The proposed tariffs by the current Trump administration for 2025 have significant cost implications for manufacturing and distribution chains, though quite a few of the additional long-term implications can easily go unnoticed for SMBs. In addition to raw materials, individual parts, fixed equipment and other components within your supply chain, the other pieces that help your business run will also be affected – including your technology.
Manufacturers and distributors relying on legacy on-premise IT assets, i.e., servers, will face new price rises from the tariffs related to their assembly or delivery. Conversely, software systems such as ERP (enterprise resource planning) applications will provide new opportunities for navigating the increasing costs of each tariff on your business goods and materials.
Continue reading below to learn more about how the right solutions can help you manage the cost increases of the 2025 tariffs:
How Tariff Costs are Impacting Manufacturing and Distribution
According to research by The Budget Lab at Yale University, the current tariff rates are the highest since 1934 and are contributing to an overall 1.7% increase in prices across the U.S. Various industries are being affected differently by this hike and the strategy behind it, with manufacturing and distribution predicted to see both new challenges and opportunities for domestic operations. Whether production and supply chains return stateside and within what timeline, in the short-term, many manufacturers, distributors and retailers will inevitably see some level of pricing changes upstream.
Hidden Tariff Costs You May Have Missed
While the direct cost increases from tariffs are immediately visible on your balance sheet, there will be several expenses that may be easy to miss and that can still significantly impact your operations:
- Administrative burden – Each new tariff brings additional compliance requirements and documentation needs that consumes valuable time for your team
- Supply chain disruptions – Finding new suppliers typically takes months but may need to be compressed into weeks
- Working capital constraints – Increasing buffer stock to hedge against price increases ties up your capital
- Product redesign expenses – Switching to domestic materials often requires potentially costly redesign and testing
- Reduced export competitiveness – Higher input costs could impact your products’ competitiveness internationally
- Customer relationship strain – Increased costs could create difficult decisions about passing the increase to customers or absorbing them internally
Tariff Impacts on Technology Costs
The computing hardware that powers modern manufacturing and distribution technology stacks will inevitably be affected by tariff cost increases, as many of the components that go into the physical equipment are often constructed overseas. While experts and observers continue to argue over the speed at which the U.S. can ramp up domestic production for critical pieces like chips, in the interim, your business will likely face higher pricing for servers and other hardware.
How Modern Manufacturing and Distribution ERP Systems Help
For businesses relying on manual processes or disconnected systems, the new challenges brought on by increasing tariff costs could become overwhelming quickly. This is where choosing the right ERP solution will provide opportunities to manage these increases and potentially offset at least some of their impact, as well as for finding new ways to capture value from the inevitable changes in your market.
Cloud vs On-Premise ERP
Businesses in the manufacturing industry have historically adopted new solutions slowly and gradually, with older legacy systems often remaining in place for years or even decades until the costs for supporting them outstrips the value they return. This has also created challenges for many manufacturers regarding security and interoperability concerns between mission-critical applications and IT assets, and with the tariffs increasing the price of hardware components it will likely introduce more cost drawbacks as well.
Cloud ERP already delivers a wide range of benefits for manufacturing and distribution operations, but with tariff costs added as an emerging factor, migrating to a completely digital SaaS (Software as a Service) or privately hosted system provides a greater advantage in this new normal. These options create opportunities that are not possible with an on-premise solution, including:
- Cut hardware tariff exposure – Eliminate concerns around tariffs for hardware and equipment components
- Faster compliance updates – Stay current with evolving regulations as they change for new trade realities
- Optimize computing resources – Scale the volume of network performance you need on-demand without having to install new servers or create storage space
- Eliminate maintenance concerns – Let your IT team worry about more important tasks instead of diverting time and effort to server maintenance
- Capture anywhere, anytime visibility – Cloud systems retain real-time, secure connections that allow your team to exchange data at up to instantaneous speeds from any location with Internet
Financial Visibility and Modeling
ERP applications are the “crown jewels” of many IT stacks because they are the natural foundation for storing and managing data from so many processes and business units. Though this terminology is primarily for security concerns, it still aligns with the role these systems play in acting as a central node for reporting, which creates opportunity to leverage your enterprise accounting solution to stay on top of changes caused by the new tariffs. Whether internally or externally throughout your supply chain or value chain, you will be able to utilize the right solution to:
- Real-time margin analysis – See exactly how tariffs affect profitability by product, category, and supplier
- Scenario planning – Model different responses to tariff changes before implementation
- Automated cost adjustments – Update product costs and pricing as tariff policies evolve
- Multi-currency management – Handle international transactions with built-in exchange rate calculations
Supply Chain Optimization
The real-time connectivity of cloud ERP systems allows for greater flexibility, agility and scalability in adapting to emerging supply chain challenges, letting you pivot as needed with quick access to data. Your solution will help you see changes as they begin to form, giving you time to restructure and:
- Supplier diversification tools – Quickly identify and onboard alternative vendors
- Inventory optimization – Balance tariff hedging with working capital efficiency
- Production planning – Adjust manufacturing schedules based on material availability and cost
- Advanced planning & scheduling – Optimize production to account for changing input costs
Landed Cost Management
One of the most useful functions of a robust ERP system is the ability to help you optimize landed costs – the total expenses involved in getting products to their final destination. While this process does not eliminate tariffs directly, you can leverage it to strategically reduce other cost components and work towards offsetting their impact through:
- Shipping optimization – Negotiate improved terms and consolidate shipments
- Packaging efficiency – Redesign packaging to reduce freight and handling expenses
- Trade program utilization – Leverage Foreign Trade Zones (FTZs) for duty deferral
- Classification review – Work with experts to identify legitimate lower-duty HTS codes
- Blend domestic & imported components – Create a balanced approach to tariff exposure
How SWK Technologies Can Help You Navigate Tariff Costs
SWK Technologies brings decades of experience in providing technology solutions for the manufacturing and distribution industries, with close relationships with multiple leading ERP publishers like Sage and Acumatica, and an award-winning team of expert implementation consultants. Whether you are searching for strategies to offset tariff cost increases or looking to restructure your supply chain in response to changing trade policies, the team at SWK will provide the technical expertise and strategic guidance your business needs to transform your ERP system into a powerful tool for tariff navigation.
Transform Your Approach to Tariff Cost Management with SWK
Stop letting unpredictable market changes disrupt your production planning and erode your profitability. SWK Technologies will help you implement a manufacturing and distribution ERP solution that transforms your approach to tariff management, giving you the tools to convert potential disruption into strategic advantage.
Contact SWK here to discover how we can help you navigate tariff impacts on your manufacturing or distribution operations with confidence.