Navigating the Tariff Storm Part III: Surviving Tariff Turbulence – What to Do Now

By David Teeple and Daniel Hyla

Navigating the Tariff Storm Part I

Navigating the Tariff Storm Part II

Since April, shifts in global tariff policy have sent disruptive ripples through supply chains. Companies are now beginning to feel the effects — quarterly earnings are taking hits, customers are being warned of impending price increases, and sourcing strategies are quickly pivoting away from high-duty countries. As tariff uncertainty continues, supply chain leaders should be prioritizing flexibility and agility. In today’s blog, we’ll dive deeper into two strategies to help mitigate tariff-related risk: diversifying sourcing and optimizing domestic warehousing and distribution tactics.

The U.S. is the world’s largest importer of goods – spending ~$419 billion on imports in March 2025, many of those goods coming from Mexico (~15%), China (~13%) & Canada (~12%). Within that same timeframe, the U.S. exported ~$278.5 billion, resulting in a trade deficit of ~$140.5 billion¹ – one of the main drivers for the imposed tariffs. The persistent trade imbalance is one of the key motivators behind the current wave of tariffs. While a recent 90-day pause on new tariffs has brought temporary relief, there is mounting uncertainty over what will occur when the pause expires on July 9th.

The trade relationship between U.S.-Mexico and U.S.-Canada is governed by the U.S.-Mexico-Canada Agreement, or USMCA (previously NAFTA), which was put in place in 2020 during the previous Trump administration. USMCA was initially instituted to encourage trade among North American countries by providing tariff relief on a bulk number of goods moving between the U.S., Mexico, and Canada. While long-term trade discussions (including updates to the USMCA) are underway, it is worth noting that the framework to USMCA is anticipated to remain in place for the long-term. For many global exporters, leveraging USMCA remains a strategic way to reduce exposure to tariff volatility – for products that meet the criteria for the Rules of Origin (ROO)

The Rules of Origin² are defined in the USMCA to ensure that to get the preferential treatment from the agreement, a significant portion of a product’s value — through manufacturing, production, or inputs — originates from North America, typically measured via Regional Value Content (RVC) or tariff shift criteria. Under the USMCA, Automotive products must have 75% of their components made in North America and non-Automotive products generally require 60% RVC under the calculated transaction value method or 50% under the calculated net cost method. One exception within the ROO is the De Minimis rule, which allows products to qualify for preferential treatment even if they include small amounts of non-originating materials — provided those materials do not exceed 10% of the total cost or transactional value³.

On the contrary, the U.S.’s relationship with China is much more unsettled. There is strong belief, driven by geo-political tensions, that trade with China will continue to deteriorate. In anticipation of this, many organizations over the past 2 months have already begun to shift sourcing out of China to nearby countries including Thailand, Malaysia, Singapore, and Vietnam, which tend to have much more favorable duties, including Free Trade Agreements (FTA). Singapore stands out as one country in Southeast Asia that has an FTA in place with the U.S (USSFTA). The USSFTA offers preferential treatment for goods travelling between the U.S. and Singapore as long as they abide by the stated ROO⁴. Sourcing from countries that have lower duties or, ideally, have a trade agreement in place with the U.S., offer opportunities to help weather the ongoing tariff storm.

Foreign Trade Zones (FTZs) are designated sites within the U.S. where imported goods can be stored, assembled, or manufactured with tariff payment deferred until the goods are formally entered into the U.S. market⁵. In many cases, duties can even be reduced or eliminated based on the final product classification. Bonded warehouses offer similar deferral benefits, but typically restrict manufacturing, limiting their use to storage, inspection, or minor processing.

As global tariff policies remain in flux, supply chain leaders must take proactive steps to reduce risk and maintain cost efficiency. Strategies like diversifying sourcing—especially through trade agreements such as USMCA and USSFTA—and leveraging duty deferral mechanisms like Foreign Trade Zones and bonded warehouses can offer meaningful relief. While geopolitical tensions and trade imbalances continue to shape the landscape, businesses that prioritize flexibility and compliance will be better positioned to navigate ongoing disruptions and sustain long-term growth.

Let Sedlak assist you in addressing these challenging times. With over 65 years of experience advising industry leading organizations, Sedlak will help address the challenges of today and prepare you for an ever-evolving future. Reach out to Dave Teeple at dteeple@jasedlak.com or Daniel Hyla at dhyla@jasedlak.com for more information.

Don’t forget to register for our upcoming virtual event! Revolutionizing Supply Chains: The Power of Swisslog Goods-to-Person Warehouse Automation – A Sedlak Virtual Event is scheduled for Wednesday, June 11^th.

Sources

1. “U.S. International Trade in Goods and Services, March 2025” – www.bea.gov
2. “Rules of Origin” – www.ustr.gov
3. “Regional Value Content” – cbp.gov
4. “Singapore FTA” – www.ustr.gov
5. “About Foreign-Trade Zones and Contact Info” – www.cbp.gov