By Mark Hoffman
As I write this, I’m sitting in Toronto’s Pearson International Airport waiting to board a flight to Dallas, Texas. I’m traveling to a meet a client. While I’m there, I’m making a presentation to their Executive Leadership Team on tariffs.
While typing I hear people at the bar talking about the tariffs. People are surprised that the U.S. would impose a 25% partner on its biggest trading partner. As I write, I read that Canada will retaliate with tariffs of their own later today. By the time you read this, the U.S. and Canada will likely be in a full-fledged trade war.
I don’t know why I didn’t put this on my 2025 Crisis Bingo Card.
In this article, I want to do a quick review on how tariffs work and give you some advice on what steps you can take to mitigate the impact on your organization. But before I get too far along, I want to answer a question you may be asking.
You might be wondering why you, as a resilience professional, should even care about tariffs:
1. Supply Chain Disruptions: Tariffs can significantly impact global supply chains by increasing costs and causing delays. This can disrupt the flow of goods and materials, making it essential to have contingency plans in place. Good resilience professionals integrated with supply chain teams to mitigate disruptions.
2. Strategic Planning: Continuing with the supply chain theme, tariffs can influence strategic decisions, such as sourcing materials from different countries or investing in local production to mitigate risks.
3. Cost Management: Tariffs often lead to higher costs for imported goods. This can affect your company's bottom line and necessitate adjustments in budgeting and financial planning. You can demonstrate value to your leadership team by helping to mitigate these costs.
4. Risk Mitigation: Understanding the potential impacts of tariffs allows you to develop risk mitigation strategies, ensuring your company remains resilient in the face of trade policy changes.
You might be wondering why you, as a resilience professional, should even care about tariffs?
How Do Tariffs Work?
There are a lot of misconceptions about how tariffs actually work. Many think the foreign company (a.k.a. the “shipper”) has to pay a tariff to the government in order to get their goods into the country. This isn’t accurate. The tariff is actually paid by the company importing the goods into the United States.
Let me give you a practical example. Let’s say your organization has open purchase orders for goods being shipped from Canada. Prior to the tariffs, those goods would have cost your organization $1 million. Now, with a 25% tariff in place, your organization will have to pay U.S. Customs and Border Services $250,000 just to get the goods released.
The goal is to put financial pressure on U.S. companies to stop buying Canadian goods, and to get the same products from American companies – and avoid the 25% penalty. But there are problems with this logic, including:
Limited Domestic Production: Some products simply aren't produced in sufficient quantities in the U.S. to meet demand. For example, certain raw materials or specialized components (oil, lumber, Tim Bits Doughnuts) might be more readily available from Canadian suppliers.
Higher Costs: Even if American alternatives exist, they might be more expensive due to higher labor and production costs in the U.S. This can make it economically unfeasible for companies to switch suppliers.
Supply Chain Complexity: Modern supply chains are highly integrated and complex. Switching suppliers can disrupt established logistics, lead times, and quality control processes. This complexity can make it challenging to find suitable American replacements. A change to a major component could result in retrofitting designs across multiple product lines.
So Who Loses?
Everyone.
As a Resilience Professional, What Can I Do?
If I had written this article a month ago, I would have told you to start back then. Monitor the news and every source you have to keep up to date on what’s happening with tariffs, Executive Orders, and other announcements coming out of Washington. The bottom line is – you just don’t know how one of these announcements might impact your organization.
But here we are. In a trade war. What can you do to mitigate the impact on your organization?
Develop a High-Level Tariff Response Playbook:
Communicate Directly with Affected Suppliers:
Work to ensure continuity of supplies. Some suppliers may redirect their goods to nations where there is no tariff.
Execute Strategies for Affected Suppliers:
Discuss strategies to mitigate cost increases and supply shortages. For example, will you be passing the cost increases on to your customers? Will your contracts allow you to do that?
Are there alternate suppliers that you can use? Is there a supplier in the U.S. or from a country where there is not tariff?
Monitor the effectiveness of these strategies and adjust as needed.
Establish a Cross-Functional Team:
Form a dedicated team comprising supply chain, production, sales, and customer service employees to manage the impact of tariffs. You will want to adjust this team based on the structure of your organization.
Ensure the team meets regularly to assess the situation and make informed decisions.
Engage the Communications Lead:
Work closely with the communications lead to draft and deliver statements to stakeholders.
Ensure messaging is consistent, transparent, and addresses the concerns of all affected parties.
Establish Reporting to Executive Leadership Team:
Set up regular reporting mechanisms to keep the Executive Leadership Team informed of the situation and the effectiveness of the response strategies.
Provide actionable insights and recommendations based on real-time data and analysis.
Continue Tariff Monitoring Operations:
In addition to the 25% tariffs already announced on Canada and Mexico, the U.S. also implemented a 10% tariff on goods from China. They have also threated a 100% tariff on BRICS nations. There will be more. Keep your eyes open and determine how it will affect your organization.
As a Resilience Professional, What Can I Do?
Identify Single Source Suppliers and Suppliers of Highly Critical Components:
Pay particular attention to suppliers from high-risk countries. The risk isn’t limited to higher costs through tariffs but also to a shortage of critical components.
Develop Strategies to Mitigate Cost Increases or Supply Shortages:
Explore alternative sourcing options, including domestic suppliers or suppliers from countries not affected by tariffs.
Negotiate long-term contracts with fixed pricing to hedge against cost increases.
Strap in. This is going to get bumpy. But as resilience professionals – this is what we do. It’s time to step up and make a difference by taking steps to mitigate the impact these tariffs will have on your organization.
About Mark Hoffman
Mark is a multi-award-winner, senior business continuity and resilience consultant, located in the Great Toronto area. He is a co-founder and partner of the Resilience Think Tank, owner of Anesis Consulting Group, Inc. and host of the Resilient Journey podcast. With nearly 25 years of industry experience, Mark continues to provide world-class consulting to organizations in the US, Canada, Caribbean, and Europe with a focus on BCM Program development and maturity, crisis management, crisis communications and cyber response.
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