Navigating the Impact of New Tariffs & Supply Chain Concerns: What You Need to Know

By Tami Christensen, CPA
TGG Account Executive
Connect with Tami on LinkedIn

As we begin the year, new tariffs and ongoing supply chain disruptions are creating challenges that are top of mind for executives like yourself.

  • 73% of supply chain executives have faced delays in production and distribution according to McKinsey.
  • In addition, nearly 60% are expected to have ongoing issues as we head into 2025.

TGG’s mission and goal is to be proactive with our partners in addressing these economic developments. Understanding the financial implications is critical for ensuring your organization remains resilient and competitive in the months ahead.

The Evolving Landscape of Tariffs

Recent shifts in global trade policies have led to the imposition of new tariffs, impacting industries ranging from electronics to automotive parts, consumer goods, and raw materials. These tariffs could drive up costs and change the pricing dynamics across the supply chain. As business owners, you’re likely facing the pressure to reevaluate pricing strategies, cost structures, and supplier agreements to manage these financial burdens. TGG is a resource and partner with you in navigating these changes.

Impact of New Tariffs

Key Considerations:

  • Cost Pass-Throughs: Companies may need to pass increased costs onto customers, but this can risk demand elasticity. How will this affect customer loyalty and brand reputation? Utilization of TGG’s KPIs will help keep an eye focused on the profit margins. Product costs and shipping costs will continue to climb 30-50% as the economy adjusts to these rising expenses.
  • Supplier Negotiations: With tariffs adding to the cost of goods, TGG can help identify contracts with suppliers to explore cost-sharing or alternative sourcing options is critical.
  • Financial Forecasting: Tariffs impact direct and indirect costs. Accurate forecasting and budgeting are essential for understanding the true cost structure of your products or services in the current economic environment. Estimates project increased shipping times 20-30% higher with the pending tariffs.

TGG Value: Each member of our team commits to maintain a forward-thinking growth mindset personally and professionally.

Supply Chain Disruptions

Supply Chain Disruptions: A Continued Challenge

On top of tariff issues, the global supply chain remains under stress due to factors like transportation delays, labor shortages, and raw material shortages. These challenges have a cascading effect on production timelines, inventory management, and distribution. Consult with your TGG CFO for ways to strategically overcome these new challenges.

Key Considerations:

  • Inventory Strategy: Many companies are shifting to a more flexible, strategic inventory model to accommodate unpredictable lead times and ensure they can meet customer demand without overburdening their working capital. With over 80% of inventory based companies utilizing just in time inventory, there will be a shift away from that concept as businesses manage cost.
  • Supplier Diversification: The risk of relying on a small pool of suppliers in specific geographic regions has never been more evident. You must consider diversifying supplier bases, both locally and internationally, to mitigate risk and avoid severe disruptions. With shipping times increasing, sourcing 20-30% of inventory locally will protect against rising costs.
  • Technology Investment: As visibility into supply chains becomes more important, leveraging technology for better data analytics and forecasting will help optimize decision-making and minimize risks.

Strategic Steps Forward

To navigate these challenges, we at TGG will work with you to take proactive steps that focus on both short-term relief and long-term resilience:

  1. Scenario Planning: Collaborate with your TGG CFO to develop multiple financial scenarios based on the potential impact of tariffs and supply chain disruptions. This allows for more agile decision-making when unexpected changes occur.
  2. Cost Containment: Review monthly financials with controllers to determine how to streamline operations where possible and focus on high-impact cost-saving measures without compromising quality or customer satisfaction.
  3. Risk Mitigation: Explore risk management tools such as currency hedging, supply chain insurance, and contracts that include tariff escalation clauses to protect margins.
  4. Collaborate with Cross-Functional Teams: Work closely with procurement, logistics, and sales teams to gain a holistic view of the situation and align on solutions that drive the business forward.

Looking Ahead: Strategic Flexibility is Key

The uncertainty surrounding tariffs and supply chain challenges is likely to persist in the near term.  Over half of CFO’s report that supply chain is their highest priority and biggest concern in navigating forward. However, by staying informed and flexible, you can ensure that your company not only survives these turbulent times but thrives through innovative solutions and strategic foresight.

As always, TGG will remain committed to helping you stay ahead of the curve and navigate these complex issues with confidence. Have questions, just ask!

Partner with TGG Accounting for Success

Contact TGG Accounting today to schedule a consultation.