How to cope with tariffs: the corporate governance perspective

How to cope with tariffs, a corporate governance analysis and survival guide as costs mount amid a bubbling trade war.  

Tariffs are making headlines across the world in 2025. They start with Donald Trump and inspire a tit-for-tat response among some of the world’s biggest trading partners, with persistent showboating and determination to not be the country that blinks first. 

With global supply chains already under strain, businesses are scrambling to make sense of the geopolitical standoff that could rampage their supply chains and force a considerable re-think of strategy. Economic nationalism is shaking the foundations of corporate norms, and boards are left in an ocean of uncertainty. 

Tariffs are like any other risk, they represent a direct threat to corporate strategy if they’re not handled correctly. As a director, the biggest mistake you could make is to think that risk can’t reach you, or will “blow over” before you need to worry. 

Not in this economy. Preparation is everything.

Just to recap if you’re new to the issue, or it’s never affected you before:

• Tariffs are a tax on goods and services that cross international borders.
• The importing company pays the tariffs.
• When tariffs increase, they add a cost to the importing company’s supply chain. The company can either take this hit, find new suppliers to avoid tariffs or, more commonly, simply charge their customers more. 
• If tariff increases are big enough or uncertain enough, they may raise serious questions about whether a company’s strategy is still fit for purpose. 

If you’re a director, it’s okay to feel lost about how tariffs might impact your business in 2025. Today’s global economy is seriously unpredictable, and assuming you’ll have total control over such a critical external factor is unrealistic. 

What you can do is learn how to be ready.

Aside from the obvious fact that the threat of tariffs will likely remain high for at least the next four years, here are some finer details to explain why they’re important.  

• Tariffs can fuel cost inflation and drive down profit margins – one of the most crucial metrics for a company’s performance, and something directors need to answer for. 
• Tariffs can change the competition landscape, as companies which rely more on international imports in their supply chain suddenly face bigger challenges. Finding a quick and durable solution to this is an urgent part of governance responsibility.
• Tariffs often involve reputational risk, as geopolitics forces companies to choose sides, potentially alienating stakeholders. 
• Compliance is an even bigger challenge than usual when tariffs significantly increase costs; it’s a stretch on priorities. 

Handling tariffs properly means taking a two-step, non-panicked, forward-thinking approach. First, you must decide how much tariffs will/may impact your firm, then implement measures to minimise exposure.

You can’t assess without raw data, fed by current market trends and your company’s historical performance in the face of higher costs. Ultimately, it’s all about asking the right questions – one of the most important functions of a board of directors. 

Things to focus on include:

• What percentage of your supply chain is exposed to new tariffs?
• Can you absorb the increased costs, or do you need to adjust pricing?
• Are competitors benefiting from more favourable trade conditions?
• Are there alternative suppliers in non-tariffed regions?
• How will your customers respond to price increases?

If the damage is significant or likely to be in the future, boards must push management to act fast. The problem is that there are several different actions you could take; finding the right one is a subjective exercise, depending on the nature of your company and how it stays financially healthy. So, ultimately, the final call is yours. However, what’s below will get you started on a game plan. 

• Supply chain diversification: If tariffs raise the prices of your imports to unsustainable levels, you could diversify your supply chain to include domestic producers. This may not always be possible, but it can be a quick fix if it is. 
• Contract renegotiations: You could work with suppliers to agree on a balanced approach to paying the new costs – one which doesn’t hit any company too hard. 
• Pricing strategy shifts: Nobody likes a price increase to cover rising costs, but there are ways it can be done with minimal damage to the stakeholders involved. 
• Strategic relocation: One of Donald Trump’s main reasons for new tariffs is that he wants to force foreign companies to set up US shops and employ more American workers. Whether this makes sense on the grand scale is the subject of much debate, but think about whether it could apply to you. 
• Government engagement: Get together with industry colleagues to form a solid campaign on the tariffs issue you can bring to your government. This won’t fix anything overnight, but it might give you a longer-term voice to help your strategy. 

Waiting to act is not an option. The companies that move swiftly will be the ones that stay competitive.

Tariffs are becoming a new currency in today’s geopolitically polarised world, and companies will often have no choice but to engage with them. 

In many cases, they’re a clear and immediate threat to corporate strategy, supply chains, and financial stability. 

Board members must proactively assess risks, strategise responses, and push for decisive action. Those who sit back and hope for the best may find themselves outmanoeuvred—by competitors, regulators, and an unpredictable global trade environment.

How to cope with tariffs: The Corporate Governance Institute