Conquer Tariffs with Confidence: A Guide for Business Leaders

As global trade tensions escalate, tariffs are reshaping the operational and financial realities for companies across sectors. From manufacturing and consumer products to M&A strategy and tax compliance, the impact is far-reaching. For business leaders, the challenge isn’t just responding to what’s happening today—it’s preparing for what might come tomorrow.

Many middle-market businesses have questions about how to navigate these disruptions. To help, we’ve compiled our thoughts on how to make proactive decisions rooted in data, strategy and alignment to help middle-market organizations respond to tariffs. Stay current with our tariffs updates page for significant tariff-related developments and what they could mean for you.

This guide explores the current tariff environment, the business implications of tariffs and considerations for managing risk and identifying opportunities.

What’s Happening Now: Volatility, Stacking and Strategic Shifts

The reintroduction of tariffs, particularly reciprocal tariffs and the tariffs on China, has introduced cascading cost pressures across supply chains. Whether it's raw materials, components or finished goods, companies are seeing:

• Tariffs across multiple stages of production, e.g., steel + parts + finished goods
• Unpredictable policy shifts, causing disruptions in planning, procurement and pricing strategies
• A need for scenario planning to model out how changes in tariffs will impact bottom-line costs, evaluate pricing options and understand the impact on overall sales
• Indirect effects of tariffs, such as customers’ input costs rising and rising bond yields
• Potential retaliatory tariffs from other countries, complicating cross-border trade

Manufacturers report struggling with timing issues related to the changes in policy, such as tariffs incurred at border crossings but billed to customers later. Increased volatility results in greater working capital needs, margin compression and financial reporting complexities, emphasizing the need for scenario modeling and careful strategic shifts.

Areas to Watch

Financial planning and reporting

Tariffs affect multiple layers of financial statements, including:

• Inventory valuation: Tariffs must be capitalized into inventory cost under U.S. GAAP, impacting gross margins and Lower of Cost or Net Realizable Value (LCNRV) testing
• PP&E: Tariffs on imported capital goods increase depreciation bases
• Revenue recognition: Cost-to-cost percentage methods under ASC 606 may trigger contract losses or variability in revenue if tariffs alter input costs mid-contract
• Impairment testing: Weakened margins and lower forecasted cash flows may trigger asset or goodwill impairments under ASC 360/350
• Working capital: Frontloading imports, raising inventory costs and straining cash flow, which may lead to port congestion and economic volatility
• Strategic risk management

Tax and compliance

Tariffs create ripple effects through tax strategies:

• Transfer pricing: Multinational companies must revisit which entities in the supply chain bear the tariff burden
• Tariff exemptions: Partial exemptions may exist for U.S.-sourced content; determining eligibility can reduce liability
• Customs strategies: Companies may consider re-routing goods or “substantially transforming” them in low-tariff jurisdictions to minimize costs

Supply chain and operations

Companies are rapidly reevaluating:

• Supplier diversification and nearshoring/reshoring to mitigate tariff risk
• Operating plans to maximize U.S. production or eliminate duties altogether
• Strategic sourcing and contract renegotiation to create cost-sharing with customers and vendors
• How to use special trade zones more strategically
• Inventory management, which is crucial; some companies will adopt frontloading, which could lead to increased inventory holding costs
• Market entry and exit strategy

Supply chain agility is now a requirement, not a luxury. One manufacturer we spoke to began itemizing tariffs on invoices and passing them directly to impacted customers while simultaneously modeling long-term alternatives to Canadian production.

M&A and deal strategy

For private equity and acquirers:

• Valuation adjustments are becoming more common as tariffs lower EBITDA or increase COGS
• Earnouts, indemnities and holdbacks tied to tariff exposure are now standard in many deals
• Enhanced diligence to review the direct and indirect impact on tariffs, such as supply chains and customer concentration, is critical
• The cost of borrowing may increase due to market volatility and actions by the Federal Reserve to combat potential inflation
• Diversifying risk helps to protect portfolio performance, maintain valuation stability and ensure flexibility

Capital allocation

• CAPEX planning could also accelerate the need for CAPEX allocation to track the impact of and plan better for expenditures, e.g., a much-needed ERP or other software investments
• Pending tariffs can impact cash flow and profitability, which may force firms to reconsider dividend payouts to preserve liquidity
• Evaluate stable, flexible long-term financing structures
• Equity financing could become less favorable or dilute existing ownership more than expected, requiring careful analysis before raising capital.

Tackling the Current Tariff Environment Head-On

Even amid uncertainty, companies can position themselves for resilience and advantage. Here’s how:

• Build flexibility into the model. Use scenario planning and AI-driven modeling to anticipate multiple tariff outcomes. Reforecast regularly and pressure-test liquidity and pricing assumptions.
• Modernize operations thoughtfully. Target automation or technology investments that could reduce labor costs or energy consumption . Also consider alternative materials or input components. These moves can offset rising material and tariff-driven costs over time.
• Align your internal teams. Tariff management isn’t just a finance or operations issue—it requires legal, tax, procurement, and executive alignment. Cross-functional governance is key.
• Track, adjust and communicate. Maintain clear audit trails for tariff charges and price changes. Review financial disclosures to ensure material tariff risks and responses are captured properly. Communicate changes clearly to investors, customers, and employees alike.

Don’t Wait for Tariffs to Hit; Take Action Now

Tariff changes can wreak havoc on your margins, supply chains and strategic plans, but only if you let them. Business leaders who move quickly and think strategically can turn volatility into opportunity.

Here are four high-impact actions to help you assess risk, uncover advantages and stay in control as the global trade landscape shifts:

• Assess your exposure: Understand which goods, services and entities in your business, including effects on the workforce at every stage of production, are most affected by tariff changes
• Evaluate exemption opportunities: Determine if your goods qualify for full or partial exemptions or if reclassification or transformation can help
• Revisit cost allocation: Ensure accurate financial and tax reporting for both tariff and non-tariff costs
• Reassess M&A or investment strategies: Factor in both risks and potential advantages in a shifting global supply chain

Get Help With Tariff Preparation and Response

Tariff changes and prolonged periods of uncertainty can disrupt nearly every aspect of a business, especially for companies already juggling lean teams, complex supply chains or high capital intensity.

Get help in these core areas to bolster your strategy and address tariff threats now:

• Financial modeling, valuation impact evaluation and risk analysis that help you scenario-plan with confidence
• Custom supply chain diagnostics to identify cost savings, supplier alternatives and contract risks
• Accounting and reporting considerations that affect stakeholder decisions
• Tax strategy and compliance support to keep you audit-ready and optimize cost treatment
• Working capital management, liquidity and going concern impacts
• Capital allocation and financing decisions to manage costs
• M&A and transaction structuring guidance to protect value in volatile times
• Pricing and promotion strategies to protect margins and customer demand

Navigating tariffs doesn't have to feel overwhelming. With the right guidance and cross-functional support, you can turn uncertainty into strategic advantage. Whether you're reassessing your supply chain, financial plans or deal structures, we're here to help you move forward with clarity and confidence.