How Procurement can Navigate Through Trump’s Tariffs

The topic of tariffs has long been discussed since US President, Donald Trump, took office for a second time – given he implemented them during his first term and his discussions on the campaign trail.

But the 't' word has dominated conversations over the past few weeks, with potential tariffs being threatened against Colombia, Mexico and Canada – as well as tariffs being implemented for good from China.

Tariffs in Trump's second term

Canada and Mexico's potential tariffs saw a delay of a month following last-minute talks on Monday between President Trump and Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum.

In January, President Trump threatened to place tariffs on Colombian exports to the US – with the country threatening to hit back with tariffs on US goods. This was avoided after the Colombian government agreed to allow US military flights carrying deported migrants to land in the country.

However, China has installed a set of tariffs on imports from the US, hitting back against the 10% tariff placed on Chinese exports. China has implemented tariffs, ranging from 10% to 15% on liquefied natural gas, coal, crude oil and farm equipment, set to come into effect from February 10 – as well as some car exports from the US facing tariffs.

It is expected that China's President Xi and President Trump will talk in the coming days to avoid the potential trade war between the world's two biggest economies.

What strategies can procurement teams use?

With all this uncertainty around potential and impending tariffs, procurement teams are now, more than ever, having to plan for supply chain disruptions, and losing suppliers due to the cost penalties coming into effect.

Supply chain mapping and risk assessment

• Conduct a comprehensive supply chain vulnerability analysis, including second-tier suppliers.
• Identify critical components and materials that may be affected by the new tariffs.
• Use advanced Supplier Information Management systems to reveal supply chain dependencies.

Supplier engagement and diversification

• Open early dialogues with suppliers to understand their risks and mitigation strategies.
• Evaluate and choose core preferred suppliers while avoiding single sourcing for critical categories.
• Explore alternative suppliers in regions not impacted by the new tariffs.
• Consider sourcing from South-East Asia or Eastern Europe as potential alternatives.

Cost management and negotiation

• Negotiate long-term contracts with suppliers to lock in prices and shield against sudden increases.
• Develop cost-sharing models and contingency plans for certain categories.
• Incorporate price adjustment clauses and caps in contracts to protect against tariff-induced price rises.

Inventory and logistics optimisation

• Consider increasing inventory of critical materials to provide a buffer against price spikes and disruptions.
• Leverage AI tools to forecast alternative logistics routes to avoid tariffs.
• Optimise inventory management practices to mitigate potential disruptions.

Cross-functional collaboration

• Establish cross-functional teams with business stakeholders to develop cohesive action plans.
• Seek support from legal experts to review and potentially revise tariff-related clauses.
• Create a centralised team to monitor announcements and respond quickly to policy changes.

Technology leverage

• Utilise Supplier Risk Management tools offering real-time updates and AI-powered analytics.
• Implement robust spend analytics systems for better visibility and faster decision-making.
• Conduct scenario planning and what-if analyses to help with proactive planning.

Strategic sourcing and product design

• Align tariff strategies with broader business goals, including product design and pricing.
• Consider redesigning products to qualify for lower-duty categories (tariff engineering).
• Explore options like pre-buying or leasing for hardware or electronics.

Regulatory compliance and tariff management

• Stay informed about ongoing trade negotiations and policy changes.
• Leverage tariff exemptions where possible.
• Ensure compliance with new trade regulations, including changes in country-of-origin labelling.

The uncertain future 

The Trump tariffs are not just about politics — they're reshaping how goods move around the world.

Simon Geale, Executive Vice President of Procurement at Proxima, summed it up on LinkedIn: "Many businesses will have begun this work already, but the implementation of these tariffs adds new urgency."

He points to the need for companies to reassess supply chains, diversify suppliers and prepare for economic slowdowns. "If economies begin to slow down, what impact will that have on businesses?"

As the situation continues to evolve, procurement professionals across industries must remain vigilant, agile and strategic in their approach to ensure supply chain resilience in the face of these new challenges.

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