A Guide to Preparing for and Navigating the Impacts of New Tariffs

The Trump administration’s recent tariff threats against Canada, Mexico, and China are fueling fears of an international trade war. While China already faces tariffs, shifting policies on Canada and Mexico are creating uncertainty. Businesses, investors, and consumers are on edge, and the stock market is feeling the impact of the ongoing turmoil.

Amidst all the uncertainty, one thing is clear: tariffs will create significant challenges for procurement teams across all industries. Rising costs, supply chain disruptions, potential loss of suppliers, and market volatility make strategic sourcing and planning more complex than ever.

Despite these challenges, supply chain leaders can take comfort in knowing these obstacles are manageable. Proactively adjusting their strategies to sourcing, logistics, and cost management ensures that procurement teams can maintain efficiency and protect profitability, even in a volatile trade landscape.

A key strategy in preparing for tariff challenges is embracing predictive procurement. Edmund Zagorin, Founder and Chief Strategy Officer at Arkestro, an industry leader in advanced predictive procurement, emphasizes, “Investing in the proper predictive procurement tools and cost models that can aid businesses in rapid response to policy changes will be integral to scenario planning, risk mitigation, and safeguarding against detrimental disruptions.”

In this blog post, we’ll look deeper into predictive procurement, examine how tariffs impact supply chains, and offer proactive steps companies can take to mitigate supply chain volatility.

Understanding the Impact of Tariff Changes on Domestic Supply Chains

So, how do tariffs impact domestic supply chains? It helps to look at it in a broader scope, where domestic supply chains are part of the larger global supply chain, and what affects one affects the other, hitting businesses at all levels. And the most significant impact of this trickle-down effect comes in the form of pricing.

For example, even if a U.S. company buys materials domestically, suppliers often import from abroad and face tariff-driven cost increases — costs they pass on to their clients. For U.S. construction businesses, tariffs on imports from Canada and China raise material prices, forcing businesses to absorb these costs or pass them to consumers, leading to higher prices and reduced demand.

Here are other ways tariffs impact domestic and global supply chains: 

• Sudden shifts in supply and demand: Businesses may rush to order before tariffs take effect, followed by a sharp drop-off once tariffs are in place, while underutilized suppliers may see sudden demand spikes.
• Trade route disruptions: Increased shipping volumes on certain routes can create bottlenecks, causing delays and raising transportation costs.
• Increased supply chain volatility: Unpredictable shipping patterns can disrupt planning and erode trust, forcing businesses to carry extra inventory to mitigate risks.
• Material shortages and production delays: Supply chain adjustments can lead to longer lead times for materials, slowing down manufacturing and affecting overall production efficiency.
• Inventory management challenges: Uncertainty in pricing and availability forces companies to hold excess inventory, tying up capital and storage space.

However, Arkestro’s Edmund Zagorin states that tariffs may actually benefit domestic suppliers as companies look to avoid foreign tariff-related price hikes altogether. “Higher tariffs on imports will likely make domestic suppliers a more attractive alternative to imports that could face price volatility and costly delays. As new policies and tariffs come into effect, procurement teams should evaluate the various trade-offs associated with domestic sourcing.”

The Role of Predictive Procurement in Navigating Tariffs

For supply chain leaders, the real challenge isn’t just preparing for tariff disruptions; it’s about ensuring they have the advanced technology they need to manage increasing levels of complexity and unpredictability. According to Edmund Zagorin, leveraging technology like predictive procurement is a must for procurement leaders to stay ahead of the game.

“Digitization and automation will play pivotal roles in guiding procurement decisions and enabling companies to respond quickly to policy changes by identifying new suppliers and optimizing sourcing strategies. These are fundamental investments in supply chain agility and adaptation, regardless of what specific scenarios for tariffs or trade restrictions emerge.”

Predictive procurement leverages data and analytics to forecast and prepare for future needs, helping supply chain leaders anticipate and adapt to potential cost increases and supply chain disruptions. Instead of reacting to disruptions, predictive procurement can help businesses anticipate challenges and make smarter, more proactive decisions. Predictive procurement can also evaluate supplier performance and risk and enable organizations to strategically build supplier relationships across multiple regions to minimize exposure to tariffs.

Here are five ways predictive procurement can ease the pain of tariffs:

Improved decision-making: By using data and analytics to forecast demand, identify risks, and optimize procurement processes, predictive procurement enables proactive and strategic choices rather than reactive ones.

Supply chain resilience: Predictive procurement reduces supply chain uncertainties by allowing businesses to forecast demand, identify potential disruptions, and optimize procurement strategies, leading to more resilient supply chains.

Anticipated tariff changes: AI-driven predictive analytics can analyze trade policies, historical tariff patterns, and geopolitical trends to forecast potential tariff changes. This approach allows supply chain leaders to proactively adjust sourcing strategies before tariffs impact costs.

Optimizing supplier selection: Predictive procurement platforms evaluate multiple suppliers based on cost, lead time, and risk factors. Leaders can shift sourcing to domestic suppliers or countries with lower or no tariffs, minimizing exposure to trade barriers.

Dynamic cost modeling: Machine learning models assess how tariffs affect total procurement costs, including duties, freight, and alternative sourcing options. This technology helps leaders make data-driven decisions about whether to absorb costs, pass them on, or renegotiate contracts.

How Procurement Teams Can Prepare for Tariffs

While predictive procurement can help procurement teams see the bigger picture, taking proactive actions to prepare for tariffs offers the best defense against them. So, what actionable steps can procurement leaders take to prepare for tariffs, now and in the future?

Optimize Supplier Strategies

To prepare for tariffs, procurement teams must reassess supplier strategies and build stronger supplier relationships. Frequent, proactive communication with suppliers helps address tariff challenges, while collaborative problem-solving fosters trust and long-term partnerships. Leveraging predictive procurement to identify new suppliers in low-tariff regions can further mitigate risks and enhance supply chain resilience.

Supplier Diversification

Reducing reliance on a single supplier or country boosts adaptability to shifting trade policies while maintaining cost control and enhancing supply chain resilience. Supplier diversification enhances negotiation power, regulatory compliance, and sourcing flexibility. By securing multiple suppliers across regions (or domestically), companies can swiftly adjust to tariff changes and maintain supply chain stability.

Leverage Data Analytics for Scenario Planning

By analyzing data, procurement teams can simulate the impact of different tariff scenarios on their supply chain, allowing them to better predict costs, assess supplier risks, and explore smarter sourcing options. AI-driven forecasting and real-time dashboards enable quick, informed decisions, ensuring smooth operations and smarter, more resilient procurement processes. 

Building Resilient Supply Chains Amid Tariff Uncertainty

To build supply chain resiliency, companies must boost transparency, enhance communication between procurement, finance, and operations teams, and diversify suppliers. Leveraging real-time data and automation can help predict and mitigate risks, while inventory buffering and flexible logistics ensure quicker responses to changes in demand, disruptions, and fluctuating market conditions. Smart sourcing, stronger supplier relationships, and proactive planning also create an agile supply chain that can help companies work through disruptions and volatility.

Supply chain volatility is a constant challenge for procurement teams, with or without tariffs, and can be caused by issues such as geopolitical instability, pandemics, shifts in consumer demand, and natural disasters. Agility is key to weathering volatility. Adaptability enables the procurement industry to build more agile and resilient supply chains by fostering quick responses to market changes, streamlining workflows, and strengthening supplier relationships, ultimately ensuring procurement aligns with business needs and goals.

Investing in advanced AI-driven technology, such as predictive procurement, can also help procurement teams prepare for the future and deal with volatility when it arises. Arkestro uses a science-based approach to predictive procurement that drives value, efficiency, and supply chain resilience. Contact us today to learn how our platform can help you through tariff uncertainties and supply chain volatility.