9 tariff mitigation strategies for U.S. manufacturers

For many manufacturers, the Trump administration’s tariff policies have created new costs and supply chain complications. Active tariffs under Section 232, Section 301 and Section 338 are raising the cost of many imports by 10-50%.

How should your business adapt to succeed in this environment? Keep reading to learn key tariff mitigation strategies that CFOs and COOs can use to protect profitability even in the face of tariff pressures.

9 top tariff mitigation strategies manufacturers should know

While there is no silver bullet, manufacturing CFOs and COOs do have options to offset tariff costs. If you understand your tariff exposure and supply chain, you can consider mitigation strategies like alternative sourcing, pricing pass-throughs, optimized inventory management, operational efficiency improvements and tax incentives.

Deploying a combination of these strategies will help protect your overall profitability even after accounting for tariff expenses:

1. Map your supply chain

Start by mapping out your current supply chain. Identify the sources of your raw materials, components and finished goods, while also reviewing HTS codes for all imports. Understanding where your products originate will help you evaluate potential tariff impacts.

2. Diversify your supplier base

Based on your supply chain mapping, consider if you could reduce tariff exposure by diversifying your materials suppliers. Nearly all U.S. trading partners remain covered by tariffs, but not all countries are subject to the same tariff rate.

Section 301 tariffs, for example, range from 10% to 12.5% depending on the country. In this example, switching from a supplier tariffed at 12.5% to one tariffed at 10% would reduce your tariff payments by 20%.

3. Evaluate domestic or near-shore sourcing

In certain cases, tariff costs may mean that domestic sourcing is now a more viable option. Materials or goods sourced domestically aren’t tariffed, so you may be able to find more competitive pricing than in years past.

Companies that have moved production overseas may also want to explore whether reshoring could make sense, although this approach typically only works when combined with heavy automation to offset high domestic labor costs.

4. Reassess your costing and quoting strategies

For much of 2025, manufacturers simply ate tariff costs rather than risk angering consumers by passing those costs along. But that’s not a viable long-term solution. If you haven’t yet, explore changing your prices to reflect your higher costs, as well as how to implement those increases over time to soften the impact on consumers.

5. Optimize inventory and purchasing strategies

Adopting a more agile, flexible approach to inventory management can help you avoid unnecessary costs. Taking this approach involves understanding exactly what your customers want, focusing on jobs that boost profitability (typically those that are either high volume or high value) and exploring more flexible contracts with suppliers to avoid over-purchasing materials you don’t need.

6. Review your supplier and customer agreements

Tariffs are affecting both your suppliers and businesses that buy your products. You may be stuck with your existing contracts, but when negotiating a new one, explore how you can share the burden of tariff costs rather than leaving your business to eat most of them on its own.

7. Improve operational efficiency

Improving operational efficiency can lower operating costs or increase production to offset tariff expenses. Manufacturers are increasingly leaning on technology like AI to deliver operational gains, with packaging automation, machine monitoring systems and process control technologies all delivering notable ROI in this area.

This does involve making a meaningful upfront investment. However, certain tax incentives can notably lower that burden.

8. Use tax incentives to offset tariff costs

A smart tax strategy can help significantly offset your overall tariff burden. CFOs should dig into the details on how to handle accounting for tariffs from a tax perspective, as well as consider how specific manufacturing tax incentives could reduce your non-tariff tax exposure or help cover the cost of investments in efficiency, molds, dies and automation.

Key tax incentives to explore include:

• Bonus depreciation and qualified production property to immediately deduct the full cost of certain qualified real property investments.
• Section 179D expensing to deduct the cost of certain energy efficiency facility upgrades.
• R&D tax benefits to deduct or receive tax credits for research, experimentation and development costs. Tariffs can also increase your credit eligibility here.

9. Pursue tariff refunds when applicable

In early 2026, the Supreme Court overturned the administration’s IEEPA tariffs and ordered that roughly $166 billion in tariff collections be refunded. If your business paid IEEPA tariffs, you may be eligible to have that money returned.

The process can be complex, but if you were burdened by significant IEEPA tariff costs, you stand to gain a significant reimbursement.

Why tariff management matters for manufacturers today

Manufacturers face a host of pressures on profitability, including high costs for raw materials and labor, competition from emerging markets, economic uncertainty and a technological revolution that is shaking up traditional business models.

Tariffs only add to that pressure, which makes managing them essential to surviving (and thriving) in today’s business environment. This is doubly the case because tariff policy continues to be volatile, which means you’ll get burned if you don’t have a process in place to help you adapt to those policy shifts.

Also consider that successful tariff management means learning to run your business more efficiently and effectively. By acting now, you’re investing in long-term performance gains that will stick around even if the current tariffs are eventually phased out.

In other words, implementing an effective tariff management strategy will bolster your profit margins both now and in the future.

How tariff mitigation helps CFOs improve profit margins

No single tariff mitigation strategy will likely offset all your tariff costs. However, by employing a combination of supply chain adjustments, efficiencies, tax incentives and pricing pass-throughs, you can significantly reduce the hit to your profit margins.

Consider that tariff mitigation strategies help you to:

• Counterbalance tariff costs by finding new cost savings or opportunities to do more profitable jobs.
• Operate more efficiently, with tariffs serving as the necessary push to adopt automation or more efficient processes.
• Better understand your supply chain and customers so you can adapt to meet today’s business demands.
• Avoid wasting valuable tax opportunities by claiming deductions or credits you may already be entitled to, or that apply to necessary expenses.
• Protect your margins by helping negate rising costs in areas like healthcare, labor and materials to set you up for a strong balance sheet five years from now.

Tariffs are frustrating. But they are also an opportunity to rethink your business and make structural changes to put it on more solid, sustainable ground.

Read more

• Tariff update: New Section 301 tariffs, Section 232 and more
• Tariff refunds for manufacturers: What to do next
• How do tariffs affect taxes for manufacturing businesses?