Turning tariff turmoil into opportunity

Distribution companies are the world’s connectors — linking retailers with manufacturers and introducing consumers to products from half a world away.

As U.S. trade policy takes sharp turns, distributors are stepping into a broader role: testing new technologies, adapting sourcing strategies and opening fresh trade routes to reduce tariff impacts and stay ahead of rapid change.

New tariffs may affect how distributors approach inventory, pricing and supplier relationships. Companies with flexible contracts, smart warehousing and smarter tech can potentially turn challenges into advantages.

Changing trade policies may create immediate complexity, but they also open the door for long-term innovation with distributors at the center.

U.S.-imposed tariffs (as of April 15, 2025)

Baseline tariff: A 10% ad valorem tariff applies to imports from all countries, effective April 5, 2025.

Reciprocal tariffs: For nations with significant trade surpluses with the U.S., the administration announced higher, country-specific tariffs on top of pre-existing duties. These tariffs were announced April 9, 2025, and then paused until July 9, 2025, to allow for trade negotiations. During that 90-day pause, the baseline 10% tariff remains in effect for most countries. The one notable exception is China, for whom the 145% tariff took effect immediately.

Here’s a rundown of major U.S. trading partners.

China: 145% on all imports

• Exemptions: Certain electronics, including cell phones and laptops, are temporarily exempt.
• Upcoming changes: The de minimis exemption for low-value shipments from China will be eliminated on May 2, 2025, subjecting these goods to a 90% tariff and a $75 per-item fee, increasing to $150 by June 1.
• Notable product impacts: Consumer electronics and electronic components, such as semiconductors, circuit boards and networking equipment; heavy machinery, motors and mechanical parts; low-cost consumer goods; textiles and apparel.

Mexico: 25% on imports not covered under the USMCA

• Notable product impacts: Automotive and aftermarket parts; agricultural products, notably tomatoes, which will face a 21% antidumping duty starting July 14, 2025.

Canada: 25% on non-USMCA-compliant goods; 10% on energy products like oil and natural gas

• Exemptions: USMCA-compliant products, including products assembled in Canada whose ingredients or raw materials are 60-75% North American content.
• Notable product impacts: Automotive and aftermarket parts.

European Union (EU): 20% on all imports

• Notable product impacts: Automobiles, industrial machinery, agricultural products and specialty goods like wine, cheese or fruits.
• Retaliatory measures: The EU has paused planned retaliatory tariffs to allow space for negotiations.

For a full list of country-specific tariff percentages, see this CBS News article or the White House’s reciprocal tariffs list from April 2, 2025.

Retaliatory tariffs and trade policies (as of April 15, 2025)

Distributors who export U.S.-made products to foreign markets should also pay attention to reciprocal trade actions imposed by other nations. Here are the latest developments:

China: 125% on all U.S. imports, effective April 11, 2025

• Agricultural goods: Tariffs of 15% on U.S. chicken, wheat, corn and cotton; 10% on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.
• Energy products: 15% tariffs on coal and liquefied natural gas; 10% on oil and agricultural machinery.
• Industrial goods: Suspension of U.S. lumber imports and revocation of soybean import licenses for three U.S. firms.
• Rare earths: Halted exports of seven heavy rare earth metals and rare earth magnets that are crucial for U.S. industries like technology, electric vehicles, aerospace and defense.
• Export control list: Added 12 U.S. entities to the Export Control List, prohibiting the export of dual-use items to these companies.

EU: Up to 20% on a range of U.S. goods

• Including soybeans, poultry and consumer goods like beauty products and motorcycles. These measures were announced April 9, 2025, then temporarily suspended to allow for negotiations.

Canada: 25% on a broad range of U.S. goods not detailed publicly.

• Effective March 4, 2025, with an expansion to additional products on March 25, 2025.

Mexico: 25% on various U.S. goods

• Specific products and rates to be announced. Reports suggest potential tariffs ranging from 5% to 20% on pork, cheese, produce, steel and aluminum, while possibly exempting the automotive industry.

How distributors are reacting

As U.S. distributors adjust to the new policies and prepare for possible additional changes, many firms are shifting their inventory and pricing strategies, and their relationships with suppliers and logistics providers, to mitigate impacts.

Here are some considerations for the import and export sides of the business.

1. Stockpiling vs. just-in-time

Some distributors have moved away from just-in-time inventory and traditional lean models, adopting short-term stockpiling strategies for tariff-affected goods to hedge against future hikes. However, this creates storage cost burdens, many of which are increasing as demand for warehouse space goes up.

Over the last year, square-foot storage rates have increased from $1.22 to $1.73 per square foot, and bin storage rates have risen from $2.67 to $3.08. Dry van linehaul costs per mile are projected to rise 9% year over year in 2025, while port managers are already starting to see congestion, delays and increased demurrage charges at major U.S. ports of entry. While building up a buffer inventory builds resilience amid current uncertainties, firms should plan for higher costs. (See the recommendations section for suggestions to improve liquidity.)

2. Dynamic, tech-driven pricing models

Distributors will need to decide whether to absorb tariffs or pass them on to customers. Some industries, like industrial parts, are better able to pass through costs without losing demand. Others, like consumer goods — particularly electronics — face tighter margins, more intense competition and greater customer price sensitivity, which make companies more reluctant to pass trade costs on to consumers.

Historically, this question has been more of an either/or. Now, technology gives distributors more flexibility in adapting their pricing strategies as market inputs change. Digital catalogs and contracts allow real-time pricing adjustments based on tariffs, fuel costs and exchange rates, and AI-driven pricing software is helping businesses stay ahead of market shifts. Advanced analytics and digital procurement platforms are helping companies model the cost and risk implications of different sourcing configurations. These tools also make it easier for distributors to simulate tariff scenarios and adjust strategies proactively.

3. Adjusting market positioning

Supply-side pressures can sometimes be offset by adjusting demand strategies. In high-tariff markets, distributors can focus on product quality, performance or brand reputation, avoiding direct price competition. Bundling goods with training, warranties or service agreements can shift customer focus from price to total value. For products that don’t offer large enough margins to absorb tariff costs, distributors can focus marketing efforts on niche segments like medical, aerospace or defense sectors, which may be less price-sensitive.

4. Nearshoring, friendly-shoring and localization

For importers, nearshoring has long been a strategy to reduce transportation costs and emissions. Now, companies are talking about “friendly shoring,” or moving production to a more politically friendly nation within the same region. Under current tariff regulations, for example, moving production from China to South Korea cuts tariffs in half (though other production costs may be higher).

Some distributors are even reshoring by co-investing in U.S.-based manufacturing or warehousing to reduce reliance on high-tariff imports. Matchmaking platform Xometry, which connects buyers with U.S.-based manufacturers through a digital marketplace, has generated $1 billion in revenue for U.S. manufacturers over the last five years. 

For exporters, localization or in-market fulfillment serves a similar purpose. Distributors ship semi-finished goods overseas, then complete final assembly in the destination country, bypassing tariffs on fully assembled products. Using a third-party distribution hub in a tariff-neutral country allows distributors to repackage or relabel under favorable trade classifications. For recurring high-volume exports, some distributors even partner with or license production to a local manufacturer, shifting the country of origin to avoid retaliatory tariffs on U.S. goods.

5. Foreign trade zones and duty-relief programs

Some distributors are exploring foreign trade zones (FTZs) located near airports, major ports and industrial hubs to defer or reduce tariff burdens.

Importers that receive their shipments in one of these zones can bring in foreign goods without paying tariffs up front — or at all, if the products are re-exported without entering U.S. markets. (Firms that aren’t located in an FTZ can explore refunds through U.S. duty drawback programs to avoid double-duty burdens on items that are imported and then re-exported.)

For imported products that will be sold in the U.S., deferring tariff payments offers a cash-flow advantage when inventory turnover is long. FTZs also allow distributors to consolidate several low-value shipments, which is helpful given the recent removal of the de minimis exemption for Chinese imports. If distributors are importing components for domestic assembly, this strategy allows companies to make the tariff payment on the assembled final product, which is charged at a lower rate than individual imported parts.

6. Increasing supplier visibility

Many distributors are pushing for better visibility beyond their tier 1 suppliers to understand where component-level risks lie. Having a better understanding of the locations and practices of tier 2 and 3 suppliers also protects distributors from non-tariff-related geopolitical risks like wars and natural disasters and ensures they can meet regulatory or sustainability requirements like avoiding conflict minerals or forced-labor production.

7. Supplier diversification

To further mitigate risk, distributors are diversifying their supplier base across multiple regions. This insulates companies from sudden tariff hikes or regulatory changes and allows for an advantage in cost negotiations. Many businesses are employing dual sourcing models to maintain optionality — keeping both a lower-cost, higher-risk supplier and a more stable, tariff-insulated one in play.

While this strategy increases flexibility, it can also increase costs, at least in the short term. Diversifying across several suppliers dilutes volume-based discounts and economies of scale, increasing per-unit production costs. The increased administrative and operational expenses to maintain multiple contracts and coordinate logistics also add to overhead. However, this more dynamic environment — including technology used to create more responsive pricing and logistical models — may foster more competition and innovation, driving costs down in the long run.

8. Supplier negotiation and collaboration

Tariff unpredictability has prompted many distributors to revisit terms with global partners. Key negotiation points include shared tariff burdens, longer lead times, alternate shipping routes and split warehousing options to reduce border tax exposure. Businesses are pushing for contracts that allow them to renegotiate pricing or switch suppliers in response to tariff changes, giving them more flexibility to remain competitive.

Distributors who command significant purchasing volumes, outsized market access or many potential suppliers gain the most market power. Conversely, distributors that are smaller or deal in highly specialized products may not have as much negotiating power.  

Firms in those situations can pursue collaboration to co-manage risk and cost exposure. This could include sharing tariff forecasts, negotiating volume-based flexibility and pursuing joint value-engineering exercises to make operations more efficient or modify product designs. Over the long term, these approaches (particularly value engineering) could spur innovation and product differentiation and build customer loyalty by ensuring greater availability and reliability.

9. Storage and logistics providers

Strong relationships with storage and logistics partners are essential for responding to trade shifts. Some distributors are renegotiating contracts with transporters to include emergency response provisions like rerouting or accelerating shipments and looking for dynamic 3PLs that offer variable-rate warehousing options (“pay-as-you-store”). To manage cash flow, companies are looking to use bonded warehouses, which allows them to store imported goods without having to immediately pay tariff duties, providing financial flexibility.

Recommendations

Uncertainty and volatility present formidable business challenges, so remaining flexible and forward-looking can help distributors maintain their financial and operational resilience. Here are some recommendations:

• Start with scenario planning: Leading distributors are modeling multiple tariff scenarios — including no change, increases and sector-specific adjustments — to understand impacts on margins and supply continuity.
• Be flexible: Prioritize short-term options that will give you the most flexibility in this rapidly changing environment. Hold off on making long-term investments or sourcing commitments until trade policy direction becomes clearer.
• Invest in technology: Consider investing in ERP and supply chain tech to increase responsiveness to policy and supply-chain changes. While the current volatility can help CTOs build strong business cases for these investments, leaders should also plan on higher costs for any platform investments that require hardware upgrades. Tariffs on Chinese-made electronic components have increased the costs of servers and other networking equipment by as much as 20%, and tablet and laptop prices may increase by as much as 57%. To mitigate these higher costs, consider cloud-based solutions that reduce reliance on physical hardware, and ask vendors about leasing options.  
• Invest in expertise. Many firms are investing in in-house or external customs and trade compliance capabilities to manage country-of-origin classification, avoid overpayment and maximize trade program benefits. Smaller distributors with straightforward compliance needs may be able to lean on logistics partners for this, while distributors dealing in regulated goods or facing heavy tariff exposure may need to find a specialty trade advisor.
• Revisit inventory and working capital strategies. Distributors that previously emphasized lean, just-in-time inventory may want to reconsider those approaches, at least in the short term.

To free up liquidity and ensure access to the working capital required for supplier redundancy and inventory storage, firms could consider strategies like:

• Accelerating receivables by offering early-payment discounts.
• Improving inventory turns by analyzing SKU profitability and phasing out slow-moving items.
• Extending payables by negotiating longer payment terms with suppliers.
• Reviewing existing lines of credit and requesting increases if necessary.

How Wipfli can help

We help companies stay informed, react to risks and plan for opportunities. Our perspective spans tax, compliance, workforce and strategic planning — so your whole organization is covered. To learn more, visit our distribution industry page and our policy and tax updates page.