Jason Alexander, industrial policy senior analyst with RSM US, discusses how businesses will navigate the coming year in the face of higher tariffs on durable goods.

As they face the prospect of higher tariffs on goods from China and elsewhere, importers and exporters first need to step back and assess their potential exposure to that eventuality, Alexander says. A significant amount of imported products are already subject to tariffs, imposed by President Trump in his first administration, and continued by President Biden.

There remains the possibility of pulling forward some orders into the fourth quarter, but many organizations have already taken that action to be better positioned for the new year, Alexander says.

Another strategy is to swap out foreign-made goods for those produced domestically, but the opportunity to do that is limited by the availability of local manufacturing. Many organizations maintain quality-assurance processes that prevent them from making sourcing shifts overnight. Even if they’ve identified a domestic supplier to replace imports, the lead time involved in making the change means that the seller will likely be subject to tariffs for at least awhile.

However the Trump administration chooses to act, business costs are likely to rise in the coming year, Alexander says. “Organizations importing goods from any potential country that’s subject to tariffs will be faced by higher costs in the near term.”

To offset that additional expense, companies need to explore new technologies that promote automation, as well as advanced analytics that will equip them with the information they need to make intelligent decisions. Whether they’ll be able to pass at least some of that burden on to consumers remains to be seen, depending on the competitiveness of markets and the seller’s ability to withstand reduced profits. 

Also uncertain at this point is whether importers will be able to find suitable alternatives to China, if the new administration imposes tariffs on all incoming goods.