Preparing for Uncertainty: Five Steps for Private Companies to Manage Tariffs

By Aldrich Wealth

30-Day Pause Gives Companies Opportunity to Develop Plans

The White House announced significant tariffs on goods coming from Canada, Mexico, and China on February 2, 2024.

The following day, a 30-day pause on the Canada and Mexico tariffs was announced, providing business owners and company leaders with a short window to understand the impact of these tariffs and develop plans that align with their goals.

Five Steps for Private Companies to Manage Tariffs

  1. Supply Chain Impact
    • Review Supplier Relationships: If your business imports goods or raw materials from these countries, analyze your supply chain for potential cost increases.
    • Explore Alternative Sourcing: Look at domestic suppliers or diversify sourcing to countries.
  2. Cost Management & Pricing Strategy
    • Absorbing vs. Passing Costs to Customers: Determine whether your business can absorb additional costs or if you need to adjust pricing. Work within your company to ensure that these additional costs are covered.
    • Evaluate Cost-Saving Measures: Look for efficiency improvements, such as renegotiating vendor contracts or streamlining operations.
  3. Tariff Mitigation Strategies
    • Leverage Free Trade Zones (FTZs): Consider warehousing in FTZs to delay tariff payments or reduce duty costs.
    • Utilize Tariff Engineering: Reclassifying products under different tariff codes or modifying product specifications can sometimes reduce duty rates.
  4. Tax Planning & Financial Strategy
    • Assess tax and financial accounting implications: Work with financial accounting and tax advisors to understand the impact of tariffs to financial statements and tax obligations.
    • Monitor Cash Flow: Increased costs from tariffs can impact cash flow, making financial forecasting essential
    • Track Tariffs Paid: Accounting and finance should consider creating new accounts to track these tariffs, as well as determining the best placement of these accounts in your financial statement.
    • Scenario Plan: Once you understand your potential exposure to tariffs, begin to map out the best options for your company for a range of potential scenarios.
  5. Be Prepared and Stay Informed 
    • Understand Secondary Impacts: Beyond the goods you buy and sell, consider secondary impacts of tariffs such as how a potential increase in gas prices could impact your company’s overall costs.
    • Stay Informed: Keep track of government negotiations, as tariffs may change based on trade agreements.

For More Information

Please view the articles below for more tariff insights or sign up for our news alerts.

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