What higher tariffs mean for supply chains — Most affected retail categories

The Trump administration’s push for higher tariffs began to take shape on Feb. 1 with the initial imposition of taxes on imports from Mexico, Canada and China. 

While deadlines for Canada and Mexico were later postponed, it’s clear tariffs will remain a moving target for retailers. Universal tariffs — flat tariffs on all imports — are still on the table and global commerce is in flux as we witnessed reactionary measures from international leaders. Many retailers are already revisiting their strategic plans for 2025 and will continue to do so ahead of the next wave of looming tariffs. 

To minimize disruption, mitigate risk and uphold business objectives, collaboration with key decision-makers and partners across business functions is essential.

Categories That Will Feel The Pinch

Industries more reliant on global supply chains — like apparel and footwear, electronics, home furnishing, home improvement, and toys — are likely to be the most impacted by these tariffs.

• Apparel and Footwear: Most of the apparel and footwear sold in the U.S. is made abroad. Mitigation strategies include diversifying manufacturing locations outside of primary tariff zones, investing in nearshoring or tapping into partner networks to utilize existing manufacturing capacity, and reinforcing sustainability messaging to justify ethical sourcing and price increases.
• Electronics: Components are often sourced from more than one country, which will require major electronics companies to rethink their manufacturing strategies. One potential solution is to negotiate bulk pricing with existing suppliers or source components from those in tariff-exempt zones.
• Home Furnishing: For cost efficiencies, a large portion of this category has been imported from Asia. In addition to nearshoring, retailers may streamline their inventory management and focus on bestselling items. This reduces overall inventory complexity and simplifies sourcing.
• Home Improvement: Raw materials like lumber, steel and aluminum typically come from overseas. Diversifying suppliers or negotiating bulk orders again can help resolve significant price hikes for the consumer. Expanding private label offerings with domestic manufacturers is another course for consideration.
• Toys and Games: Statista reports that in 2020, the US imported roughly $17.33 billion worth of toys, dolls and games from China alone. To avoid steep price increases, brands may simplify product and packaging designs to limit international sourcing. Warehouse automation can also help with economies of scale and quickly setting up operations in tariff-exempt zones.

Navigating Supply Chain Shocks

In addition to retail category challenges, tariffs will add pressure to already strained supply chains. Historically, before tariffs take effect, foreign and domestic freight rates typically increase as the volume of imports grows. Companies forward stock inventories in the short term to try and get ahead of the higher tariffs as much as possible.

Subsequently, warehousing and shipping costs go up as companies stockpile their inventory to reduce tariff exposure. Supply chain leaders may seek to optimize existing warehouses and establish new carrier partnerships to address the inventory surge.

Supply chain diversification will be another outcome of higher tariffs. Industry leaders have spent the last several years evolving and expanding their sourcing and manufacturing partnerships because of ongoing geopolitical risks. This trend will continue as companies look to revamp their partner portfolio or assume the higher costs of domestic production.

Retailers and brands may be weighing the options of short-term and long-term strategies, but they could be missing a piece or two of the puzzle. Trusted logistics partners – or third-party logistics providers (3PLs) – have significant industry expertise and partner networks that can aid retailers as they navigate more complex logistics dynamics.

Utilizing New and Mature Partnerships

Retailers have a depth of knowledge in a specific retail category and often excel in their niche, but navigating tariffs requires interdisciplinary collaboration and trusted partnerships. Whether seeking new arrangements or investing in already mature ones, trusted logistics partners can manage uncertainty with flexible warehousing and shipping solutions, mitigate risks through diversified supplier networks, and scale operations quickly to adapt to changing market dynamics. 

To maintain customer loyalty and protect margins, every decision —from sourcing to fulfillment — must track back to long-term strategy. Everyone at the table should be mindful of how a response to universal tariffs could affect brand loyalty, fulfillment timelines, end consumer cost and product quality, not just sourcing and warehousing.

The situation remains fluid, and companies should take a holistic and historical approach, like how they address other major disruptions. Identifying ways to mitigate risk early on is critical, whether through partnerships or further investments. Ultimately, tariffs affect everyone involved, and consumers often bear the brunt, especially if their favorite products become inaccessible or unaffordable. Therefore, companies need to plan ahead and reduce the potential fallout. This is no time for waiting in the wings, it is best to be prepared.