business From the Frontlines: How Tariffs Could Disrupt Your 2025 Budget—What Manufacturing Companies Can do to Prepare March 27, 2025 Hear expert insights from Lauren, Director of Audit Services, on how manufacturing businesses are navigating tariffs and what steps they can take to ensure financial stability. With the potential of rising tariffs on imports from Canada, Mexico, and China, business owners must brace for rising costs, supply chain disruptions, and pricing challenges. How can businesses navigate these changes, adjust their budgets, manage risks, and maintain profitability in this evolving landscape? I sat down with Lauren Amaral, Director of Audit Services, to discuss the challenges manufacturing businesses are facing due to rising tariffs and the strategies they can use to protect their budgets. We explore ways to optimize sourcing, negotiate supplier contracts, and implement cost-saving measures to stay competitive in 2025. Rising Tariffs: What You Should Know Q: Can you talk about the rising tariffs and explain how manufacturing businesses could be impacted? Lauren: The Trump administration has imposed tariffs on Canadian, Chinese and Mexican imports, which act as a tax on imported goods. Businesses that rely on these imports are now facing significantly higher costs, forcing them to make tough decisions—absorb the added expense, pass it on to customers, or find alternative suppliers. Beyond rising costs, tariffs can disrupt supply chains, making it harder for businesses to get what they need on time. For companies that export, potential retaliatory tariffs from Canada, Mexico, or China could make U.S. products more expensive in those markets, potentially leading to declining sales. Q: Given these challenges, what are some budget strategies manufacturing businesses can implement? Lauren: There are a few ways businesses can adjust amid this economic uncertainty: Diversify suppliers – If your current supplier is heavily affected by tariffs, look at options in non-tariffed countries or even domestic alternatives.Renegotiate contracts – Suppliers may be willing to adjust pricing, offer bulk discounts, or extend payment terms to help offset costs.Review pricing models – While raising prices may be necessary, it’s important to do so strategically so customers aren’t caught off guard.Improve operational efficiency – Streamlining processes, reducing waste, and cutting unnecessary expenses can help offset the impact of higher import costs. Review all budget line items to see where savings could occur.Take advantage of tax credits or incentives – Some businesses may qualify for deductions or relief programs that could help offset increased expenses. Q: What are some other areas manufacturing businesses can save? Lauren: Even in times of more economic certainty, it’s always a good idea to take a hard look at your expenses to see where you can optimize your budget. Many businesses I work with are under the assumption that reviewing your budget once per year is efficient. It’s very important to monitor your budget throughout the year and be proactive. Now is the time to re-assess your 2025 budgets and make any adjustments. Some areas to consider include: Supply chain logistics – Reducing unnecessary shipping costs, consolidating orders, or changing freight providers can help manage expenses.Inventory management – Avoiding overstocking or understocking can prevent unnecessary carrying costs or last-minute rush orders. Our blog How Much Is Inaccurate Inventory Really Costing You? explores valuable inventory management tactics.Energy and operational costs – Small savings on utilities, leasing expenses, or even office supplies can add up.Labor efficiency – Investing in automation or outsourcing non-core tasks could help offset rising material costs. Check out our blog, Value Drivers for Manufacturers: Focusing on What Counts for more strategies for manufacturers to optimize tangible assets to boost value, a key strategy for navigating tariff-related challenges. Q: What if your business relies on imports from Canada, Mexico or China and cannot negotiate lower prices? Lauren: If negotiation isn’t an option, businesses still have a few levers they can pull: Adjusting product offerings – Some companies may shift to alternative materials or different product lines that aren’t as affected by tariffs. Exploring new markets – If exporting, consider markets where tariffs aren’t in place to keep sales strong. Reevaluating business models – In some cases, companies may need to rethink how they source, manufacture, or price their goods to remain competitive. Building financial buffers – A business line of credit or cash reserves can help bridge the gap if costs rise suddenly. The key is flexibility—companies that are willing to adapt and rethink their approach will be in the best position to handle these tariff changes. Q: What is the number one thing to keep in mind when it comes to tariff concerns? Lauren: It is important to stay up to date as current policies are changing on a daily basis. Staying informed and on top of all internal controllable costs will be key to success in today’s business climate. While tariffs present challenges, they also push businesses to innovate. By staying proactive, reassessing supply chains, and keeping an eye on budgets, businesses can stay competitive and prepared in 2025 and beyond. A Note on Tariff Volatility It’s important to keep in mind that tariff policies can shift quickly based on decisions made in Washington. Presidential administrations have broad authority to impose, adjust, or lift tariffs—often with little notice. The strategies outlined in this article are designed to help navigate the current environment, but we encourage readers to regularly monitor updates from federal agencies and trade organizations to adjust their plans as needed.