What are Tariffs?

Tariffs are back—fast-moving, politically driven, and more unpredictable than ever. They’ve become a go-to lever in global economic strategy. And when everything looks like a nail, supply chains are taking the hits.

Policy shifts land without warning and retaliation is often near-instant. Many companies scramble to revise plans as lead times stretch and margins shrink.

But not all supply chains are stuck in reactive mode. Leading teams are simulating disruptions in real time, rethinking sourcing strategies, and rebalancing inventory while others are still parsing headlines.

This guide breaks down what tariffs are, how tariffs disrupt supply chains, and where companies typically get caught off guard. More importantly, it explores how scenario-driven response strategies can turn uncertainty into a competitive edge.

See how companies are transforming trade volatility into supply chain agility. 

Tariffs are government-imposed taxes on imported or exported goods. In theory, they’re meant to protect domestic industries or correct trade imbalances. In practice, they’ve become volatile policy levers with cascading effects. There are three common types:

• Ad valorem: A percentage of a product’s value (e.g., 10%)
• Specific: A fixed amount per unit (e.g., $50 per ton)
• Anti-dumping: Imposed when a country accuses another of unfair pricing to gain market share

Why tariffs matter now

After decades of gradual decline, tariffs are back in force. Recent U.S. administrations have used tariffs as geopolitical tools, reshaping global trade and injecting instability into global supply chains.

As a result, supply chain risks have risen sharply, upending sourcing strategies, delaying shipments, inflating costs, driving price increases, and disrupting inventory plans. And with little warning, companies have had to adjust or risk falling behind.

By Q2 2025, over 140 global public companies cited “tariff surcharges” in earnings calls—five times more than during the peak of the 2018 trade war.

(Source: AlphaSense Generative Search, via The Globe and Mail)

And it’s not a passing phase. In a March 2025 Thomson Reuters survey, 76% of global trade professionals said they expect tariffs to remain a long-term fixture of U.S. trade policy for at least the next four years.

Tariffs are now dynamic operational variables, embedding uncertainty deep into modern supply chains from sourcing and planning to execution and fulfillment.

Costs and uncertainty

Tariffs disrupt supply chains by raising costs, creating uncertainty, and forcing companies to rethink sourcing, operations, and delivery strategies.

Planning and delivery impacts

Manufacturers cite shifting timelines and unstable cost structures as key pressure points. And this pressure shows up differently depending on the role:

• For CEOs, it’s about protecting profitability without sacrificing delivery performance or brand trust.
• For planning leaders, it’s rapidly adjusting sourcing, production, and pricing assumptions—often without end-to-end visibility.
• For logistics and operations teams, it’s managing container costs, rerouting shipments in real time, and maintaining OTIF (on-time, in-full) delivery as disruptions ripple outward.

Why a new approach is needed

While some tariff effects may stabilize over time, volatility is unlikely to fade soon. The price impacts of some tariff proposals can take years to normalize, depending on how negotiations evolve, and push companies to rethink how they manage supply chain risk and resilience.

One often-cited example is Apple. During the 2018 tariff hikes, the company diversified production to Vietnam and India, renegotiating contracts to protect performance and reduce exposure. Apple’s China+1 strategy helped mitigate impact at the time. But in recent years, even Southeast Asian countries have been threatened with potential tariffs, making dual sourcing and supplier diversification harder to execute and scale.

The takeaway? Diversification still matters, but it’s not enough on its own. Companies need the ability to simulate scenarios, orchestrate alternatives, and make confident trade-offs in real time. In a more volatile world, agility depends less on having a second, third, or fourth supplier and more on knowing when and how to activate them.

Take distribution plans: Tariffs are upending traditional distribution networks. A sudden duty on a key component—or a policy shift that reshapes a major trade lane—can throw even the most mature inventory strategies off balance.

Tariffs impact inventory and lead time by destabilizing just-in-time models, driving up costs, and increasing delays across distribution networks.

Just-in-time (JIT) inventory, once a gold standard for lean operations, becomes fragile fast in the face of tariff volatility. With duties landing without warning, more companies are moving toward just-in-case models, building buffer stock to hedge risk and buy time.

Naturally, that buffer comes at a cost: higher working capital, storage expenses, and reduced flexibility. But companies will absorb higher costs in the short-term to avoid even costlier disruptions later.

At the same time, congestion, rerouted shipments, and customs delays are tightening delivery windows. OTIF (on-time, in-full) performance suffers, especially when teams lack the real-time visibility to respond before issues cascade.

Without the ability to rebalance inventory or reroute shipments mid-execution, stock gets stranded. Customer expectations aren’t met. Margins take the hit. But for agile organizations, tariff shocks are also catalysts: opportunities to rethink network design, distribution models, and supplier alignment.

Leading companies are reshaping their supply chains to manage tariff risks proactively. Instead of reacting after disruptions hit, they’re recalibrating sourcing, diversifying suppliers, exploring nearshoring, and investing in systems that improve visibility and resilience.

In short: Managing tariff risks across the supply chain requires building processes, visibility, and alignment to act with precision—connecting early signals to clear plans and fast execution as policy shifts unfold.

That starts with aligning the right teams. When sourcing, logistics, finance, and compliance work from different assumptions, even small disruptions can ripple outward. But with a shared response plan—clear roles, common data, and defined decision points—adjustments happen faster and with fewer surprises.

NORMA Group, an international market leader in engineered and standardized joining and fluid-handling technology, supports this kind of coordination with supply chain transparency and scenario planning. Teams used to plan in monthly cycles, but now they can plan, debate, and act with speed and clarity to determine the impacts of any change instantly.

Simulation plays a critical role, too. Before tariffs take effect, leading teams model the impact on cost, lead time, and fulfillment. Running what-if scenarios helps surface trade-offs early, so decisions can be made while options are still open.

And as trade rules shift, documentation becomes as critical as delivery. Manual compliance processes slow teams down. Automating filings, syncing to the latest requirements, and keeping workflows audit-ready reduces delays and lowers risk.

Building on this model, more organizations are adopting AI-infused supply chain orchestration. By connecting planning and execution, orchestration improves how teams respond to tariff changes—enabling faster, more coordinated, and more resilient supply chain decisions.

The day-to-day practices described above—scenario planning, cross-functional coordination, and integrated execution—form the foundation of a broader system: a tariff response strategy. This strategy brings together tools, workflows, and supply chain orchestration in a single, connected environment.

A well-defined strategy enables faster, better-aligned responses. It ensures teams can act confidently before disruptions escalate based on real-time inputs and shared assumptions.

This model strategy includes:

Exposure awareness

This is mapping where tariffs are most likely to impact operations—by supplier, SKU, trade lane, or customer region. This helps prioritize mitigation where it matters most.

Scenario simulation

This is testing potential responses before action is required. Modeling sourcing, pricing, and logistics options helps teams weigh cost and performance implications under different assumptions. Following a major tariff announcement in early 2025, Kinaxis customers increased scenario usage by 124%, highlighting the growing reliance on simulation-led planning.

Execution alignment

Plans are only effective if they’re actionable. Strong strategies connect planning with execution systems, so decisions made at the model level ripple across sourcing, finance, and logistics in real time.

Forecasting tariffs means predicting risk before it hits

Every strategy starts with timing. And in the case of tariffs, timing depends on foresight.

Forecasting tariffs and potential tariff rate changes requires interpreting signals early—before policies are finalized or enforcement begins. The sooner an organization sees potential exposure, the more options it has to adjust sourcing, costs, or capacity without disrupting performance.

Best practices include:

Tracking policy and economic indicators

Campaign rhetoric, evolving trade agreements, and regulatory changes often provide early clues. Monitoring these signals helps teams anticipate developments rather than react to them.

Mapping sourcing dependencies

Identifying exposure by country of origin, trade lane, or tier-two supplier gives planners the context needed to understand where tariffs might hit hardest.

Reviewing historical benchmarks

How have past tariffs affected pricing, service levels, or lead times? Analyzing these trends helps teams model likely outcomes with more accuracy.

Feeding forecasts into planning

Forecasting is most valuable when it informs planning and not when it lives in isolation. Organizations that link forecasted risk to scenario planning can begin preparing options well before formal decisions are announced.

In short, forecasting doesn’t solve the problem—but it buys time, sharpens focus, and lays the groundwork for faster, more coordinated response.

When a potential tariff appears, companies must quickly assess its impact on cost, service, sourcing, and performance. Modeling helps turn that ambiguity into something operational. Not a perfect prediction, but a working sense of scale and consequence.

The goal is to build just enough clarity to support a better decision—and to do it before the window for action closes. That often starts by identifying where risk lives: which suppliers, SKUs, and lanes are most exposed. The real value lies in running simulations—testing how sourcing, pricing, or fulfillment changes ripple across the network.

For example, imagine a 25% tariff is suddenly imposed on a key semiconductor sourced from East Asia. Within minutes, teams need to understand: Can we switch suppliers? How would that affect lead times? What’s the cost trade-off between a faster route and a cheaper one?

Modeling lets you run several quick, targeted scenarios: What if we reroute through a lower-duty port? What if we shift production to a different region? Which customers will feel it first? Simulations reveal both the direct effects and the ripple impacts across margins, inventory, cash flow, and service levels.

Many teams still approach this work with spreadsheets and siloed inputs. But that’s changing. More companies are adopting supply chain orchestration platforms that connect planning and execution, turning simulations into action. The same data used to test a scenario can now trigger a supplier switch, reroute a shipment, or rebalance inventory dynamically.

Ultimately, real-time simulations reduce the time between understanding risk and responding to it. Teams are then empowered to turn clarity into action, fast.

Tariffs can shift faster than traditional supply chains can respond. The result is slower decisions, as well as fragmented plans and missed opportunities.

Companies need tighter planning, faster execution, and more resilient operations. Adaptability comes from forecasting risks early, modeling trade-offs, and linking decisions directly to action.

Here are some key takeaways:

• What are tariffs and how do they disrupt supply chains?
  → Tariffs act as sudden cost multipliers, trigger rerouting, and inject instability into sourcing and landed cost models—often with little notice.
• How do tariffs impact inventory and execution?
  → They destabilize just-in-time strategies, drive preemptive stockpiling, and disrupt on-time delivery when fulfillment plans can’t flex in real time.
• Which industries are hit hardest?
  → Industries like high tech, mobility, consumer goods, and industrials—with complex sourcing networks and thin margins—face the highest risk.
• How can teams manage tariffs more effectively?
  → By coordinating across functions, running simulations in advance, and ensuring that planning and execution stay connected under pressure.
• What defines a modern response strategy?
  → It’s a connected capability: one that links forecasting, simulation, and execution into a unified system of response.
• How do companies forecast tariff risk?
  → Companies can forecast tariff risks by tracking trade signals early, mapping supplier and lane exposure, and reshaping sourcing before policies land.
• What does modeling look like in practice?
  → Modern modeling is scenario-based, fast, and decision-oriented—built to shrink the gap between recognizing threats and executing responses.

Want to see how this plays out in practice?

See how Kinaxis customers are turning trade volatility into supply chain advantage. Explore the Kinaxis Tariff Response solution or watch the demo to see it in action.