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Tariff Pressure Is Back — What CEOs Should Know
Understanding the Situation
The U.S. government is reintroducing and expanding tariffs under what are known as Section 301 tariffs. These are trade penalties imposed on countries like China when they're seen to be engaging in unfair trade practices, such as intellectual property theft or forced technology transfer. These tariffs increase the cost of importing specific goods from those countries—including raw materials, industrial equipment, and electronics—by applying additional taxes at the border. As a result, companies that rely heavily on foreign suppliers, particularly from China, could see sharp increases in costs, delays in production, and tighter margins.
This is part of a broader policy push to bring manufacturing back to the U.S. and reduce American dependence on geopolitical rivals. But in the short term, it means business owners must prepare for disruptions to their supply chains and pricing models.
Action Plan for CEOs and Owners
1. Audit Supply Chain Exposure
Begin by identifying all materials, products, or components your business imports from overseas. Focus especially on those sourced from China, even indirectly through third-party suppliers. Review your purchase orders, vendor lists, and bills of materials (BOMs). Then, quantify how much of your cost of goods sold (COGS) could be affected by new or rising tariffs.
Work with your operations or procurement team to build a report that answers:
- What are we buying from tariff-impacted regions?
- What is the current landed cost?
- How much margin is at risk?
This exercise will give you visibility into where your business is vulnerable—and where you need to take action.
2. Explore Domestic or Nearshore Alternatives
Once you've mapped exposure, identify alternative suppliers either within the U.S. or in nearby countries like Mexico or Canada. While the unit cost might be higher, you may save on tariffs, shipping, and long-term risk. In many cases, buyers are also placing a premium on supply chain resilience, so being able to show domestic sourcing can improve company value in a future sale.
Build a matrix comparing cost, reliability, lead time, and risk for each current and potential supplier. Consider running small test orders with alternative vendors to validate quality and consistency before making full transitions.
3. Raise Prices Strategically
If tariffs are going to squeeze your margins, you need to plan your pricing response now. Don't wait for your profits to disappear. Segment your customers by pricing sensitivity and adjust accordingly. Begin by communicating the "why": this is a government-imposed cost and not something you're doing arbitrarily. Buyers are more understanding when price increases are tied to external, well-known factors like tariffs.
Build a tiered pricing strategy: for example, raise prices slightly across the board, with larger increases on tariff-heavy SKUs. Give customers a timeline and options to adjust purchasing behavior.
4. Reconsider Your Exit Timing
If you're considering a sale in the next 12-24 months, know that buyers will discount businesses that appear vulnerable to tariffs or have compressed EBITDA. Conducting a supply chain audit, demonstrating alternative sourcing, and showing your ability to protect margins will improve valuation.
Alternatively, if your margins are strong today but at risk soon, it may be smarter to sell before those changes impact your trailing earnings. Buyers pay for clean, growing, stable companies. If you're exposed and not adjusting, you're inviting valuation risk.
5. Reevaluate Working Capital Strategy
Tariffs and global uncertainty are already leading to longer lead times, larger order sizes, and supplier cash demands. This puts pressure on your working capital. Forecast how much extra cash you might need to hold in inventory or deposits to keep things flowing.
Consider renegotiating terms with your vendors or lenders now while your credit is strong. Keep your lines of credit flexible. If you don't plan for this proactively, you may face cash shortfalls or delays in customer delivery when it matters most.
Bottom Line
Tariffs are no longer just a policy debate—they’re an immediate cost pressure and a strategic risk. CEOs who move first will protect value, maintain margins, and be better positioned for growth or exit. If you're unsure how to assess your exposure or communicate changes to investors or buyers, Seaside Business Advisors is here to help.
Clarity. Confidentiality. Results.
