Create a monitoring team
Management accountants and finance leaders should establish teams tasked with monitoring the constantly evolving landscape, staying informed about current policy changes, and anticipating future shifts. The team should also be responsible for scenario planning and wargaming possible responses and contingency measures.
This team should also carry out business impact assessments to identify the areas of greatest vulnerability in different scenarios. This will enable organisations to prepare for almost all eventualities and build the agility required to respond in an exceptionally fast-moving environment.
Use technology
Data analytics can help to anticipate disruption and provide insights into potential impacts on supply chains, costs of logistics, and raw material availability. They can also support decisions on sourcing and pricing changes as well as future market strategies. Greater use of predictive analytics — making use of lead indicators, for example — can help with better demand planning, which feeds through to production and supply chain decisions. Collaboration between supply chain participants to share and utilise data can transform the collective visibility in the supply chain. When supply chain and import data is poor, however, the challenge in responding to tariffs will be greater.
Know your costs
Finance should work with production teams to carry out a detailed analysis of all manufacturing process materials and establish the tariffs’ impact and restrictions on materials’ cost and availability. For example, components or materials sourced from the US may become more expensive if a trade deal cannot be negotiated.
Similarly, if anti-dumping measures are enacted by the EU and UK governments, there may be a cost increase for materials from China and other countries. Furthermore, certain countries may restrict exports of key materials and components. This analysis will inform future decisions on both sourcing and product portfolio changes.
Understand your customs exposure
Rules of origin can have a significant impact on exposure to duties and tariffs. A product may be manufactured and exported from one country, but if the majority of its constituent parts come from another, the level of the duty and tariffs may change. Finance leaders should work with procurement teams to fully understand the product portfolio. There are mitigation measures that can be explored, including sourcing from different countries and changing internal pricing strategies where the components are produced by subsidiary companies.
Evaluate and act on supply chain risk
For businesses, the ability of key suppliers to withstand the current disruptions to trade will be critically important. Finance leaders should work with procurement teams to evaluate suppliers’ financial health and their ability to continue to trade under various scenarios.
At the same time, organisations should seek to strengthen their relationships with key suppliers, so they can agree on strategies to address shared challenges. This will also help improve supply chain resilience in the longer term.
A natural next step for many is to renegotiate contracts with suppliers to take into account tariff- and trade disruption-related events. These updated contracts would include terms that are capable of variation when certain events occur.
Supply chain diversification should also be a priority. The lean, highly complex globalised supply chains that have been developed over time have served companies and consumers very well. Their fragility was exposed during the COVID-19 pandemic, which led to a renewed focus on resilience. Dual-sourcing and nearshoring options should, as a matter of urgency, be explored to build resilience and potentially reduce exposure to tariffs and government-imposed supply restrictions.
Pay close attention to inventory management
Marked increases in trade flows were seen in the first quarter of 2025 as companies accelerated exports to the US to get ahead of potential tariffs. This had the impact of building inventories to historically high levels in some cases, which can bring risks.
Firstly, the company may have to carry the higher working capital cost of the elevated inventory until it is sold. Even when it is sold, the natural replenishment cycle has been disrupted, which can lead to production issues, supplier strain (to the relationship and otherwise), and operational inefficiency from the production rescheduling.
In other cases, companies may be seeking to ship more goods on a reduced frequency to cut shipping costs to offset other cost increases. We are also seeing some companies actively reducing inventory in anticipation of reduced demand due to tariffs.
While these strategies have merits, there is no one-size-fits-all solution. Each company must act in accordance with its unique circumstances and should use predictive analytics and other technologies, such as supply chain management software, integrated with overall finance planning tools, to inform the decision-making process. Ensuring your working capital funding has the capacity and flexibility required is a key action finance teams should take immediately.
Rethink production locations
Shifting some parts of production to the US to avoid tariffs may be an option for some companies to consider. This does not always mean establishing new, greenfield operations. Contracting production to a partner can offer advantages of in-market production with lower or none of the upfront capital costs.
However, such decisions require careful consideration of other factors, such as whether raw materials and components will have to be imported to the new manufacturing location and therefore be subject to tariffs. Companies will also need to consider the potential trade-off between tariffs remaining in place longer term and the cost implications of moving production to the US.
Time for action
The time for action is now. Companies that fail to proactively anticipate events and their impacts will struggle in the current rapidly evolving business environment. On the other hand, businesses that move swiftly can gain a competitive advantage, but only if they take a broad view of the current challenges. It is not simply a case of responding to tariffs. Geopolitical tensions and their consequences must also be taken into consideration in strategic planning. It is not about trying to second-guess what any leader or government might do, but rather about being prepared to respond with agility to the broader trends.
