What are ten ways to navigate a trade war?

Navigating a trade war requires a careful strategy

In today’s volatile global trade environment, managing tariffs is not just a cost-control exercise—it’s a strategic imperative. A structured, forward-looking approach can help businesses turn compliance challenges into opportunities for competitive advantage. The following ten approaches could provide a practical roadmap for navigating and mitigating tariff risks.

1. Map your tariff exposure are precisely as possible

A comprehensive mapping of your import data is foundational. Start by analysing all imported goods and assessing applicable tariffs by country of origin. Cross-reference this with the volume and value of imports across product lines to determine where duties hit hardest.

It may highlight that many components fall under high-risk tariff categories—prompting targeted rather than blanket mitigation strategies. Use dynamic mapping tools—such as tariff heat maps—to regularly update and visualise your exposure. This allows for quicker identification of priority areas and a more agile response to policy changes.

2. Clarify and optimise rules of origin

Don’t rely on assumptions about where your products “come from.” Customs authorities use complex rules—including value-added thresholds, substantial transformation tests, and specific processing criteria—to determine origin. These vary significantly between trade agreements.

Recent audits have shown that a number of origin certificates contain errors that can result in penalties. To avoid this, independently verify your suppliers’ documentation, conduct periodic audits, and educate your supply chain on correct origin determination. Include origin verification clauses in supplier contracts and align sourcing with favourable trade zones where possible.

3. Reengineer your product classification

Even minor design changes can shift your product into a more favourable tariff classification. This technique—known as tariff engineering—has proven particularly effective in high-duty sectors.

Some companies are avoiding component duty by importing items separately for domestic reassembly, or by altering material composition. Other approaches include packaging adjustments, material substitutions, or importing components rather than fully assembled goods. Done correctly and legally, these changes can yield substantial long-term savings.

4. Actively leverage FTAs, duty reliefs, and bonded regimes

While trade tensions persist, Free Trade Agreements (FTAs) and relief programs still offer untapped value. Agreements like  United States-Mexico-Canada Agreement (USMCA), Regional Comprhensive Economic Partnership (RCEP), and the European Union (EU)'s network can reduce or eliminate tariffs if origin requirements are met.

Supplement this with programmes such as duty drawbacks, Foreign Trade Zones (FTZs), and temporary importation bonds. While these programmes require diligent administration, the payoffs are often substantial and justify the effort.

5. Continuously monitor political and regulatory risk

Tariff classifications and trade measures evolve quickly. Classification codes are revised periodically, and new trade remedies or retaliatory tariffs can appear with little warning.

Set up systems to monitor global developments, including new antidumping duties. Consider establishing an internal task force or engaging external experts.

6. Build a resilient and diversified supply chain

Modern supply chains must balance efficiency with flexibility. Companies should adopt multi-source strategies across regions and trading blocs to reduce dependency on any single geography.

Nearshoring, alternate port selection, and buffer inventory positioning are now standard. This could be by offsetting marginal cost increases with tariff savings and faster delivery to key markets. Tariff planning should be a standing agenda item in supplier development and logistics strategy discussions.

7. Integrate tax, legal, and compliance functions

Tariff decisions ripple through your organisation. A change in sourcing or production location might trigger new tax obligations or affect your transfer pricing strategy.

Coordination between legal, tax, and trade compliance is essential. Consider forming cross-functional governance structures to evaluate impacts holistically. For instance, relocating manufacturing could raise IP protection concerns or trigger permanent establishment risks in new jurisdictions. Unified planning prevents missteps and unlocks smarter configurations.

8. Quantify and scenario-test your exposure

Strategic planning begins with understanding potential downside risk. Map out scenarios to assess how various tariff levels—5%, 15%, 25%—could affect your landed costs, supplier network, and customer pricing.

Ask critical questions: What’s your threshold for breaking even? Which second- or third-tier suppliers might be disrupted? How does your vulnerability compare to competitors? Quantifying these factors enables confident decision-making under uncertainty.

9. Reassess pricing and customer strategy

If passing costs to customers becomes unavoidable, don’t do it without careful thought. Analyse price elasticity and segment customers by their ability to absorb increases. Where margins allow, consider asking higher-margin suppliers to share the burden.

Adjust your pricing strategy in a targeted way. This could involve regional pricing models or differentiated increases across product lines. Avoid flat-rate markups, which can erode competitiveness unnecessarily.

10. Anticipate competitor behaviour through simulations

Note that your competitors are facing similar challenges—and their responses can reshape the playing field. Will they cut prices to gain market share, or raise them to protect margins?

Use techniques like game theory and simulation exercises to model likely competitor moves and pre-emptively shape your response. For example, if a rival is insulated by geography or preferential trade terms, you may need to double down on customer retention, explore new markets, or fast-track cost-saving innovations. Scenario planning can be about psychology and perception as much as it is about economics.

Conclusion

Managing tariffs in today’s climate demands more than tactical reactions. It requires an integrated, strategic framework that combines data, design, diversification, and diplomacy. Businesses that proactively map their exposure, build flexible structures, and align functions internally will be better positioned not just to survive trade disruptions—but to turn them into levers for growth.