NETSTOCK RESEARCH
Tariff Impact Report 2025:
5 Proactive strategies for SMBs
Introduction
Tariffs continue to create uncertainty for small—and medium-sized businesses (SMBs), disrupting supply chains and driving up costs in unpredictable ways. As businesses adjust to evolving policies and increasing pressures, the need for data-driven decision-making has never been more critical.
This Tariff Impact Report, created in collaboration with supply chain expert Lora Cecere, Founder of Supply Chain Insights, examines how SMBs are reacting to the volatile tariff environment. Drawing on insights from Netstock’s North American customer base, we’ve identified key challenges, concerns, and strategies shaping supply chain decisions in this uncertain time.
This report will explore five key areas where businesses can take proactive steps to address tariff challenges, backed by research and insights from SMBs.
Use analytics to be proactive in the management of cross-border trade
Global supply chains were built on three assumptions: rational government policy, availability of transportation resources, and low variability. These assumptions are no longer valid.
As compliance, sanctions, and tariffs loom, supply chain leaders have little history to draw on as a guide for preparation. The key is proactivity.
However, the question is what to do. Before the pandemic, supply chain leaders experienced relatively free trade across borders. Now, all has changed.
The takeaway? Current supply chain practices are not designed to operate in a high tariff/compliance environment.
In Netstock’s recent survey of 126 North American customers with annual revenues of less than $500 million, we found only 12% of businesses rely heavily on analytics to consider the impact of this dramatic shift in supply chain management. Unfortunately, in most organizations, data is managed in functions. Managing total costs versus functional costs impacts requires the use of analytics.
Figure 1. | The Use of Data and Analytics Tools to Analyze Tariff Impacts
Q: We use data and analytics tools to manage and measure tariff impacts. N=126
Analytics is essential because the tariff environment will change frequently, and the impact will be bi-directional (with multiple businesses initiating tariffs in a dynamic environment). Trade across borders will take longer and require more documentation, resulting in increased variability of lead times.
Wrap-up
Prepare for the headwinds. Don’t expect business as usual. Aggressively use analytics to manage total costs. Question current process paradigms, measure outcomes, and make a difference. Be proactive in driving adaptive processes based on market data.
Is the answer reshoring?
The level of tariffs and the ever-changing dynamics of bi-directional tariffs are a step change. This shift marks the beginning of a new era in supply chain management. In this new environment, businesses must develop new processes and techniques to manage market-to-market flows (channel to suppliers).
Our research (see reference Figure 2) shows that approximately 63% of respondents anticipate a moderate or significant impact from new tariffs. The answer is uncertain: the outcome will depend on the duration, degree, and frequency of tariff changes. All of this supports the need for analytics to constantly model and understand tariffs’ impacts on costs, lead times, and alternate sources of supply.
Figure 2. | Anticipated Impact of Tariffs
Q: How do you anticipate new tariffs impacting your supply chain strategy? N=126
While politicians and the news media may advocate for reshoring as a solution, the barriers to reshoring and nearshoring—moving manufacturing and supply chains closer to markets—are high. In this survey, only 15% of respondents could easily reshore operations. The most significant concern is the impact on trade with China.
Nearly half of SMB respondents (47%) expressed great concern regarding tariffs impacting trade with China. A combined 74% view tariff risks from China as either moderate or severe. This overwhelming sentiment underscores how strongly U.S.-China trade tensions resonate among SMBs, with many businesses likely to rethink sourcing strategies or supplier networks connected to China.
Figure 3. | Reshoring as an option
Q: Is nearshoring an option for you?
Suppose nearshoring is not the right solution for you. In that case, the answer lies in utilizing visual and descriptive analytics in conjunction with decision support from supply chain planning to make informed decisions. In this volatile world, the proactive use of analytics to understand demand and supply shifts is essential.
Wrap-up
Eight out of ten supply chain leaders do not want to physically move supply chain manufacturing and supply. As a result, the answer lies in making decisions based on cross-functional analysis of trade-offs. Break down functional barriers to utilizing logistics and transportation data to make informed trade-off decisions. Analyzing trade-offs before the Sales and Operations Planning (S&OP) meeting is ideal.
The impact on inventory
As tariff threats ebb and flow, the key is proactivity. Begin by conducting an inventory audit. How susceptible is your company’s inventory to tariff impacts? What is the source of your inventory, and how will tariff levels affect your inventory strategies? Don’t be like the 25% of businesses in Figure 4 that are uncertain.
In Figure 4, over 50% of respondents expect the impact to affect more than 50% of their inventory.
Figure 4. | What is the anticipated impact of looming tax and tariff legislation on your inventories?
Q: What percentage of your inventory or raw materials would be directly impacted by changes in international tariffs? N=126
What to expect?
Inventory impacts will be significant. Constantly monitor:
- Costs. Expect a rise in inventory costs to affect your cash-to-cash metrics. The increase in tariffs/duties will increase the cost of inventory. Since cash-to-cash is a combination metric (receivables+inventory-payables), expect finance to put pressure on maximizing payables and minimizing receivables to mitigate the cost impact of higher inventories.
- Supply shortages. Tariffs will have unexpected effects on inventories as manufacturers source from different locations. Expect the shifts to result in shortages. Explore alternative sourcing strategies.
- Variable lead times to increase safety stock. As friction across borders increases, expect lead times to lengthen and become more variable. The lengthening of the lead time and the variability will increase safety stock.
Wrap-up
Based on survey data, more than 50% of respondents expect the tariffs to increase the cost of more than 50% of inventoried items. To combat the issues of variable and longer lead times, shortages, and rising costs, focus on utilizing inventory planning technologies. Enhance your inventory planning skills by refining the Forecast Value Add (FVA) in demand planning and incorporating actual lead times, rather than planned lead times, into safety stock calculations.
Impacts will not just be on supply. Demand will change as well
While most think tariffs will impact supply, don’t overlook the effect on demand. As tariffs are implemented, expect a shift in consumer sentiment and a tightening of pocketbooks for most consumers. Tariff costs will be passed on to the cost of goods, affecting end-consumer purchasing.
Do not overlook the emotional component in your planning. Implementing reciprocal tariffs may drive nationalism in buying behavior, and loyalty may cause regions to boycott buying in unpredictable ways.
To ensure your organization is ready, use channel data in demand planning and focus on Forecast Value Add (FVA). Expect demand error to increase and accept that historical data will be less valuable in predicting demand. Store forecast information for each period and carefully analyze the trends over time based on demand drivers.
In our work with customers, we find that eight out of ten businesses’ accuracy in the demand stream improves dramatically when they shift their focus from demand error to prioritizing Forecast Value Added (FVA). Forecasts using channel data consistently outperform those based on order or shipment data. In these volatile times, it matters. A shift in demand error has a 3- 5X impact on safety stock requirements.
Why it matters
With pressure on managing inventory in these volatile times, improving the demand stream should be the first course of business. Actively manage demand by analyzing flows based on market/channel data.
Expect the unpredicted
Regarding tariffs and their impact on the supply chain, businesses face unpredictability, with no well-established playbooks or best practices. In our survey, only 22% of businesses have successfully implemented strategies to manage tariffs. For most, this ever-changing world of bidirectional tariff legislation is new ground.
These SMBs are adopting a cautious strategy. Fifty-seven percent of SMBs are taking a “wait-and-see” approach, delaying significant changes and closely monitoring the situation. This cautious stance reflects the unpredictability of the current trade environment.
Figure 5. | Prior Experience with Supply Chain Tariffs
Q: Have you previously implemented strategies to manage tariffs in your supply chain? N126
To move forward, consider these four strategies:
- Use descriptive analytics and optimization to understand options and impacts. Be proactive. Develop a comprehensive supply chain planning master database to track lead times, lead time variability, cost fluctuations, inbound quality issues, shortages, and country of origin. Use this data to analyze the impacts and identify potential strategies for continuous improvement. Include this analysis in regular Sales and Operations planning meetings.
- Meet with suppliers. Build strong relationships. Understand their sourcing strategies and understand their impact on the supply chain. Focus on building 360-degree relationships. Actively utilize supply chain planning to assess the potential for switching suppliers.
- Improve forecast value-added in demand planning using channel data. Every demand planner should be open-minded to detect unusual and unpredictable demand patterns.
- Align the organization to expect the unpredictable. Following the pandemic, supply chain variability has been relatively low. Enhance organizational alignment by sharing data and fostering active communication.
Wrap-up
The impact of the tariff will be pervasive and unprecedented. There is no prior playbook to use. As a result, there is a need to be more proactive and align the organization to foster a spirit of cooperation and adapt to what is expected to be ever-changing market conditions.
Key takeaways to combat tariffs
- Expect supply shortages. Know faster and respond better—work on being a more capable trading partner. Share data and build relationships. Build capabilities for alternative sourcing and bill of materials, and drive bidirectional orchestration of source, transform, and delivery capabilities based on market shifts. Invest in supplier visibility and prioritize being a reliable trading partner.
- Align for success. Build cross-functional leadership. Start by auditing your current capabilities. Do you have technologies deployed that could help? What is the state of readiness of your third-party logistics and contract manufacturers? How effective is your Sales and Operations planning process?
- Variability will be higher. Movement across borders will slow, and shipment variability will be higher. Implement a tracking system to understand how lead times are changing. Don’t let your planning system be a set-it-and-forget-it deployment. Instead, track lead time as a master data element and use it to inform planning.
- Don’t just focus on supply. Also, drive demand signal improvements. Tariffs will increase costs and affect customer sentiment. History will not be a good guide for the buying pattern. Bi-directional tariffs across borders can also evoke emotional responses that may alter consumers’ purchasing behaviors.
- Reshore where you can. Recognize where you cannot. As the research in this report shows, reshoring is not an option in many industries for many reasons. Focus on improving reliability.
Conclusion
It’s time for SMBs to be proactive! As the tariff landscape shifts, businesses that fail to adapt risk falling behind. The rapid fluctuations in tariff levels and the complexities of bi-directional tariffs are reshaping supply chain management in ways that many SMBs are unprepared for.
Data is no longer just information—it’s a commodity that drives competitive advantage. With the right tools, those who can harness data effectively will be in the best position to manage risk, control costs, and turn uncertainty into opportunity. Enhancing team alignment is just as critical. By sharing data and fostering active communication, businesses can respond faster and more effectively to supply chain volatility.
Advanced inventory management solutions are no longer a luxury—they’re essential. SMBs need real-time analytics to model the impact of tariffs, identify alternative sourcing strategies, and stay ahead of potential supply shortages.
But here’s the reality: can businesses afford to wait? SMBs risk supply disruptions, rising costs, and shrinking margins without the ability to assess and respond continuously to changing conditions. The choice is clear—adapt now, or risk being left behind.
