. 3. Get smarter about pricing—Don’t just raise prices; rethink value, bundling, and efficiency. 4. Invest in automation—Higher costs require finding ways to do more with less. 5. Plan for long-term volatility—Tariffs aren’t going away. The winners will be those who build resilience into their operations. This is an article I wrote for #forbes a month ago. The tariffs have changed but everything else stands. It's my take on the disruption and opportunities ahead as manufacturing is caught squarely in the crossfire of this trade war. #Manufacturing #Tariffs #SupplyChain #TradePolicy #Reshoring #China #Canada #Industry40 MAGNET: The Manufacturing Advocacy and Growth Network

TARIFF TURMOIL 📦 🚛 🚢 🗺️ Consumer Packaged Goods founders! I know "Tariff Turmoil" sounds dramatic. Still, with the constantly changing news being on everyone's mind lately - and especially if you're sourcing products internationally, you're likely feeling the pinch coming down the pipeline, and we need to talk about it. Now, I’m not here to debate the politics of it. But what I do know from working with entrepreneurs in the CPG space is that these changes can seriously affect your margins. Whether it’s bottles, raw materials, or specific ingredients for products, many of you are sourcing internationally. So, what’s the play? Here’s my quick advice: ⛓️💥 Adapt your supply chain: First, look at your supply chain. If you rely on suppliers in regions impacted by these tariffs, it might be time to rethink your strategy. Are there ways to diversify? Are there alternative suppliers that can give you the same quality at a better price? It's all about being flexible and creative. 🏷️ Don’t fear pricing adjustments: Yes, this is tough. We all know you want to keep costs down, but if you’re seeing massive increases from tariffs, you may need to raise prices. The goal isn’t just to cover those extra costs—it’s to make sure your business stays viable. But remember, communication is key. Be transparent with your customers, and they’ll respect the decision. 🧘 Focus on what you control: You can’t change tariffs, but you can control how you pivot and adapt. And if you’re not sure what to do next, talk to people who’ve been there. Talk to advisors, mentors, other founders. Lean into your network and ask for help. This isn’t a time to go it alone. You’ve built something great. Don’t let external factors like tariffs throw you off course. Stay focused on what you can control, keep your customers in mind, and keep pushing forward. You’ve got this. What are YOU doing to navigate these changes? 

I’ll be blunt: If these tariffs caught you off guard, that's on you. Big players stockpiled inventory last year because they saw this coming. The real question isn't "how do we deal with this crisis?". It’s "why weren't you prepared for an obvious economic shift?". When tariffs slash your margins, you have two levers to pull: 1. Increase your product costs. 2. Decrease what it costs to get that product to you. That’s where most businesses fail catastrophically - they never even thought of a flight plan. They can't model basic scenarios because they don't track their fundamentals religiously. I need you to stop everything and examine your Q1 - COGS - AOV - Ad spend - All operational costs. Model April with the tariff impact if nothing changes. On price increases: Forget blaming tariffs - consumers don't give a shit. Focus entirely on increased value. If you can't articulate why your product deserves that 20-30% bump, you'll hemorrhage customers. On supplier negotiations: Your suppliers are panicking too. They're losing business - that's the whole point of tariffs. Be prepared to walk away. Competitors in lower tariff regions will cut aggressive deals to win your business, which gives you leverage with current partners. Too many brands operate on gut feeling instead of modeling variable changes. If you're making decisions without running these projections, you're flying blind. And in 2025's economic landscape, that's a guaranteed path to failure.

New tariffs on apparel and footwear imports from key manufacturing regions are putting real pressure on costs. It’s a direct hit to unit economics. For U.S. businesses, profit can flip negative if costs are absorbed. Push prices higher, and you risk volume. >> Pressure test your exposure at the SKU level. Use real import flow and cost data. >> Activate customs strategies like First Sale and bonded warehousing to reduce the hit. >> Re-evaluate your sourcing footprint. Look for flexibility, not just cost. >> Build pricing guardrails that protect margin without killing demand. There are no silver bullets. But there are smart plays. If you're working through this, let’s talk.