Tariffs: supply and price inflation a real concern for business

Commenting on the impact on US tariffs on business, Brad Ashton, Customs and International Trade Partner at RSM UK, said: “Following speculation, we now have the detail of universal US tariffs for each jurisdiction which will take effect over coming days. Things could change as bilateral negotiations play out, which creates another layer of uncertainty, but what businesses need to focus on is what they can control.

“Supply chain agility will be crucial to allow businesses to react quickly to seize opportunities and mitigate increased costs. Knowing the current tariff exposure of the business will be crucial to provide an indication of what this looks like under the new universal tariffs to identify any key pinch points.

“The origin of goods will be under increased focus as businesses look to mitigate the impact of the tariffs but just relocating aspects of production, although not a simple task, could be seen as tariff avoidance and may lead to further costs and reputational issues. What we could see is more manufacturers reshoring production – one of the aims of the measures, but this is expensive and will take time. In the short term it won’t be possible to unravel contracts or change the origin of product so we could see businesses absorbing the cost where possible, but realistically many will need to increase prices to protect margins.

“Oversupply is a real concern, as the practical implementation of this will be complex leading to potential delays for goods entering the US. The additional administrative burden for businesses, may lead some to turn their back on the US and look to other markets to place their goods – potentially creating market imbalance and increased competition.

“Where there is no option but to pay tariffs, rejigging the supply chain to legitimately reduce the value of the consignment could help to reduce the calculated customs duty but this might not work for every business model or tax structure so detailed analysis to map the impact of any changes will be key.

“The other risk is the implementation of additional reciprocal tariffs on US goods which is likely to see escalation.”