How tariff early movers can continue to cement their advantage

History is written by the victors. This article, however, is written for the victors…of the first round of implementing tariff mitigation strategies in supply chains. A little less catchy.

When President Trump imposed tariffs in his first term, companies that moved quickly to develop alternative supplier ecosystems and build multi-sourcing trade relationships, among other strategies, quickly outpaced competitors.

“There were other companies that chose to not move as quickly, and I think they’re paying for it and playing catch-up now,” Andrew Rader, managing director of Maine Pointe, a global supply chain and operations consulting firm, told CFO Brew.

“Early movers are now structurally advantaged. Companies that relocated production during the first Trump term didn’t just ‘avoid tariffs,’” Ted Stank, co-executive director of the Global Supply Chain Institute at the University of Tennessee Knoxville’s Haslam College of Business, told us over email. “When trade policy shifts again, they don’t have to react; they just execute their plan.”

It’s not that late movers are hopeless cases, though. What better way to catch up than, oh, I don’t know, reading this article?

And if you’re sitting high and mighty, proud of all your tariff mitigation efforts thus far but also stressed that the Supreme Court tariff ruling upends your current supply chain strategy, this one’s (also) especially for you.

(Recent) history lesson. You know the whole “those who don’t learn from the past” rigmarole? That applies here. One of the most crucial things CFOs can do is to take a look at what did (and didn’t) work for companies in Trump’s first trade war, experts say.

Once it became clear the US was actually going to implement at least some of the proposed tariffs in the late 2010s, the most “forward-looking companies” were already looking at regionalized supply chains, which started to increasingly make “a lot of sense, with all this volatility,” Lance Saunders, a professor of supply chain management at Haslam College, told CFO Brew.

The benefits were quickly evident amid the pandemic. “Even though they did obviously have to deal with a lot of issues during Covid, [those companies] didn’t have to deal with as many issues as people that are shipping all the way across the Pacific Ocean and have 130 ships out there,” Saunders said.

What the savvy did. Finding alternative suppliers and fostering geographic diversity within supply chains—two of the key tariff mitigation strategies deployed by companies starting in Trump’s first term—was never about “chasing the lowest tariff rate” but rather “about reducing concentration risk,” Stank noted. “Companies that moved capacity out of China into Mexico, Vietnam, Poland, et cetera, reduced geopolitical exposure, shortened lead times (nearshoring), and improved working capital turns.”

At the end of the day, it was also a mindset shift that differentiated early movers from those playing catch-up: The savviest companies “treated trade volatility as a permanent operating condition, not a temporary disruption,” Stank added.

Another divide between winners and losers? Firms that took “a cross functional approach,” and created war rooms for scenario planning, looping in procurement, finance, marketing, operations, and other disparate functions, were able to pivot more quickly than the companies that siloed everything to “a largely procurement slash supply chain effort to go solve this very complex problem,” Rader said.

That open communication, or lack thereof, is also tied to why some companies might not have acted as quickly the first time around, Saunders said. During Trump’s first term, companies that fostered transparent dialogue between different sides of the organization “could make the business case much more easy” for moving supply chains, ultimately helping the finance side see hidden costs they might be exposed to.

Here and now. So, should early movers stick to more of the same or implement a bold new strategy if they want to stay ahead? Supply chain experts recommend a bit of both.

For starters, “don’t let up. Keep analyzing your supply chain to see where you have an advantage, and exploit it, because you probably do have an advantage,” Saunders said. All the while, don’t forget that “supply chains are dynamic, not static,” he continued. “Just because you made those changes doesn’t mean that you’ve won.”

“We’re at a time right now where I think we need to be updating our playbooks every single day, because stuff is changing just so fast,” Saunders added. “Those of us that aren’t learning from the past and then updating are going to get left behind.”

Assuming you’ve already assembled some kind of trade war room with relevant parties, both Saunders and Rader think CFOs should keep asking questions about supply chain risk and tariff exposure, rather than waiting for someone else to inform them.

“CFOs that are able to ask the right questions to their cross functional colleagues and to their teams are going to be the most powerful,” Rader said.

“If you’re in a situation where the finance side is the one asking the questions versus the supply chain side yelling, ‘Hey, we’re exposed,’ you probably are on the journey you need to be on,” Saunders added.

Future-proofing. Still, there are new tools at your disposal that you shouldn’t ignore, Saunders and Rader note, both citing AI’s potential for supply chain planning tasks.

“The [scenario planning] tools that exist today didn’t exist a year ago, and they’re going to look probably even different a year from now,” Rader said.

And in that regard, we might have to write another article about how the mid-2020s differentiated even more winners from losers depending on how finance and supply chain teams chose to invest (or not) in automation efforts, Saunders said.

“We’re really at an inflection point where some companies are just going to think AI is going to be the savior, and it’s just going to drive what they do, and I think they’re probably going to get way worse, and they’re not going to see that return on the investment,” he cautioned. “The companies that really look at their processes first and understand how AI can better support that process are going to see a huge ROI.”

“If you’re taking a bad process and just automating with software, all you’re doing is automating a bad process,” he added.