With Trump’s tariff changes, businesses are preparing for business shifts, sometimes acutely unaware of the potential impact to their entire supply chains. Tariffs - taxes placed on imported goods - impact manufacturers, distributors, and retailers by increasing costs and forcing companies to reconsider their sourcing strategies. Some businesses may attempt to pass these higher costs onto consumers, but in competitive markets, this isn’t always a viable option. Take U.S.- China trade, for example. In response to previous tariffs, U.S. businesses didn’t stop importing goods, instead, they shifted production to other countries such as Vietnam to avoid additional costs. As reciprocal tariffs are being implemented again, we can expect further shifts in global supply chains, requiring businesses to adapt quickly and efficiently.
How Tariffs Affect Different Players in the Supply Chain
1. Retailers: Sourcing Challenges & Profit Margins
Retailers must evaluate alternative sourcing strategies, considering three critical factors:
- Base Price: Will switching suppliers lower or raise costs and potentially impact margin?
- Quality: Will the product quality change?
- Lead Time: Will delivery times be affected, leading to stock shortages or excess inventory?
Retailers need a fast and reliable way to assess these trade-offs to protect margins.
Optii enables retailers to analyse multiple scenarios in real-time, helping them make informed sourcing decisions.
2. Manufacturers: The Complexity of Component Costs
For manufacturers, tariffs impact not just final products but also raw materials and individual components. Higher costs for certain materials can affect overall production and production expenses, making it essential to explore alternative suppliers, substitute materials, and pricing impacts across different markets.
Given the complexity of these calculations, Optii helps manufacturers model different sourcing and production strategies, ensuring the most cost-effective approach while maintaining quality and efficiency.
3. Distributors: The Cost of Logistics & Storage
Distributors face a different challenge: balancing logistics, inventory levels, and transportation costs. A new supplier might offer lower pricing but longer lead times can drive up warehousing costs. On the contrary, paying tariffs to maintain current suppliers might, in some cases, be the better financial decision.
Optii runs thousands of “what-if” scenarios, allowing distributors to model different tariffs and supplier options, ensuring optimal service levels while keeping costs under control.
Why Optii Is the Answer to Tariff Uncertainty
Tariffs create complex decision-making challenges, but Optii helps businesses navigate these challenges with confidence.
Here is how:
- Runs “What-If” Scenarios: Before making supply chain changes, Optii models all possible outcomes, helping businesses make data-driven decisions.
- Balances Cost, Service, and Cash Flow: Ensures companies maintain profitability and efficiency while adapting to new trade conditions.
- Fast, AI-Powered Analysis: With tariffs taking time to implement, businesses can use this window to model scenarios in advance and plan accordingly.
- Industry-Wide Flexibility: Whether you are a retailer, manufacturer, or distributor, Optii provides tailored solutions to help companies adjust supply chain strategies effectively.
Tariffs Are Changing - Smarter Supply Chains are Required
Economists have said that reciprocal tariffs could take six months or more to come into full effect, but under the 'International Emergency Economic Powers Act of 1977', they are being introduced with immediate authority. The act allows the administration to act swiftly without congressional approval. This means companies need to move quickly to reassess and adapt their supply chains. Companies relying on outdated models and slow decision-making risk falling behind competitors who leverage AI-powered solutions like Optii.
With Optii’s AI-driven Digital Twin technology, companies can anticipate, plan for, and adapt to change before they happen. This helps them stay competitive and resilient in shifting global trade environments.
Referenced:
- Young, L. (2025) A Step-by-Step Look at How Trump’s New Tariffs Will Be Implemented. Available at: https://www.wsj.com/economy/trade/step-by-step-look-at-how-trumps-new-tariffs-are-implemented-47527fbc?mod=Searchresults_pos6&page=1 (Accessed: 09 April 2025)
- The Wall Street Journal,20th March 2025,(How Trump’s Reciprocal Tariffs May Spark a U.S. Recession | WSJ, The Wall Street Journal. Available at: https://www.youtube.com/watch?v=Y__2UsC7T-I&t=2s (Accessed: 28 March 2025).
- Clarke, J. (2025) What are tariffs, how do they work and why is trump using them?, BBC News. Available at: https://www.bbc.co.uk/news/articles/cn93e12rypgo (Accessed: 28 March 2025).
