As new US tariffs take effect, much of the public debate misses the most important point for supply chain professionals: this isn’t a political theory debate— it is already hitting sales order and purchase orders. But with much of the commentary coming from people who aren’t familiar with supply chain, we thought it would be good to break down the impact with a clear, operational lens, focusing on how tariffs affect your day-to-day processes, cost structures, and strategic decisions.
Tariffs Aren’t Theoretical. They Show Up on the Purchase Order for buyers, and Sales Orders for sellers.
Here’s how it works in the real world:
When goods arrive into any country, they cannot be received until they clear customs. And to clear customs, the duties—including these new tariffs—must be paid. It’s not optional, it’s not delayed, and it’s certainly not a “wait and see” scenario. These charges show up at the point of customs clearance, and that makes them a very immediate cost for businesses. They must be paid or you do not get the goods.
Depending on the INCOTERM used in your contracts:
- DDP (Delivered Duty Paid): The seller is responsible for all transport and export duties up to the point of delivery. These new tariffs now become the seller’s cost, and should be reflected as additional lines or charges on the sales order.
- Ex Works (EXW): The buyer carries full responsibility, including customs clearance and duties. The PO will remain the same for the item cost, but in a system like SAP, the conditional costs associated with the PO will increase—this is where the tariff cost gets captured.
- FOB, CIF, and others: Each arrangement brings its own nuance, but in all cases, someone in the supply chain must pay, and that cost must be explicitly tracked in the system.
How It Flows Through Your Business: Variances, Costing, and Lagging Impacts
In many companies, inventory is valued at a ‘standard cost’. When goods arrive at a higher cost than expected (now due to tariffs), the system logs this as a purchase price variance (PPV). For companies that are on top of their game, standard costs will be updated quickly to reflect reality. But let’s face it: most businesses are too busy. They’ll discover these variances later—when month-end closes, financial statements are prepared, or margins start to erode.
There’s also a lag due to existing inventory. Tariffs only apply to new receipts. So, depending on how fast stock moves, the effect of tariffs will show up:
- Fast movers: Within days or weeks.
- Slow movers: It could take months before the new costs hit your financials.
This means the impact on business performance will be uneven and delayed—a bit of a slow burn before everyone feels it.
How Long Before Tariffs Impact Product Costing and End Customers?
This gets even messier.
Finished goods often include a mix of components—some domestic, some imported, some tariff-affected. So there’s no clean rule like “add 20% to the final product cost.” It will vary product by product, supplier by supplier, and company by company.
For some, the impact will be minor. For others, it will materially change the profitability of product lines. What matters most is having the analytics, visibility, and team readiness to spot and respond to these shifts in real time.
Long-Term Impact: New Supply Strategies, Higher Prices, and Inflation Risks
So while it’s hard to say what the short-term impact will be, when we step back and look at the long term, the path is clearer.
Just like every economic cycle before, businesses will respond. US companies will look for local sources to avoid these tariffs. The most prepared supply chain teams, especially those with risk mitigation and alternate sourcing plans already in place, will be fine. But others—particularly SMEs or those hoping the problem would disappear—will now be forced to react as cost variances start damaging their margins.
As more buyers turn to local US suppliers, demand will rise. But capacity is constrained. Prices will go up. That’s the classic supply-demand equation. Indigenous US manufacturers will benefit: their factories will be full, they’ll hire more people, and they’ll raise prices. This is exactly the political promise that’s been made. It will deliver more jobs, more manufacturing in the US.
But in the long run? This will add inflationary pressure. Prices will increase across multiple categories, and while it may take time to hit CPI indexes, the underlying cost base for businesses will steadily rise. That’s likely a problem for the next administration to solve.
Will Tariffs Be Reversed Quickly? Don’t Count On It.
Some speculation suggests these tariffs are temporary—perhaps just a bargaining chip. But we don’t think that’s realistic.
Why? Because capital investment decisions aren’t made on a whim. Manufacturing site decisions, tooling changes, supplier shifts—all happen on a 2–5 year time horizon. The goal of these tariffs isn’t just to charge a fee—it’s to drive investment in US capacity, and that only works if businesses believe the tariffs will stick around.
To assume they’ll vanish in a few weeks due to political pressure or stock market dips is wishful thinking. Realism, adaptability, and speed are what will define supply chain winners in this environment.
Final Word: Move Faster Than Your Competitors, Build for Resilience
For supply chain teams, this is one of those moments where action beats analysis. The new key capability for a supply chain now is to be able to react quicker, the speed and agility are critical. Building for resilience is the one way you can take control of your future and help your organisation to better react to what will happen. While the ultimate impact is still uncertain, being quicker and more adaptive will always be a smart move and positive strategic capability to have.
