8 Best Practices for Navigating Tariffs

Claire Burke, CPA CFO and Treasurer, Dearborn Group
Creating Value for Your Company

Those who thrive in a dynamic, challenging environment may be embracing the complexities that crop up each week in our current economic landscape. Others, however, may be wondering simply how to survive the uncertainty.

In an era defined by geopolitical tensions, shifting trade policies, and volatile markets, corporate finance leaders today face mounting challenges in maintaining stability and profitability. For instance, tariffs—once a distant concern for many—have become a disruptor, impacting supply chains, input costs, and international competition. Coupled with broader economic uncertainty, these factors necessitate a new level of agility and foresight in corporate finance.

So, how can finance leaders proactively navigate the tariff landscape and safeguard their organizations’ long-term success? I believe it starts with following these eight best practices.

1. UNDERSTANDING THE FINANCIAL IMPACT OF TARIFFS

While it seems obvious, navigating this period of uncertainty will require corporate finance leaders to first understand tariffs. Tariffs act as a form of tax on imported or exported goods, which directly increase the cost of goods sold and affect profit margins. For companies with complex global supply chains, tariffs can significantly alter the economics of sourcing and manufacturing decisions. However, given the magnitude of the Trump administration’s proposed tariffs, the impact goes well beyond these types of companies—even to the smallest of organizations. That said, here are a few key tactics that’ll help mitigate any financial risks from tariffs regardless of your organization’s size:

• Cost modeling: Finance teams must build flexible cost models that incorporate different tariff scenarios. This includes performing a sensitivity analysis to understand how tariff changes impact profitability across products and regions.
• Supply chain audit: A thorough audit of the current supply chain can uncover hidden dependencies on high tariff regions. Finance leaders should collaborate with procurement and operations to identify alternative suppliers in lower tariff regions or domestic markets.
• Currency risk assessment: Tariffs often lead to currency volatility. Finance teams should monitor foreign exchange exposure and consider hedging strategies to manage this risk.

2. ADOPTING DYNAMIC SCENARIO PLANNING AND FORECASTING METHODS

Traditional forecasting methods are often insufficient in uncertain economic environments. Instead, corporate finance leaders should adopt dynamic scenario planning to prepare for multiple outcomes.

In this current economic climate, effective scenario planning involves:

• Creating multiple financial models: At a minimum, finance leaders should prepare base, optimistic, and pessimistic scenarios. These models should reflect variables like tariff increases, inflation, interest rate hikes, employment rate, and supply chain disruptions.
• Stress testing liquidity: Understanding how each scenario impacts cash flow and working capital is critical. Leaders should identify how long the company can operate under stress and what cost-saving levers can be pulled if needed.
• Cross-functional collaboration: Finance should work closely with operations, sales, and strategy teams to ensure forecasts reflect business realities and customer behaviors.

3. ENHANCING SUPPLY CHAIN RESILIENCE

The ripple effect of tariffs often begins with the supply chain. Therefore, having a finance-led strategy to enhance supply chain resilience can better protect your margins and reduce your exposure to geopolitical risks.

Here are a few strategic actions to consider:

• Diversification: Relying heavily on a single region or supplier is risky. Finance leaders should support diversification efforts by analyzing the cost-benefit of expanding supplier bases across multiple countries.
• Nearshoring and reshoring: Though potentially more expensive initially, moving production closer to key markets can mitigate tariff exposure and reduce transportation risks.
• Inventory optimization: While holding too much inventory ties up working capital, having too little exposes you to disruptions. Finance can help find the balance by refining just-in-time models and using predictive analytics.

4. OPTIMIZING TAX STRATEGIES

Tariffs intersect closely with global tax strategies, so having a comprehensive tax strategy can help offset any financial burden. Consider these tactics:

• Transfer pricing adjustments: Adjusting your transfer pricing policies to reflect new cost structures can help optimize tax liabilities across jurisdictions.
• Utilizing trade agreements: Finance and legal teams should work together to explore preferential trade agreements, such as free trade zones or bilateral treaties, which may reduce tariff burdens.
• Leveraging duty drawback programs: In some jurisdictions, companies can reclaim duties paid on imported goods that are later exported. Understanding and leveraging such programs can result in substantial savings.

5. MAINTAINING CAPITAL FLEXIBILITY

In uncertain environments, access to capital becomes both more critical and more difficult. Finance leaders should take proactive steps to preserve liquidity and ensure capital flexibility. To do so, consider:

• Strengthening the balance sheet: This can involve improving receivables collection, managing payables strategically, and reducing nonessential expenses.
• Managing your credit line: Ensure adequate lines of credit are available and negotiate favorable terms before market conditions tighten further.
• Evaluating alternative financing: In challenging environments, traditional lending may be constrained. For alternative funding sources, finance leaders should consider asset-based lending, supply chain finance, or strategic partnerships.

6. LEVERAGING TECHNOLOGY AND DATA ANALYTICS

Technology plays a crucial role in helping finance leaders respond to rapidly changing external conditions. When it comes to leveraging technology for help, consider implementing:

• Real-time data visibility: Implementing integrated enterprise resource planning systems enables faster and more accurate financial reporting.
• Predictive analytics: Tools powered by artificial intelligence can help forecast demand shifts, cost pressures, and geopolitical developments, giving finance leaders a valuable edge.
• Automation: Robotic process automation can reduce manual efforts in finance operations, increasing efficiency and freeing up resources for strategic analysis.

7. COMMUNICATING WITH STAKEHOLDERS

During periods of uncertainty, transparent communication becomes even more important, and finance leaders must keep internal and external stakeholders regularly informed and aligned. Consider implementing these best practices to ensure open communication with your stakeholders:

• Clear investor updates: Provide regular, transparent updates on how the company is responding to economic shifts and trade-related developments.
• Internal alignment: Ensure the C-suite and departmental leaders understand financial strategies and their roles in executing them.
• Employee engagement: Clear communication helps reduce uncertainty among employees, especially when cost-cutting measures or strategic pivots are required.

8. BUILDING STRATEGIC AGILITY

Ultimately, navigating tariffs and economic uncertainty requires a mindset shift. Finance leaders must move from reactive to proactive, embedding strategic agility into the DNA of the organization. To foster agility, adopt the following:

• Continuous learning: Watch global trade developments, fiscal policies, and macroeconomic indicators.
• A culture of adaptability: Encourage experimentation and flexibility in budgeting, capital allocation, and decision making.
• Board-level engagement: Ensure the board understands the evolving financial landscape and is involved in shaping long-term strategy.

Tariffs and economic uncertainty aren’t temporary challenges—they’re becoming structural features of the global economy. For corporate finance leaders, this reality demands a strategic approach, grounded in data, resilience, and adaptability. By anticipating risks, optimizing operations, and embracing agility, finance teams can not only weather volatility but turn it into a competitive advantage.

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