In 2025, the new Trump administration introduced tariffs on goods entering the US from many countries. The program now includes a broad baseline tariff, or additional tax, of 10% on imported goods as well as additional reciprocal tariffs on imports from regions including Europe, China, and Japan.

The government claims that tariffs will encourage consumers to buy American-made goods and strengthen investment in US companies. However, many experts believe they are bad news for the economy overall as they raise prices, reduce competition, and potentially invite retaliation from other countries, harming American exports.

Regardless of your view on the tariffs, there is no doubt that the current business landscape is volatile and challenging, and that manufacturers are amongst those hardest hit. Tariffs have added significant cost and complexity to the supply chain.

As a web design agency primarily serving clients in the B2B manufacturing space, Lform has witnessed how tariffs have impacted our clients. In this post, we’ll talk about a few of the ways they are adapting to handle them.

How do Tariffs Impact Manufacturers?

Tariffs impact manufacturers in a number of ways, both directly and indirectly. Though all business types can be affected, tariffs tend to be more challenging for B2B businesses than for their B2C counterparts.

Tariffs increase the cost of imported raw materials, narrowing the profit margins of manufacturers that rely on overseas sourcing. This can force manufacturers to raise prices for end consumers, reducing their market potential and harming customer relations. Some manufacturers may also be locked into long-term contracts with clients, which constrain price increases and force them to absorb the additional cost.

The tariffs have created significant price volatility for many materials, making budgeting and forecasting a challenge for businesses that rely on imported materials. In addition, the disruption they have caused to the supply chain, which is already complex in the B2B world, can have significant ripple effects, delaying research and development, production, and product launches.

The economic uncertainty caused by tariffs has also led to longer purchasing cycles, with many businesses hesitant to invest in goods or services amid the current landscape.

How are Manufacturers Managing These Changes? 

As individuals and as business owners, the big-picture economic climate is beyond our control. All we can do is “roll with the punches” and try to adapt as well as we can. The manufacturers that are faring best are those that remain agile and flexible despite significant challenges.

Here are a few ways we’ve seen our manufacturing clients adapt to the changes brought about by the new tariffs.

Understanding the Supply Chain More Thoroughly

B2B supply chains are inherently complex, and many manufacturers lack a clear picture of their supply chain or where they sit within the broader supply ecosystem.

By mapping their supply chains in detail, manufacturers can identify potential vulnerabilities, more accurately assess their tariff risk, and take preventive action in advance. Amidst so much uncertainty, accurate information is your most effective weapon, and forewarned is forearmed.

Re-Assessing Supply Networks

Once manufacturers thoroughly understand their supply chains, they can begin evaluating them and assessing whether changes are needed. Many manufacturers are now seeking more cost-effective solutions, with some switching from foreign to domestic suppliers when feasible and affordable.

Other options include switching to overseas suppliers in regions less affected by the tariffs and spreading sourcing to minimize disruption and reduce reliance on a single supplier.

Renegotiating Supplier Contracts

It is always a good idea for manufacturers to evaluate and renegotiate their supplier contracts periodically as needs and market conditions change. In light of the tariffs, manufacturers with long-standing supplier relationships may be able to negotiate more favorable contracts, offsetting some of the financial impact.

Flexible Contracts with Clients

In the manufacturing world, long-term contracts between manufacturers and clients are often a normal part of doing business. However, in the wake of the tariffs and the uncertainty they have created, some are now instead opting to keep contracts with their customers open and flexible. This reduces their risk of being locked into deals that are no longer financially feasible should prices rise significantly.

Bonded Warehouses and Foreign Trade Zones (FTZs)

Bonded warehouses and foreign trade zones (FTZs) are both Customs-authorized ways to store imported goods while deferring (or sometimes eliminating) duty payments. Though both storage and import methods have been in operation for many years, the number of businesses using them has risen sharply in response to the tariffs.

A foreign trade zone warehouse is a customs area generally located at or near a US point of entry, such as a major port or airport. Although they are physically located on US soil, FTZs are considered outside the United States Customs Service’s territory for legal and tariff purposes.

When a manufacturer imports goods into an FTZ, those goods do not incur tariffs or import duties until they leave the zone and enter the US commerce market. When manufacturing occurs within an FTZ, the resulting finished goods often incur lower tariff rates than the raw materials, making this a cost-effective option for many manufacturers. In addition, no tariffs or duties are payable on exports sent directly from an FTZ to another country. There are currently more than 200 active FTZs throughout the US.

A bonded warehouse is a facility where imported goods can be stored for up to 5 years without incurring tariffs or duties until they are withdrawn into the domestic market. Unlike FTZs, bonded warehouses are legally considered to be inside US Customs territory and therefore fall under the jurisdiction of US Customs and Border Protection.

Using bonded warehouses can help manufacturers to manage their cash flow by spreading out tariff and import liabilities, since goods are taxed only at the point of withdrawal from the warehouse. Some manufacturing and manipulating of goods is permitted within bonded warehouses, but there are strict regulations and restrictions. However, bonded warehouses can be a convenient and cost-effective choice for manufacturers seeking a time-limited storage, distribution, and tariff deferral solution.

Temporary Importation Bonds (TIBs)

Temporary importation bonds (TIBs) allow businesses to import goods for specific, temporary purposes, with the intention that the goods will ultimately be re-exported or destroyed. Goods imported under TIBs are not subject to tariffs or duties and cannot be sold, leased, or otherwise released into the US market.

TIBs have limited use-cases due to their strict limitations, but can be helpful in certain circumstances. Some of the common uses for TIBs include promotional products brought into the US for trade shows and exhibitions, commercial samples for evaluation or demonstrations, goods imported for repairs or modifications, professional equipment (from sporting equipment to musical instruments and theatrical props) for time-limited use, and scientific equipment for use in research, development, or education.

TIBs can allow manufacturers to comply with import regulations while saving money by avoiding tariffs on equipment and materials intended for sale and that will not remain in the United States indefinitely.

“Delivery Duty Paid” (DDP)

“Delivery duty paid” (DDP) is a system under which the seller assumes responsibility for all import duties, tariffs, and other additional costs associated with an overseas sale. US manufacturers may opt to broker DDP deals with their suppliers where possible to maximize convenience, streamline the purchasing process, and avoid surprise or hidden fees when goods arrive.

However, DDP purchases are likely to raise the overall cost of a purchase. Therefore, manufacturers should assess their options and ensure this is a cost-effective solution before proceeding.

“First Sale Rule”

The “First Sale Rule” applies when goods are imported to the US as part of a multi-tiered transaction (for example, when a foreign supplier provides goods to a US manufacturer through an intermediary vendor, broker, or “middleman.”) It allows importers to value goods, for the purposes of tariffs and duties, based on the earlier sale price (i.e. the price paid to the original supplier by the intermediary) as opposed to the final, usually higher price paid by the final buyer to the intermediary.

There are strict regulations on what qualifies imports for taxation under the First Sale Rule. Transactions must involve three distinct parties: a foreign supplier, an intermediary, and a US importer. The transaction between the importer and intermediary must be a bona fide sale, goods must be clearly destined for the US at the point of first sale, and the price charged to the intermediary by the supplier must reflect fair market rates.

When used correctly, the First Sale Rule can significantly reduce import and tariff liabilities for manufacturers using intermediary vendors in their supply chains.

Tariff Engineering Using Harmonized Tariff Schedule (HTS) Codes

A Harmonized Tariff Schedule (HTS) code is a standardized 10-digit numbering system used to classify goods during import/export and to calculate tariffs and duties. The US International Trade Commission publishes the HTS and allows manufacturers to estimate the duties payable on shipments of products and materials from overseas.

Tariff engineering is a common practice in which manufacturers slightly alter a product’s design, composition, or structure to classify it under a different HTS code so it incurs lower tariffs. Tariff engineering is legal when done correctly and, where possible and practical, can save manufacturers a significant sum on their import duties.

Understanding the Tax Implications of Tariffs

Did you know that tariffs are typically considered tax-deductible expenses? Many business owners are unaware of this, potentially costing them thousands of dollars (or more) per year. However, unlike ordinary business expenses, tariffs are not deductible in the year incurred. Instead, they must be capitalized as part of the total inventory value and deducted through the cost of goods sold (COGS) at the point of sale.

Tariff tax law is far from simple, and there are variations between states, so make sure you understand the laws in your area. Your accountant or a lawyer will be able to advise you further.

Re-Evaluating Pricing

All B2B companies that rely on imports have had to re-evaluate their pricing structures in the wake of the tariffs. Wherever possible, and particularly in highly competitive markets, it is important to strike a balance between absorbing the additional costs created by the tariffs and passing them on to buyers.

The manufacturers we have seen weathering this storm most effectively are those using a combination of both strategies and making informed, intentional choices with long-term success in mind.

Changing Inventory Management Practices

The tariffs have caused some manufacturers to reassess their inventory handling practices and make changes. Some have chosen to strategically stockpile hard-to-source materials and components to minimize disruption and beat volatile pricing structures. Others have tightened their purchasing, reducing inventory overstocking to save money.

Taking In-House Cost Saving Measures

Though the tariffs have been tremendously challenging for manufacturing businesses, they also offer an opportunity to review your business practices and processes to identify what is working well and what could be improved.

Simple in-house steps, such as reducing waste and streamlining workflows, can significantly enhance efficiency and save money. These small changes can add up to significant savings, helping companies to survive amidst challenging conditions.

Transparency

Trust is always essential in business, and becomes even more essential during periods of uncertainty and difficulty. Businesses seeking to maintain trust with their clients amid the changes brought by tariffs must be open and transparent about pricing changes, supply chain issues, and other disruptions. Simply telling the truth about what is happening and how you are managing it will go a long way.

In Uncertain Times, Stay Informed to Stay Ahead 

Agility, responsiveness, and staying informed about the latest changes and developments are the most important tools to protect your business amidst uncertainty and economic changes. By being aware of what’s happening, not panicking, and responding quickly yet intentionally, manufacturers can keep their businesses strong and continue serving their customers effectively.

If you’d like to work with a web design agency that understands the challenges manufacturers face and excels at helping mitigate them, the Lform team would love to talk to you. Book a meeting today to get started.