04/17/2025
The global trade landscape is shifting rapidly, driven by recent U.S. tariff policies. These developments pose challenges and opportunities for leaders in manufacturing and consumer packaged goods (CPG), and the companies that effectively implement tailored strategies to navigate this evolving landscape will come out ahead. Below are key considerations and actionable steps to help leaders prepare for and adapt to these changes.
Understanding the Current Trade Environment
1. New Tariffs and Responses
- Recent U.S. tariffs target imports from key trading partners like Mexico, Canada, and China, impacting raw materials, packaging components, and finished goods. This may signal an emerging trend where trade policy—historically an area that only changed gradually—is more frequently used as a tool to achieve economic objectives.
- In response, countries like China and Canada have announced their own tariffs, adding complication to the global trade dynamic.
2. Sector-Specific Challenges
- Manufacturing: Tariffs on critical inputs such as steel, aluminum, copper, lumber, and machinery parts impact production costs and timelines.
- CPG: Ingredients like coffee beans, cocoa, cheese, palm oil, and various spices —often sourced internationally—will be affected by tariffs, which will impact supply chains for food, beverage, and household products in turn.
3. The Devil is in the Details
- The news headlines when it comes to tariffs only scratch the surface. Behind most tariffs are detailed rules, requirements, conditions, and exceptions. Understanding which do and do not apply to your business will be key to optimizing the impact to your business.
Strategic Responses for Manufacturing and CPG Leaders
To navigate the complexities of trade policy shifts effectively, manufacturing and CPG leaders should adopt both immediate and forward-looking strategies.
1. Reevaluate Supply Chains
- Near term – Reduce dependency on single suppliers or regions by expanding sourcing to countries with lower tariffs or more stable trade relationships.
- Long term – Shift manufacturing closer to end markets (e.g., Mexico or Canada) to benefit from regional trade agreements like the United States-Mexico Canada Agreement (USMCA) while reducing transportation costs. While headlines may focus on broader tariff actions, there is still an advantage in maintaining strong U.S.-Canada-Mexico trade ties.
- Long term – Invest in technology, like AI-driven analytics and ERP systems, for robust supply chain visibility. These tools provide real-time insights and enable proactive adjustments during disruptions.
2. Strengthen Sourcing, Procurement, and Processing
- Near term – Strategically determine where materials are processed to capitalize on favorable trade rules. For example, a company could partially process materials in one country and complete final production in another. While these shifts may incur additional costs, companies should evaluate whether they outweigh the potential tariff impact.
- Long term – Partner with R&D teams to design products that use locally available materials or alternative components that minimize exposure to tariff risks.
3. Communicate Effectively with Customers
- Near term – Proactively explain how tariffs may impact pricing or product availability, aligning the message with your customer promise to manage expectations, especially for B2B customers who import your goods.
- Long term – Foster transparency by consistently communicating your company’s efforts to manage costs while maintaining product quality and availability. This builds trust with both customers and suppliers over time.
4. Engage Trade Experts
- Near term – Partner with trade attorneys and customs consultants to interpret tariff regulations, ensure compliance, uncover cost-saving opportunities, and optimize supply chains while minimizing delays and penalties.
- Long term – Foster long-term relationships with trade advisors and treat them as strategic partners. Engage these partners consistently for ongoing insights, guidance, and proactive support.
5. Build Agile Operations
- Near term – Make strategic operational decisions that enhance agility, such as adopting a muti-sourced supplier strategy that balances low-cost/high-tariff and high-cost/low-tariff options, allowing for quick shifts as trade polices evolve.
- Long term – Embed operational flexibility into your planning, whether through scalable production capacity, flexible contracts, or cross-trained teams to ensure your business can respond effectively to a wide range of disruptions, not just tariffs. Looking beyond flexibility, many organizations are also exploring antifragility measures by leveraging decision intelligence technology to turn uncertainty to their advantage.
The Path Forward
Navigating trade policy shifts require manufacturers and CPG leaders to adopt a proactive and flexible approach. There is no one-size-fits-all solution and any strategy will inevitably involve trade-offs—whether through higher production costs, reduced profit margins, or increased consumer prices. Companies must carefully assess their options and remain adaptable.
By optimizing supply chains; enhancing sourcing, procurement, and processing strategies; fostering transparency with customers; engaging the right experts; and embedding flexibility into operations, companies can build resilience needed to weather current and future policy shifts.
Ultimately, agility is key. The environment is incredibly dynamic, making it even more critical to stay up to date and maintain nimble operations so you may respond quickly.
Identifying the right strategies to respond to the ever-evolving landscape can be challenging. Our team offers tailored solutions to enhance supply chain resilience, improve procurement practices, and drive stronger alignment across stakeholders. Fill out the form below to hear how Sendero can help your organization achieve its transformation goals.
