Coupa: How to Prepare for and Respond to Tariffs

Tariffs and global trade uncertainty are creating serious concern for supply chain professionals.

However, rather than reacting with panic, leaders stand to benefit from taking a more measured approach. That means preparing for possible tariff scenarios through planning, modelling and enhanced communication.

In an environment where protectionist measures are increasing, Coupa has outlined five steps organisations can take to prepare their response to tariffs. 

1. Know where tariffs may hit your supply chain

The first step is to identify where tariffs may impact operations, given each element of the supply chain carries unique challenges.

Raw materials such as metals, lumber, minerals and agricultural goods can raise manufacturing costs if sourced from regions subject to tariffs. Understanding both the direct supplier and their own sourcing routes is essential.

Intermediate goods are also critical. These are semi-finished components like computer chips, engines or steel. Because these often come from multiple countries, they’re particularly vulnerable to shifting trade rules.

Then there's finished goods – the end products sold to consumers, such as cars, electronics or clothing. If finished products cross borders from manufacturing hubs to their end markets, they may face tariffs unless specific trade conditions are met.

Mapping all of these points — raw materials to finished goods — helps companies identify where tariffs may add cost or disruption.

2. Understand rules of origin and how products are classified

Rules of origin are the trade rules that determine where a product is considered to be 'from'. These are critical in qualifying for trade agreements or avoiding tariffs.

The World Trade Organization defines these rules as “criteria used to define where a product was made" and they play a key role in trade policies like anti-dumping duties, quotas and preferential treatment.

Coupa identifies some nuances in rules of origin regulations to ensure firms can craft efficient tariff preparation strategies:

• Substantial transformation is a concept applied when a product’s components come from various countries. If the assembly of those parts in one country results in a product with a new name, character and use, then that country can be considered the product’s origin. Take an engine assembled in the US using parts from Germany, Japan and Mexico. Because the individual components are transformed into a working engine, the US can be classified as the origin. That designation may allow the product to qualify under certain trade agreements and bypass tariffs.
• Regional value content is another element. For example, a truck built in Mexico with parts from the US and Canada must have 75% of its value derived from within these countries to qualify under the United States-Mexico-Canada Agreement (USMCA). If the truck is worth US$30,000, then US$22,500 must come from the USMCA region to avoid tariffs.
• Domestic value addition refers to how much of a product’s value is generated within the country — through labour, materials or other production inputs. Increasing this share may help lower tariff exposure.

3. Align supply chain strategies to limit exposure

Once risks have been identified and trade rules are understood, strategy comes into play. This means exploring new sourcing or manufacturing models that reduce tariff impacts.

Options include diversifying suppliers, shifting production to regional partners and nearshoring or reshoring operations to cut high-tariff imports. You could also increase domestic production or change the country mix in your intermediate goods sourcing.

Trade tactics like tariff engineering — adjusting how products are classified — can help reduce duties. Bonded warehousing allows goods to be stored without immediate tariff costs, while Free Trade Zones (FTZs) offer deferred or reduced tariffs.

You may also consider digital compliance solutions, working closely with customs brokers and trade compliance teams to audit classifications and identify savings. Renegotiating supplier agreements can also add predictability.

4. Use scenario modelling to test supply chain shifts

Making changes without understanding the full knock-on effect can damage margins, service and supply continuity. Using digital scenario modelling, firms can simulate the impact of changes before making them.

This includes modelling new supplier mixes, adjusting transport modes or testing sourcing from different regions. It also lets you calculate cost-to-serve, revenue impact and carbon emissions.

Moreover, scenario modelling tools such as AI-powered supply chain prescriptions can help evaluate these variables quickly. These tools test changes in real time and allow your team to fine-tune recommendations.

5. Communicate clearly with stakeholders

Once strategies are clear, they must be shared in ways that stakeholders understand. Rather than overwhelming colleagues with all possible options, focus on one to three key actions supported by data.

Use visual dashboards and quantifiable metrics. For example, show how a proposed supplier change affects total cost-to-serve, emissions or margin. Tailor communication to your audience; a finance director will need different information than a procurement manager, for example. 

Use language that aligns with business outcomes, not just supply chain terminology. Make the case for how changes help control costs or reduce risk in a volatile trade landscape.

By breaking the challenge into parts — identifying risks, understanding origin rules, building strategies, running models and communicating clearly — supply chains can act with confidence rather than react with panic.

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