Mitigating the Effects of Tariffs on Your Business
Written by: Aubrey M Mallett, Manager, Project Controls, Life Cycle Engineering
Tariffs are no longer a temporary disruption—they are an ongoing operational reality affecting costs, supply chains, pricing strategies, and long-term planning across nearly every industry.
For manufacturers, distributors, and businesses dependent on imported materials or components, the impact is immediate. Rising input costs, supply uncertainty, and shifting trade policies are putting pressure on margins and forcing leaders to make difficult decisions about pricing, sourcing, and operational performance.
Recent legal and ongoing policy changes have added even more uncertainty to the global trade environment. While some tariff measures have been modified or challenged in court, many remain in place , leaving businesses to navigate continued cost pressure and an increasingly complex supply chain landscape. The result has been an environment characterized by regulatory complexity, legal ambiguity, and ongoing policy shifts.
For business leaders, this evolving tariff landscape presents a difficult reality: uncertainty is not temporary, it is structural. Whether operating a steel mill in Pennsylvania, an aluminum extrusion facility in Michigan, or a small retail business in Oregon, organizations must navigate higher costs, fluctuating policy conditions, and increasingly complex supply chains. The challenge is not simply to endure these pressures, but to respond strategically in a way that preserves margins and sustains competitiveness.
The organizations best positioned to adapt are those that focus on three critical areas:
- Pricing strategy
- Cost optimization
- Productivity improvement
Understanding how tariffs affect each of these areas is essential to building a more resilient and competitive business.
Understanding Where Tariffs Hit the Business
Tariffs do not affect just one area of the business. They ripple across procurement costs, inventory valuation, pricing strategies, customer demand, and ultimately profitability.
At a fundamental level, tariffs increase the landed cost of imported goods and materials, directly impacting cost of goods sold (COGS) and raising the baseline cost structure of the business. However, the impact extends beyond material costs, influencing working capital requirements, souring strategies, and operational planning.
The steel and aluminum industries provide a clear illustration of these pressures. Approximately 25% of steel used in the United States is imported, while aluminum imports account for roughly 50% of domestic demand. Limited U.S. aluminum smelting capacity has further increased dependence on global supply chains, leaving many manufacturers particularly exposed to rising material costs and sourcing constraints.
This dependence creates vulnerability. While domestic producers may benefit from higher market prices, downstream manufacturers face increased input costs and limited sourcing flexibility, particularly in aluminum, where domestic capacity remains restricted despite growing demand.
While metals provide a useful case study, similar dynamics exist across many industries. Companies that rely on imported components, raw materials, or finished goods must contend with the same fundamental questions:
- Can the market absorb price increases?
- Are there viable opportunities to reduce costs?
- Can operational performance be improved to offset higher expenses?
These questions define the three primary levers available to businesses: price, cost, and productivity.
Pricing Strategy: Evaluating the Ability to Pass Through Costs
One of the most immediate decisions a business faces when costs rise is whether those increases can be passed on to customers. Tariffs function as a direct cost increase within the supply chain, making pricing strategy a central concern.
The ability to pass through costs depends largely on customer sensitivity to price increases, the competitiveness of the market, and prevailing customer behavior. In highly competitive or discretionary markets, even modest price increases can reduce sales volume as customers shift to lower-cost substitutes. In contrast, businesses supplying essential goods or specialized industrial products may have greater flexibility to increase prices without significantly affecting demand.
Most markets fall somewhere between these extremes. Demand elasticity can vary by industry, product segment, customer type, geographic region and competitive positioning. Value-added products may support higher pricing, while commodity products often face greater margin pressure.
For managers, this means pricing decisions must be data-driven and nuanced. Rather than applying a uniform increase across all products, businesses should evaluate:
- Customer sensitivity by segment
- Competitive positioning
- Availability of substitutes
- Contribution margins by product line
In some cases, selective price adjustments combined with other mitigation strategies may offer the best balance between protecting margins and maintaining market share.
Cost Reduction: Focus on What Can Be Controlled
When pricing flexibility is limited, organizations naturally turn to cost reduction. While some businesses may mitigate tariff impacts through supplier changes, material substitutions, or contract negotiations, these options are not always feasible.
Tariffs should be treated as an increase in material or inventory costs. In some industries, alternative sourcing strategies may help mitigate these increases. For example, businesses may explore:
- Switching to suppliers in non-tariffed countries
- Substituting materials where feasible
- Renegotiating supplier contracts
However, in industries such as steel and aluminum, these options are often constrained by availability, quality requirements, or logistical considerations. As a result, businesses may need to look internally for cost-saving opportunities.
At the operational level, managers typically divide costs into two categories: controllable and non-controllable. While all costs can theoretically be adjusted at the corporate level over time, plant-level managers often have direct influence only over specific areas, including:
- Indirect labor and overtime
- Maintenance and repair spending
- Energy usage efficiency
- Consumables and supplies
- Third-party services
Larger cost drivers—such as direct labor agreements, major capital expenses, and baseline energy contracts—are often fixed in the short term. This limits the immediate impact of cost-cutting initiatives.
Nevertheless, even incremental improvements can add up. Reducing waste, optimizing procurement practices, and eliminating non-essential spending can help offset a portion of tariff-related cost increases. The key is to approach cost reduction strategically, avoiding cuts that could impair long-term performance or operational stability.
Productivity Improvement: The Most Sustainable Competitive Advantage
While pricing and cost reduction are important, productivity improvement often provides the greatest long-term advantage. Unlike price increases, which may be constrained by market conditions, or cost-cutting measures, which have natural limits, productivity gains can improve the underlying economics of the business.
In manufacturing environments, productivity is often measured using Overall Equipment Effectiveness (OEE), a framework that evaluates performance across three dimensions:
- Availability (uptime versus downtime)
- Performance (operating speed versus design capacity)
- Quality (defect-free production)
OEE provides a structured way to identify inefficiencies and prioritize improvement efforts. A key component of this approach is addressing the “Six Big Losses” that reduce equipment effectiveness:
- Equipment failures (unplanned downtime)
- Setup and adjustment losses
- Idling and minor stoppages
- Reduced operating speed
- Process defects
- Startup losses
By systematically addressing these inefficiencies, organizations can unlock hidden capacity within existing operations. This often results in higher output without additional capital investment, effectively creating “new” production capacity from existing assets.
The benefits extend beyond cost reduction. They include:
- Lower unit production costs
- Increased throughput and capacity utilization
- Improved product quality and consistency
- More efficient maintenance practices
- Enhanced collaboration across departments
In the context of tariffs, these improvements are particularly valuable because they help offset rising input costs, while increased capacity can support revenue growth without proportional cost increases.
Importantly, productivity improvement is not a one-time initiative, but an ongoing discipline. Organizations that embed continuous improvement into their culture are better positioned to adapt to changing external conditions, including tariff fluctuations.ture are better positioned to adapt to changing external conditions, including tariff fluctuations.
Balancing the Three Levers: Price, Cost, and Productivity
No single strategy is sufficient to fully offset tariff pressures. Organizations that rely solely on price increases risk losing market share, while those focused only on cost may sacrifice long-term performance.
The appropriate mix will vary depending on industry conditions and company-specific factors. However, the most successful organizations adopt a balanced approach that leverages all three levers: price, cost, and productivity.
In practice, this requires cross-functional coordination. Pricing decisions must align with market realities, cost initiatives must support operational goals, and productivity improvements must be sustained over time.
It also requires leadership discipline. Short-term actions—such as aggressive cost cutting—must be balanced against long-term objectives, including maintaining product quality, customer relationships, and employee engagement.
For manufacturers, the goal is not simply to absorb higher costs, but to strengthen operational performance in ways that improve resilience regardless of future trade policy changes.
Conclusion: A Strategic, Not Reactive, Response
Tariffs are likely to remain a persistent factor in the global business environment. While organizations cannot control trade policy, they can control how effectively they respond. A strategic approach that integrates tariff response into broader operational and financial planning
Success depends on balancing the three primary levers available to every business: pricing, cost management, and productivity improvement. Organizations that strengthen operational performance, improve efficiency, and make disciplined business decisions will be better positioned to protect margins and remain competitive despite ongoing uncertainty.
Ultimately, the goal is not simply to offset tariff costs. It’s to build a stronger, more adaptable organization that can thrive in an increasingly complex and volatile marketplace.
Aubrey M Mallett, Manager of Project Controls and Business Analysis for the Reliability Consulting Group with LCE and has twenty-five years of prior experience in finance and manufacturing accounting as operations and mill controller and various other managing positions in the pulp & paper and automotive supplier industries.
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