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Navigating the Tariff Storm Part IV: How Mid-Size Retailers Can Stay Afloat

May 30, 2025 By: David K. Teeple | Topics: Supply Chain

By David Teeple and Jake Snider

The year 2025 has ushered in a challenging new era for mid-size retailers across the United States. A fresh wave of tariffs, coupled with ongoing global trade tensions, is fundamentally reshaping the retail landscape. These new duties, particularly those impacting goods from China, present a complex set of hurdles that demand strategic foresight and operational agility, especially for businesses lacking the vast resources of their larger competitors.

The most immediate impact of these tariffs is the upward pressure on costs and the subsequent shrinking of profit margins. Mid-size retailers find themselves at a critical crossroads: absorb the increased costs and risk their bottom line or pass them on to consumers and risk alienating price-sensitive customers. This dilemma is intensified by significant changes in trade policy, including the effective elimination of the de minimis exemption for goods shipped from China. This long-standing rule, which allowed low-value (under $800 USD) packages to enter the U.S. duty-free, was a crucial cost-saver for many e-commerce and mid-market players. Its removal means a sudden and substantial increase in the landed cost of many popular consumer goods.[1]

Beyond the direct financial hit, the current tariff environment breeds significant volatility. Supply chains that were once predictable are now fraught with uncertainty. Mid-size businesses face an elevated risk of delivery delays and disruptions as sourcing patterns shift and customs processes adapt. This makes forecasting demand and managing inventory levels an increasingly complex challenge. Consequently, a critical re-evaluation of sourcing strategies and supplier relationships is underway as businesses seek to build resilience in an unpredictable global market.[2]

This volatility also impacts market competitiveness. Mid-size retailers now find themselves in a precarious position, competing with larger corporations that possess more diversified sourcing networks and greater bargaining power. These larger entities can often absorb or mitigate tariff impacts, potentially undercutting mid-market prices. The loss of price-sensitive customers is a real concern, as is the diversion of crucial resources. Funds and attention that could be invested in growth initiatives like marketing, research and development, or capital projects are increasingly being channeled towards managing the complexities of tariffs and navigating supply chain disruptions.

In light of these challenges, mid-size retailers have no choice but to adapt. Proactive and strategic measures can help mitigate the impact of tariffs and foster long-term resilience:

Supplier Diversification: Reducing reliance on a single geographic region, particularly those heavily impacted by tariffs, is paramount. Exploring alternative sourcing options, both domestically and internationally, can spread risk and enhance flexibility. [https://www.jasedlak.com/surviving-tariff-turbulence-what-to-do-now/]
Transparent Communication: Open and honest communication with customers regarding potential price adjustments and the reasons behind them can help manage expectations and maintain loyalty.
Strategic Inventory Management: Balancing the benefits of strategic stockpiling to hedge against future price increases with the associated carrying costs require careful analysis and sophisticated inventory management techniques.[3]
Contractual Review: Engaging in open dialogue and potentially renegotiating contracts with suppliers to share some of the tariff burden can provide a measure of relief.[4]
Utilizing Foreign-Trade Zones (FTZs): Consider leveraging U.S. Foreign-Trade Zones to defer, reduce, or potentially eliminate customs duties on imported goods, especially if engaging in manufacturing, processing, or re-export activities.
Employing Tariff Simulation Tools: Implement or utilize tariff simulation software to model the financial impact of various tariff scenarios, enabling data-driven decisions on sourcing, pricing, and supply chain adjustments to enhance forecasting and risk management.[5]

Optimizing Customs Strategies: Deepen understanding and application of U.S. Customs rules and regulations to identify all available duty mitigation opportunities. This involves ensuring accurate product classification and valuation, and exploring specific programs like the “First Sale” rule, which can yield significant cost reductions. These crucial customs strategies will be explored in greater detail in a forthcoming article.[6]

The current tariff landscape underscores the necessity for mid-size businesses to embrace proactive planning and cultivate operational agility. The ability to anticipate shifts in trade policy, adapt sourcing strategies swiftly, and manage costs effectively will be the hallmarks of successful retailers in this new environment.

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 Jake Snider at jsnider@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] Tariff uncertainty will damage the US retail sector | Oxford Analytica

[2] How Businesses Are Navigating Trump’s Tariff Limbo | TIME

[3] Tariffs Impact on Retail: What Shoppers Can Expect | Morgan Stanley

[4] 8 Strategies to Mitigate New Trade Tariffs | TrueCommerce

[5] https://www.truecommerce.com/blog/how-to-mitigate-new-trade-tariffs/

[6] Businesses are finding a tariff workaround: the first sale rule