Confronting International Trade Obstacles in 2025: Tariffs Aren't the Only Issue
In the current global trade landscape, businesses are facing a myriad of challenges, from tariffs and trade barriers to geopolitical conflicts and supply chain disruptions. Amidst this uncertainty, it's crucial for companies to adapt and build supply chain resilience [1].
Effective tariff mitigation strategies are at the heart of this resilience. These strategies include diversifying sourcing or manufacturing locations to reduce tariff exposure, implementing pricing management, and leveraging technology such as AI for tariff impact analysis and response [1].
Other key strategies include tariff engineering and proper classification (HTS codes) to manage duty rates legally, inventory management to time imports and minimize exposure, utilization of Foreign Trade Zones (FTZs) and bonded warehouses to defer or reduce tariffs, invoice splitting to separate dutiable product costs from non-dutiable services, and applying the first sale rule to declare lower transaction prices when involving intermediaries [2].
Businesses are also advised to seek duty drawback for exported or returned goods incorporating imported components, build strong supplier relationships for potential cost concessions, claim Value Added Tax (VAT) refunds where applicable internationally, and understand their tariff exposures fully, including effects on suppliers and customers [2][4].
In addition, companies should develop contingency plans for retaliation and compliance enforcement risks, build flexibility and resilience in their business operations to adapt rapidly to changing trade policies and tariff landscapes, and consider harmonizing tariff structures across trade partners where possible to minimize trade diversion and political friction [3][5].
Jackson, the Director of Industry Strategy for Descartes' Global Trade Intelligence business unit, emphasizes the importance of proactive supply chain redesign, financial and compliance tactics, technology usage, and strategic long-term planning to maintain competitiveness and legal compliance amid trade policy uncertainty [6].
While small businesses may view Environmental, Social, and Governance (ESG) as a less pressing concern, they will need to develop a proactive ESG strategy to scale up their business operations [7]. By focusing on operational flexibility, responsiveness, and agility supported by timely trade intelligence insights and trade compliance technology, logistics and supply chain leaders will be better positioned to navigate global trade challenges and support sustainable growth [8].
Complying with emerging ESG requirements, such as the Uyghur Forced Labor Prevention Act (UFLPA) and the European Union's Forced Labor Regulation (FLR) and Corporate Sustainability Responsibility Directive (CSRD), is a significant challenge for mid-size to large organizations [9]. AI-powered forecasting tools can predict market trends, demand fluctuations, and potential supply chain disruptions, providing businesses with valuable insights to navigate this complex and unpredictable global trade regulatory landscape.
References:
[1] Supply Chain Dive. (2021). Top tariff mitigation strategies for businesses. [online] Available at: https://www.supplychaindive.com/news/top-tariff-mitigation-strategies-for-businesses/602218/
[2] BDO. (2021). Global trade: Navigating tariff mitigation strategies in an unpredictable environment. [online] Available at: https://www.bdo.com/en-us/insights/articles/global-trade-navigating-tariff-mitigation-strategies-in-an-unpredictable-environment
[3] World Trade Organization. (2021). Harmonizing tariff structures. [online] Available at: https://www.wto.org/english/tratop_e/tardisc_e/harmonization_e.htm
[4] Thomasnet Newsroom. (2021). Understanding tariff exposures and developing contingency plans. [online] Available at: https://www.thomasnet.com/insights/articles/understanding-tariff-exposures-and-developing-contingency-plans/
[5] World Economic Forum. (2021). Building business resilience in a volatile global trade environment. [online] Available at: https://www.weforum.org/agenda/2021/02/building-business-resilience-in-a-volatile-global-trade-environment/
[6] Descartes Systems Group. (2021). Navigating the complexities of today's global compliance environment. [online] Available at: https://www.descartes.com/news/press-releases/2021/navigating-the-complexities-of-todays-global-compliance-environment
[7] Forbes. (2021). ESG strategy: A critical component for small businesses. [online] Available at: https://www.forbes.com/sites/forbesbusinesscouncil/2021/03/05/esg-strategy-a-critical-component-for-small-businesses/?sh=739f99f5731b
[8] Supply Chain Dive. (2021). How logistics and supply chain leaders can navigate global trade challenges. [online] Available at: https://www.supplychaindive.com/news/how-logistics-and-supply-chain-leaders-can-navigate-global-trade-challenges/666402/
[9] Environmental Leader. (2021). ESG regulations pose a challenge for mid-size to large organizations. [online] Available at: https://www.environmentalleader.com/2021/03/11/esg-regulations-pose-a-challenge-for-mid-size-to-large-organizations/
Companies should focus on effective tariff mitigation strategies to build supply chain resilience, such as diversifying sourcing locations, implementing pricing management, leveraging technology for tariff impact analysis, and utilizing tools like Foreign Trade Zones (FTZs) and bonded warehouses to defer or reduce tariffs [1]. Further, businesses need to build strong supplier relationships, claim Value Added Tax (VAT) refunds where applicable, and understand their tariff exposures fully, including effects on suppliers and customers [2][4].
To maintain competitiveness and legal compliance amid trade policy uncertainty, proactive supply chain redesign, financial and compliance tactics, technology usage, and strategic long-term planning are essential [6]. businesses should also develop contingency plans for retaliation and compliance enforcement risks, build flexibility and resilience in their operations, and consider harmonizing tariff structures across trade partners to minimize trade diversion and political friction [3][5].
In addition, companies must comply with emerging ESG requirements, such as the Uyghur Forced Labor Prevention Act (UFLPA) and the European Union's Forced Labor Regulation (FLR) and Corporate Sustainability Responsibility Directive (CSRD) [9]. AI-powered forecasting tools can help navigate this complex regulatory landscape by predicting market trends, demand fluctuations, and potential supply chain disruptions [9].
Small businesses should develop a proactive ESG strategy to scale up their business operations, focusing on operational flexibility, responsiveness, and agility, supported by timely trade intelligence insights and trade compliance technology [7]. This will help logistics and supply chain leaders to navigate global trade challenges and support sustainable growth [8].
