Updated: May 20, 2025
Published: November 2, 2022

Tariffs and Ongoing Trade Tensions

Tariffs have been a constant topic of discussion due to the new U.S. executive  administration now in place. The recent increase in U.S. tariffs, announced April 2nd, on imported goods is having significant repercussions across multiple industries, impacting manufacturers, suppliers and consumers. The announcement introduced a series of tariffs aimed at promoting U.S. domestic manufacturing and addressing trade imbalances. The tariffs include a universal 10% tariff on all imported goods, effective April 5, 2025. 

Beyond this baseline tariff, the administration has announced higher, country-specific tariffs on nations with significant trade deficits with the U.S. — of course, those of you following this topic closely know that things are changing daily in many cases. Notably, China and the European Union will see extra tariffs, unless negotiated otherwise. Several other countries are subject to similar increases resulting in strong reactions from global leaders. Germany has previously and firmly stated it “will not give in” to the tariff hikes, while China has accused the U.S. of breaching World Trade Organization regulations. One recent consequence of these tariff announcements is Stellantis’ temporary suspension of production at a plant in Mexico and another in Canada.

The US, the EU and China are the world’s largest economies by GDP. Retaliatory tariffs — and the threat thereof between large economies — can significantly hamper global trade and disrupt customer relations, impacting importers, exporters, manufacturers and consumers around much of the world.

Negotiating the New Normal

Global enterprises have a number of ways that they can respond to these challenges. These include holding back on purchase orders in the hopes that tariffs will be removed or reduced after further trade talks, moving production facilities, or applying for tariff remedy programs. None of these are easy options. Canceling orders or not fulfilling contracts can come with penalties and damaged supplier relationships. Moving production facilities is time-consuming and expensive, even if you already have a location in a country not subject to tariffs. Applying for tariff exemptions where possible is smart, however, this can take several months or more.

If you cannot move the production of your goods, you might be able to change the classification of them. Changing the design or assembly of a product to minimize tariffs is known as “tariff engineering.”  This allows manufacturers to classify their products with a different Harmonized Tariff Schedule (HTS) code to take advantage of more favorable duties. Manufacturers may also assemble separate parts of their products in different regions to leverage free trade agreements available there.

Tariff engineering — when done correctly — is legal and should be taken into account at the start of the design process. As well as favorable duties, manufacturers should also consider the costs of the materials, the cost of making the goods, transportation and the resources needed to ensure compliance with regulations. Authorities will take a dim view of companies that use artifice to classify products to obtain lower duties.

Taking Advantage of Free Trade Agreements

When you work across different regions of the world, leveraging all the free trade agreements (FTAs) that you are entitled to makes good business sense. If your products qualify for low or zero import duties, you are a more competitive supplier. The majority of global enterprises do not take advantage of all the FTAs that they could, largely because of the complexities of remaining compliant with them. Moreover, there are also significant penalties for violations.

Qualifying products under FTAs is a complex process. To qualify their products, manufacturers need to pull production bills of material, perform respective content calculations, then prepare and distribute potentially thousands of FTA Certificates of Origin.

Manufacturers cannot qualify products just once. It may be necessary to qualify products several times every year, such as if there are changes to the costs of materials or when you add new vendors. Furthermore, with each new qualification, manufacturers will have to produce and disseminate new Certificates of Origin too. For some enterprises, remaining compliant with FTAs may seem too burdensome a task.

Rethinking Policies and Procedures

Difficult trading conditions, tariffs and other geopolitical uncertainties, such as Brexit, can hamper operations and negatively impact profitability. An enterprise facing such challenges should examine their trading policies and procedures. In many companies, including industry giants, strategies that have been in place for a long time often go unexamined. Accordingly, a mindset of “that’s the way we have always done things” prevails. However, “good enough” processes are not the same as “best in class” — and may not be robust enough for current trading conditions.

Manufacturers looking to optimize trade operations and drive efficiencies must first critically examine their procedures, map processes and see where gaps exist. Once this exercise is complete, a company will have a clearer idea of what technologies they could use to support their operations.

Simplifying Global Trade and Transportation Operations

Technological solutions help manage and simplify global trade. International shipping and manufacturing comes with an array of regulations and paperwork — none of which shippers should ignore. Missteps can result in customs hold ups, lost shipments, missed delivery deadlines, loss of export privileges and fines.

Enterprise-level software solutions should automate the most time consuming processes of global trade by ensuring all export and import processes are met, including trade compliance, documentation production and customs reporting. By automating compliance checks, manufacturers can perform due diligence, mitigate risks and create audit-ready electronic reports.

Automating free trade agreement compliance will allow manufacturers to verify thousands of products across multiple FTAs quickly and according to current preferential Rules of Origin legislation. In addition, the solution should automatically solicit for inbound Certificates of Origin from suppliers and generate outbound Certificates of Origin to customers, create detailed audit trails and comply with record retention rules.

Global enterprises benefit from integrating compliance and transportation. This is because switching between a compliance and a transportation solution is time consuming and may require you to re-enter information with the risk of keystroke errors. Furthermore, manually switching between carriers looking for the best rates, transit times and service levels is labor intensive. This is not feasible for high volume shippers, since you must ensure that each shipment is compliant with that carrier’s specific requirements. 

Simplifying global trade and transportation with integrated solutions offers significant benefits. These include shorter cycle times, an ongoing compliance and risk mitigation strategy, a competitive advantage through low or zero tariffs and increased efficiencies. With integrated solutions, your enterprise works smarter — not harder.

Learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization streamline global trade management and boost competitive advantages.