As the U.S. looks to reset its trade imbalances with other countries and implement a raft of wide-ranging tariffs, it’s fair to say there’s a lot of uncertainty affecting markets and businesses right now.
Tariffs are effectively taxes that impact anyone who imports materials – and with their scope and scale seemingly changing daily, it's not only extremely disruptive but difficult to know what to expect, or how best to prepare.
The situation has escalated quickly since President Trump’s initial announcement in February that tariffs were to be imposed on steel and aluminum imports. Not long after on April 2, otherwise known as “Liberation Day,” he unveiled wide-ranging tariffs covering all imports entering the country, starting with a 10% baseline tariff and rising as high as 145% for Chinese goods.
Most of the countries targeted were quick to respond with tariffs of their own, with others coming to the negotiating table to agree more favorable trade deals. The rates have fluctuated ever since with tariff increases, reductions, exemptions, and delays dominating the news headlines.
With no one truly knowing what’s going to happen from one day to the next, it’s proving extremely challenging for process manufacturers and chemical distributors to manage their margins and productivity–a similar story to a few years ago during the COVID-19 pandemic, when prices spiked and logistics costs skyrocketed.
In times like these, digital solutions such as Enterprise Resource Planning (ERP) systems offer the assurance and stability that businesses need to navigate the complexities of tariffs and trade shifts.
Uncertainty is always damaging to your bottom line, and even modest tariffs can have an enormous impact on sourcing, cost predictability, and margins, says Dan McCusker, VP of Sales at Datacor.
From a practical standpoint, tariffs mean process manufacturers have to take tough decisions by putting orders on hold or factoring in an additional landed cost to their calculations.
Tariffs can have a significant effect on the value of inventories and balance sheets. After all, products worth a dollar today may be valued at $1.35 tomorrow. Whether you’re seeking a loan or insurance for your goods and need to factor the fully landed cost into your calculations or you’re looking to pass that 35% price increase onto your customers, it’s important to demonstrate the agility and flexibility to adapt in an ever-evolving global trade environment.
Technology and ERPs allow you to do that in a proactive, expedient way, says McCusker.
For procurement and supply chain teams managing international purchases, trying to navigate pricing volatility is tough – and almost impossible if you’re having to rely on manual calculations to stay on top of everything. Businesses must be able to re-cost and re-price as necessary and make strategic decisions almost on the fly.
Tariff codes – or Harmonized System (HS) codes – are used to determine how different products should be taxed. Petroleum products may be taxed at a different rate to specialty chemicals or metal additives, for example, so it’s important to have a thorough understanding of the rates and the implications.
Businesses rely on HS codes to understand their costs, applying them where necessary. The problem is, with so many different products and codes, managing and maintaining them can be difficult.
ERPs are very good at making global changes, quickly updating your system if tariffs need to be added, altered, or updated, says McCusker.
Typically, a business importing hundreds of products that fall under an HS code affected by a 35% tariff would need to manually edit every single record. This can take an inordinate amount of time and effort, and errors may occur.
ERPs allow those details to be changed once and have them propagate throughout the system, says McCusker. The next day, if the tariff rises further to 70%, another simple adjustment in the software updates the pricing immediately, revalues any purchase orders that are in transit, and adds it to your landed cost. Replacement costs can quickly be updated and margins checked without any hassle, he says.
It makes it far easier to keep customers informed of tariff changes, instantly updating them about price adjustments without wasting hours reaching out to them on the phone or drafting individual emails.
Even for companies that may be locked into long term contracts – making it impossible to accommodate the changing tariffs and adjust pricing accordingly – Datacor offers some “Surcharge” functionality that allows the price to be consistent for the customer but adds a “Tariff Surcharge” as a separate line item to cover this new and expected cost.
Scenario modelling, meanwhile, allows for “what if” trade changes, helping to minimize the impact of future price shocks or margin erosion. Entering different conditions and pricing criteria provides much-needed insight into what the future holds and how your business can stay profitable.
Users also benefit from landed cost tracking across global suppliers. Software allows you to support multiple suppliers for the same product so if there are domestic alternatives for a product that you import, you'll be able to quickly compare their pricing. Maybe the U.S. supplier was always too expensive, but faced with a 70% tariff, they may now be viable.
In times of uncertainty, it pays to be proactive and move quickly when situations are changing – something that is almost impossible with manual processes. Without software, mistakes are almost inevitable, and businesses often find themselves playing catch-up rather than looking forward.
Datacor ERP offers users complete control over their products and pricing:
Digital solutions can help ensure businesses stay on top of tariff changes and better manage fluctuating prices and product costs, so they can make more timely and informed business decisions, says McCusker. Not only will this benefit your business and your bottom line, but your customers will appreciate this too, preferring to work with companies that can keep up with these changes than those selling at lower margins because their data is old.
When it comes to managing tariffs, investing in an ERP is a small price to pay. Tariffs aren't just a regulatory hurdle, they're a strategic opportunity when you have the right tools!
To find out more about how Datacor’s range of products and services can help you minimize the impact of tariffs on sourcing, cost predictability, and margins, contact us today.