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What Do Tariffs Mean for Global Manufacturing and Supply Chain?

Tariffs are making headlines in the manufacturing world, and for good reason. In today’s global supply chains, a single tariff decision can impact a production line, affecting costs, lead times, and sourcing strategies.

Few factors influence global supply chains as much as tariffs and import duties. Whether you’re importing machined components, sourcing injection-molded parts, or coordinating international prototyping, understanding these factors is critical for managing cost, timelines, and supplier relationships.

A tariff is not just a tax—it’s a signal. It influences where companies choose to source, which materials they prioritize, and how they design for manufacturability. Even small percentage shifts in tariff rates can impact your entire product lifecycle, potentially doubling lead times or pushing a supplier outside your budget.

At Fictiv, we believe manufacturers should never be caught off guard by changes in trade policy. That’s why we created this guide to help you navigate the complexities of tariffs and import duties. We’ll walk you through the core definitions, clarify the differences between tariffs and duties, and share best practices to future-proof your supply chain strategy and secure the lowest total landed cost.

Tariffs can impact your entire product development lifecycle.

💡 Best Practice: Regularly monitor tariff trends to anticipate potential cost changes and protect your supply chain planning.

Tariffs vs. Import Duties: What’s the Difference?

What Is a Tariff?

A tariff is a tax imposed on imported goods by a country’s government, typically to protect local industries or regulate trade flows. Essentially, if imported materials or goods are more expensive, it gives people an incentive to buy domestic goods. Tariffs are usually calculated as a percentage of the product’s declared value, though in some cases they may be based on quantity or weight.

Example: A company importing precision fasteners from an overseas supplier may face a 10% tariff. If the shipment is valued at $15,000, an additional $1,500 must be paid as part of the customs process. This added cost directly impacts the total landed cost and overall project budgeting.

Tariffs can vary based on product classification, country of origin, and trade agreements. They’re applied using internationally standardized codes (more on that below), and they can change with little notice, making it vital for manufacturers to monitor updates and plan for variability.

❗️ Importing aluminum or steel products or materials? Read:  Understanding Section 232 Tariffs

What Is an Import Duty?

An import duty is a broader term encompassing any type of tax levied on imported goods. It includes tariffs, but also covers:

  • Customs duties: General taxes based on item category or value (often used interchangeably with “import duties,” though customs duties can also include export duties).
  • Excise duties: Taxes applied to specific goods like alcohol or tobacco
  • Anti-dumping duties: Taxes imposed on certain goods from specific foreign firms to prevent or counteract “dumping,” the practice of selling products below fair market value, which can harm domestic businesses
  • Countervailing duties: Taxes imposed on goods that receive foreign government subsidies, intended to protect domestic industries from unfair competition

Example: A manufacturer importing cast aluminum housings may pay both a standard import duty (e.g., 5% of the value) and an additional countervailing duty if the product is subsidized in its country of origin.

Import duties can be triggered by trade agreements, national security policies, or the enforcement of international rules. They’re not only financial concerns—they also carry compliance implications, as errors in classification or valuation can lead to penalties.

💡 Best Practice: Train procurement and logistics teams to differentiate between tariffs and import duties to avoid miscalculations in landed costs.

Tariffs have a significant impact on global trade.

How Tariffs Work in Global Trade

Understanding how tariffs are applied is essential for navigating global manufacturing and ensuring accurate landed cost calculations. Tariffs are part of a structured international trade system, involving classification codes, customs declarations, and regulatory oversight.

How Are Tariffs Imposed and Collected?

Tariffs are set by national governments and are typically administered through customs agencies. When goods cross a border, importers are required to declare the product, its value, and the country of origin. Based on this information, the relevant tariff is applied.

Entities involved include:

  • Importers (usually manufacturers, distributors, or logistics providers)
  • Customs brokers (facilitators of import compliance and documentation)
  • Customs authorities (enforce tariff rules and collect duties)

Product Classification: The Role of HS Codes

All goods traded internationally are assigned a Harmonized System (HS) code, developed by the World Customs Organization (WCO). This code determines how the product is classified and what tariffs apply. HS codes consist of at least six digits and may be extended further depending on the importing country.

Example: A 10mm steel bolt might be classified under a different HS code than a similar-sized aluminum bolt, and each code could carry different duty rates or restrictions.

Getting the classification wrong can result in delays, fines, or overpayment—so accuracy is critical. Many manufacturers partner with customs brokers or use tariff classification tools embedded in ERP systems to reduce risk.

❗️ Ordering prototype or commercial parts? Read our Guide to International Shipping Requirements

Tariff Exclusions and Exemptions

Governments occasionally allow exclusions or temporary waivers on certain products. These can be based on product availability, national security considerations, or trade negotiations. Applying for exclusions often requires documentation, technical justifications, and ongoing monitoring of policy updates.

💡 Best Practice: Stay up to date on changes relevant to your product category and be ready to adjust sourcing or classification accordingly.

Tariffs and changes lie ahead for global manufacturing.

Types of Tariffs

There’s no one-size-fits-all approach to tariffs. Depending on the product, origin, and policy goals, different types of tariffs may apply. Understanding these distinctions can help manufacturers optimize sourcing decisions and manage risk.

Ad Valorem Tariffs

Ad valorem tariffs are the most common type of tariffs and are calculated as a percentage of the product’s declared value. These tariffs apply uniformly, regardless of the unit quantity, and tend to be used for more complex or finished goods. Trade enforcement actions under Section 301, Section 232, and IEEPA typically result in ad valorem tariffs.

Real-World Example: The Section 301 tariffs on Chinese electronics parts are currently a 25% ad valorem tariff. So, a U.S. company importing $50,000 worth of circuit boards from China would pay $12,500 in tariffs.

Specific Tariffs

Specific tariffs are fixed fees per unit of measure—by weight, quantity, or volume—regardless of the item’s value. These tariffs tend to be applied to raw materials or bulk commodities and can disproportionately affect lower-cost items. Section 321 programs often involve specific tariff thresholds.

Real-World Example: A specific tariff might be $1.00 per liter on imported industrial lubricants. Whether the lubricant is high-end or generic, the importer pays the same $1.00 per liter.

Compound Tariffs

Compound tariffs combine both ad valorem and specific elements. This structure ensures that importers pay a minimum amount while still accounting for product value.

Real-World Example: An imported mechanical assembly might be taxed at 3% of the declared value plus $2 per unit, ensuring both value-based and quantity-based revenue.

Special Tariffs and Duties

Some tariffs are enacted for specific policy reasons and may vary widely in scope and duration:

  • Anti-dumping duties: Taxes applied when a foreign producer sells goods at a price below the fair market value.
  • Countervailing duties: Taxes applied to offset foreign government subsidies on exported products.
  • Safeguard duties: Temporary measures to protect domestic industries from import surges.
  • Reciprocal tariffs: Trade tariffs imposed by a country in response to tariffs placed on its exports by another country

Example: During the U.S.–China trade dispute, the U.S. imposed Section 301 tariffs on a wide range of Chinese imports. In response, China introduced reciprocal tariffs on U.S. goods such as soybeans and automotive parts, raising duties by up to 25% to match U.S. measures.

  • Retaliatory tariffs: Trade tariffs imposed by a country to punish or pressure another country in response to trade practices or tariffs perceived as unfair
  • Universal tariffs: Flat-rate tariffs applied broadly across a wide range of goods from a particular country or group of countries, regardless of the specific product type or classification, to streamline enforcement or signal a broader trade posture (i.e., send a political or strategic message)

Example: A government might impose a universal tariff of 10% on all imports from a non-preferred trade partner, effectively applying the same rate to machinery, electronics, textiles, and raw materials alike.

❗️ Looking for key strategies? Read: Strategies for Tariff-Proofing Your Supply Chain

How Different Tariffs Impact Manufacturing

Manufacturers of CNC-machined parts, injection-molded components, electronics, or assemblies may encounter all of the above, depending on their supplier network. Understanding how and when different tariffs apply can inform smarter supplier selection, better cost modeling, and strategic long-term planning.

For example:

  • If you’re sourcing aluminum extrusions from multiple countries, knowing whether you’re subject to a specific tariff (e.g., by kilogram) or an anti-dumping duty can determine whether to consolidate suppliers or diversify further.
  • If you’re prototyping with internationally sourced parts, ad valorem tariffs may fluctuate with material costs, which could affect low-volume unit economics.

💡 Best Practice: Understand the specific tariff structure (ad valorem, specific, compound) applied to your goods to optimize compliance and budgeting.

Incoterms and How They Impact Tariffs

When it comes to international trade, Incoterms (International Commercial Terms) define the responsibilities of buyers and sellers throughout the shipping process—including who pays for tariffs and duties. These standardized terms are issued by the International Chamber of Commerce (ICC) and play a crucial role in how total landed costs are calculated.

For manufacturers, choosing the right Incoterm can mean the difference between a smooth import process and unexpected tariff liabilities.

Incoterms rules chart for logistics, imports, and exports.

What Are Incoterms?

Incoterms establish who is responsible for:

  • Export/import clearances
  • Freight costs
  • Insurance
  • Duties and tariffs

These terms are especially important when importing mechanical parts, electronic assemblies, or raw materials across borders, as misunderstandings can result in delayed shipments or added costs.

Common Incoterms in Manufacturing

Here are three frequently used Incoterms and how they affect tariff responsibilities:

EXW (Ex Works) Incoterms

  • Seller responsibility: Only responsible for making goods available for pickup.
  • Buyer responsibility: Full responsibility from pickup, including all transportation, duties, tariffs, customs paperwork, and associated risks and costs.
  • Use case: Commonly used when buyers want complete control over shipping logistics or work with a third-party freight forwarder.

FOB (Free On Board) Incoterms

  • Seller responsibility: Deliver goods onto the vessel at the port of shipment.
  • Buyer responsibility: Manages freight, import duties, customs, and all risks and costs from that point forward.
  • Use case: Commonly used when manufacturers work with overseas suppliers but handle their own shipping logistics.

DDP (Delivered Duty Paid) Incoterms

  • Seller responsibility: Handles everything—shipping, customs clearance, duties and tariffs, and all risks and costs—until the goods reach the buyer’s doorstep.
  • Buyer responsibility: Only responsible for unloading goods.
  • Use case: Ideal for buyers who want a turnkey delivery solution without the hassle of managing international compliance.

❗️ Ordering prototype parts? Learn how DDP applies.

Choosing the Right Incoterm for Tariff Management

Selecting an Incoterm isn’t just about convenience—it directly affects your exposure to import duties and tariffs, as well as the final cost of your parts. 

If you’re looking to simplify your import process and reduce compliance risk, opting for DDP may be the most efficient route. However, if you want to maintain control and possibly optimize costs, EXW or FOB could be a better fit.

💡 Best Practice: Choose Incoterms carefully in contracts to clearly define who is responsible for customs clearance, duties, and tariff costs.

Tariff Impact on the Manufacturing Supply Chain

Tariffs don’t just affect pricing—they reshape end-to-end supply chains. For manufacturers, they act as a cost multiplier, influencing decisions around sourcing, production, logistics, and even design. When tariffs change, they can have wide-reaching effects on global operations.

Cost Amplification: The Multiplier Effect

Even a seemingly small tariff—say, 5%—can significantly increase the total landed cost once you factor in logistics, insurance, and overhead. This can:

  • Erode profit margins
  • Push customers to seek alternative vendors
  • Create pressure to redesign or re-source parts

Example: A company sourcing injection-molded enclosures from multiple countries may discover that importing from Country A incurs a 10% tariff while Country B qualifies for preferential duty-free treatment under a trade agreement. That difference can be the tipping point between staying under budget and exceeding cost targets.

Lead Times and Supplier Strategy

Tariffs often trigger shifts in supplier strategy. If a primary supplier suddenly becomes cost-prohibitive due to new duties, companies may scramble to onboard secondary or regional vendors, which can:

  • Extend lead times
  • Introduce quality risks
  • Require emergency inventory planning

Real-World Scenarios

While the specifics may change, the pattern remains: manufacturers with flexible, well-documented supply chains adapt quickly, while others are left with delays and unexpected costs.

  • A mechanical parts manufacturer might keep alternative suppliers in two or more regions to hedge against potential tariff changes.
  • An OEM building global prototypes may design with substitute materials that avoid heavily taxed imports.

💡 Best Practice: Map your entire supply chain to identify tariff exposure points early and build flexibility into sourcing strategies.

Tariff Mitigation Strategies for Manufacturers

Tariffs can be an unavoidable part of global trade, but there are ways for product designers and manufacturers to mitigate their impact. With the right strategies, businesses can reduce tariff exposure, lower landed costs, and build a more resilient supply chain. These tactics don’t rely on knowing the future of trade policy—they’re evergreen tools you can implement today.

First Sale Rule

A “first sale rule” is a customs valuation rule allowing an importer to base the declared value of goods on the price paid in the first sale of a multi-tier supply chain (e.g., manufacturer → wholesaler → importer), rather than the final sale price. It often results in a lower declared value and therefore a lower tariff. 

Example: If you’re buying a part from a U.S. distributor who sourced it from a factory in Vietnam, you may be able to use the factory price instead of the distributor’s markup when calculating tariff costs.

Tariff Engineering

Tariff engineering involves designing or modifying a product in a way that legally reclassifies it under a lower-duty HS code.

Example: A product might be assembled in such a way (e.g., unpainted or partially assembled) that it qualifies for a reduced rate or bypasses certain product classifications, without compromising function.

Country of Origin Planning

Tariffs are often based on the country of origin, not the country from which goods are shipped. Manufacturers can plan sourcing or final assembly locations to take advantage of favorable trade agreements.

Example: Moving the final assembly of an electromechanical part to a country with a free trade agreement may exempt it from high tariffs.

Free Trade Zones and Bonded Warehousing

Free Trade Zones (FTZs) are secure areas typically located near ports or airports, where goods can be handled with relaxed customs requirements. Bonded warehouses are customs-authorized storage facilities where imported goods can be temporarily stored without incurring duty payments. 

These special areas allow goods to be imported, stored, and even assembled without incurring tariffs immediately—duties are only applied when the goods officially enter domestic circulation.

  • Great for bulk imports or staged production runs
  • Especially useful when rerouting or exporting components again
Free trade zones are secure areas where goods can be handled with relaxed customs requirements.

Duty Drawbacks

If you pay duties on goods that are later re-exported, you may be eligible for a partial refund. This is particularly valuable for manufacturers that assemble globally but distribute internationally.

Partnering with Strategic Experts

Sometimes the best mitigation strategy is finding the right partner. Consider working with:

  • Customs brokers for classification and compliance
  • Trade attorneys for legal interpretations and appeals
  • Sourcing specialists (like Fictiv) for multi-region supplier strategies

💡 Best Practice: Leverage strategies like free trade agreements, First Sale Rule, and bonded warehousing to minimize tariff liabilities. 

Tariff Management in Practice: Tools & Support

Once mitigation strategies are in place, manufacturers still need ongoing tools and systems to manage tariff complexity. Tariff rates can change. HS codes can be revised. Supplier regions can shift. That’s why tariff management isn’t a one-time task—it’s a continuous discipline.

Tariff Forecasting and Modeling

Use cost modeling tools to simulate how tariff changes might affect your landed cost under various sourcing scenarios.

What to look for:

  • Sensitivity analyses for different suppliers and regions
  • Scenario planning tools for trade policy shifts
  • Integration with BOM and procurement platforms

Working with Trade Compliance Experts

Even the best systems can’t replace the insight of professionals who track regulatory developments and help prevent costly errors.

  • When to engage experts: New product launches, changes in suppliers, unfamiliar classifications
  • Value add: Reduced audit risk, accurate documentation, peace of mind

Leveraging Tariff Management Technology

Many modern ERP systems and sourcing platforms offer built-in tariff management tools, including:

  • Real-time landed cost calculators
  • Auto-classification based on product specs
  • Alerts for new duties or rule changes

These tools are especially valuable for manufacturers managing complex, multi-region supply chains or operating at scale.

Fictiv for Tariff Management

At Fictiv, we provide more than parts—we provide clarity. Our global teams are equipped to help customers:

  • Source from optimal regions to avoid excessive tariffs
  • Navigate international shipping requirements
  • Estimate total landed costs upfront to avoid budget surprises

By integrating engineering, sourcing, and logistics under one digital platform, we reduce friction and increase visibility in your global operations.

💡 Best Practice: Leverage available tariff management technologies or trusted partners like Fictiv to proactively manage your supply chain and minimize tariff liabilities.

Latest Tariff Updates [2025 and Beyond]

While the majority of this guide is designed to be evergreen, tariff regulations and trade policies are dynamic. Shifts in political leadership, economic strategy, or global events can all influence tariff structures with little notice. That’s why it’s critical to monitor updates from authoritative sources and stay agile in your supply chain strategy.

For current and breaking updates, visit:

 USTR Presidential Tariff Actions
Customs and Border Protection (CBP)
 World Trade Organization (WTO)

Conclusion: Staying Proactive in a Dynamic Trade Environment

Tariffs are an integral part of the global manufacturing equation, and their impact is too significant to overlook. From product design and sourcing strategy to shipping and customs compliance, understanding tariffs is essential to optimizing costs and minimizing risk.

Here’s what we covered:

  • What tariffs and duties are and how they affect your business
  • How tariffs are applied, calculated, and classified
  • Types of tariffs and how to recognize them in sourcing decisions
  • The role of Incoterms in determining duty responsibilities
  • The impact of tariffs on your supply chain and lead times
  • Strategies to mitigate and manage tariffs using tools, partners, and best practices
  • Ongoing resources to keep you informed of the latest changes

Why It Matters

It’s crucial to be proactive, not just reactive. Tariff-savvy companies benefit from:

  • Reduce operational surprises
  • Lower landed costs
  • Improve sourcing flexibility
  • Gain a competitive edge through smarter planning

How Fictiv Can Help

We don’t just source parts—we design smarter ways to build. Our global supply chain network and logistics experts help you:

  • Forecast tariff impact
  • Identify lower-duty alternatives
  • Navigate compliance confidently
  • Optimize international shipments with options like DDP delivery

💡 Best Practice: Continuously assess risk, update policies, and stay up to date on changing and emerging tariffs to maintain your supply chain resilience.

Ready to Reduce Tariff Risk?

Whether you’re prototyping or scaling to production, our team of trade compliance experts and global sourcing strategists is ready to support you.

Talk to a Tariff Expert at Fictiv

Fictiv can help support tariff mitigation.

Tariffs FAQ

Have specific questions about how tariffs work or how they might affect your manufacturing operation? You’re not alone. Here are answers to some of the most frequently asked questions by product teams, sourcing managers, and operations leads navigating global trade.

What is the difference between a tariff and a tax?

A tariff is a type of tax specifically applied to imported goods. While all tariffs are taxes, not all taxes are tariffs. Tariffs are usually imposed to regulate trade and protect domestic industries, whereas other taxes (like sales tax or VAT) apply more broadly across all types of goods and services.

How do I know if my product is affected by a tariff?

The best way to find out is by classifying your product with the correct Harmonized System (HS) code. This code determines the tariff rate based on the product type and country of origin. You can look up HS codes via customs databases, work with a customs broker, or use classification tools provided by logistics platforms.

Can I avoid tariffs legally?

Yes, in some cases. Here are a few legal ways to reduce or avoid tariffs:

  • Use the First Sale Rule to declare a lower transaction value
  • Reroute production or final assembly to countries with free trade agreements
  • Leverage tariff engineering to qualify your product under a different classification
  • Explore Free Trade Zones or bonded warehousing
  • Claim duty drawbacks for exported products

What are the risks of ignoring tariff classifications?

Misclassifying a product, under-declaring its value, or ignoring country-of-origin requirements can lead to:

  • Customs audits and delays
  • Fines and retroactive duties
  • Loss of import privileges
  • Brand reputation damage

Getting classification right is critical—especially in industries where compliance is heavily monitored, like aerospace, defense, electronics, or medical devices.

How often do tariff rates change?

Tariff rates can change frequently depending on trade policy decisions, international negotiations, or economic sanctions. That’s why manufacturers should track changes using:

  • USTR announcements
  • Customs and Border Protection (CBP) updates
  • World Trade Organization (WTO) rulings
  • Alerts from trade compliance partners

Can Fictiv help me navigate tariffs?

Absolutely. At Fictiv, we offer:

  • Support for DDP shipping, so duties and tariffs are handled for you
  • Access to global sourcing experts who can help evaluate tariff exposure
  • Recommendations for alternative suppliers and manufacturing strategies

Get Support: Talk to a Tariff Expert at Fictiv

Final Thoughts on Tariffs

Tariffs and import duties may be complex, but with the right knowledge and partners, they become manageable—and even a source of strategic advantage. Bookmark this guide, revisit the resources linked throughout, and stay ahead of the changes shaping global manufacturing.

Ready to get proactive about tariff management for your order? Sign up with Fictiv today.

Get proactive about tariffs with Fictiv.

Glossary of Key Terms

TermDefinition
TariffA tax imposed by a government on imported or exported goods.
Import dutyA tax charged on goods brought into a country from abroad.
Total Landed Cost (TLC)The complete cost of a product once it has been delivered and is ready for use or sale, including purchase price, shipping, duties, taxes, and other fees.
Harmonized System (HS) codeAn internationally standardized code used to classify traded products for customs purposes.
Ad valorem tariffsThe most common type of tariffs, calculated as a percentage of the value of the imported goods.
Specific tariffsTariffs charged as a fixed amount per unit of imported goods, regardless of their value.
Compound tariffsTariffs that combine both ad valorem (percentage-based) and specific (fixed-rate) charges on imported goods.
Reciprocal tariffsTariffs imposed in response to tariffs set by another country, aiming to balance trade terms.
Retaliatory tariffsTariffs imposed to punish or pressure another country in response to unfair trade practices.
Universal tariffsFlat-rate tariffs applied broadly across a range of goods from specific countries, regardless of product type.
Incoterms (International Commercial Terms)Standardized trade terms that define the responsibilities of buyers and sellers in international transactions.
EXW (Ex Works)An Incoterm where the seller makes goods available at their premises, and the buyer bears all costs and risks from pickup onward.
FOB (Free On Board)An Incoterm where the seller delivers goods onto the vessel at the port, and the buyer assumes risks and costs from that point.
DDP (Delivered Duty Paid)An Incoterm where the seller handles all transport, duties, and risks until the goods reach the buyer’s location.
First Sale RuleA customs valuation rule allows import duties to be based on the price paid in the first sale of a supply chain (i.e., factory price vs. distributor markup price), often lowering duty costs.
Free Trade Zone (FTZ)A designated area where goods can be imported, handled, and re-exported without paying customs duties until they enter the domestic market.
Bonded warehouseA customs-authorized storage facility where imported goods can be held without paying duties until they are released for domestic sale or use. 
Trade deficitA situation where a country imports more goods and services than it exports.
Trade surplusA situation where a country exports more goods and services than it imports.