In war, there are winners and losers. But in either case, innocent bystanders often suffer.

This is worth remembering as the world finds itself poised for an escalating trade war. Supply chain professionals are the innocent bystanders, being hit with sudden changes, tough obstacles, new risks and unanticipated cost. Oh, and more work.

With higher U.S. tariffs being discussed for implementation within a matter of weeks, we should be alert and avoid being taken unaware of changes we can anticipate. We need to analyze, prepare and assess risk, regardless of whether we believe tariffs may be beneficial and justified.

The incoming Trump Administration is contemplating across-the-board tariffs on products originating in certain countries. Those assessed under Section 301 of the Trade Act of 1974 focus on country of origin — meaning the origin of the product, not the shipment. In order to estimate fully loaded landed cost, procurement organizations must therefore verify country of origin as opposed to a supplier’s physical location, which can be deceiving.   

As U.S. organizations scramble to shift to suppliers with manufacturing in countries that may initially be exempt from U.S. tariffs, it’s worth considering that the country-of-origin designation often is triggered by the last substantial transformation to the product. This may be performed by a tier 2, 3 or even “tier-n” supplier — far up the supply chain. Whatever a product’s ultimate origin, it must be fully traceable, and the transformation of components from different countries must not be commingled. That level of detail might not always be available, however, and procurement organizations must consider the compliance risk associated with unclear traceability.

Another significant risk is cost increases from indirect tariffs, meaning those associated with components and raw materials. For many companies, the extra cost that becomes embedded in the products may be significant; yet procurement organizations may have limited visibility to sourcing done by their suppliers. As inventories deplete and new pricing is discussed for post-tariff implementation, this can entirely blindside purchasing.

Following are some actions that “innocent bystanders” should take (or not):

Don’t overreact. There’s a significant risk and cost associated with procuring too much inventory. The possibility of obsolescence, excess inventory and write-offs should be weighed against a potential tariff that may come later than anticipated, be less than anticipated, or be lessened or lifted. Of course, the opposite could happen, but with panic buying often leading to 20% excess inventory, for tariffs in the 20% range, it may be safer to wait and see than panic. There’s also the cash and interest impact, as well as the warehousing cost.

Prioritize visibility. You simply cannot have too much visibility to your supply chain. Mapping multiple tiers of suppliers has always been good advice.

Understand classification: Determining country-of-origin classification sounds simple, but like everything related to supply chains, it’s fraught with complexities. This is not a place to skimp on due diligence.

Consider near-sourcing. Higher tariffs may make U.S. manufacturers more competitive and reliable, when factoring in landed cost, risk, agility, and other supply chain advantages. Procurement organizations would do well to ingratiate themselves with domestic manufacturers to ensure preferential treatment, now that the equation has shifted.

Decide how near your suppliers should be. While many U.S. organizations in the past near-sourced to Mexico, many would now consider that decision fraught with risk.

Calculate landed cost: Many organizations still haven’t fully embraced the concept of landed cost. With tariffs now potentially adding significant supply chain expense, it’s time to complete the analysis and include all risk factors.

Stress agility. Visibility and willingness to react quickly will make a huge difference. Large organizations with significant procurement bureaucracy may want to focus on streamlining and speed up the onboarding of new suppliers.

Think about building up safety stock. Everyone witnessed the impact of product unavailability during the early days of the COVID-19 pandemic. We’re now seeing a total stop in the export or import of certain materials or products. Even worse than increased cost due to tariffs is a total lack of availability, or possible catastrophic price increases that can double or triple the cost of raw materials or components. In some cases, stockpiling may not be a terrible idea.

As in all conflicts, tariff wars will likely create collateral damage. Supply chain managers will need vigilance, visibility and agility if they wish to succeed during this time of uncertainty.

Hannah Kain is president and chief executive officer of ALOM.