How GovCons With Global Supply Chains Can Manage New Tariffs

New tariffs from President Donald Trump are roiling markets and industries around the world. No longer just a tool of trade negotiations, tariffs can initiate a series of counter-tariffs and other actions, such as state investigations into firms, that can substantially hike prices and costs, foul supply chains and hurt supplier arrangements. But there are ways GovCons and executives with global supply chains can best deal with these tariffs.

One prominent GovCon, Iridium, has developed an innovative shipping partnership to protect itself from import tax increases. The company is broadening a European third-party logistics association created in 2024 to move almost all non-U.S. shipments from Thailand to avoid being subjected to U.S. tariffs. 25 percent of Iridium’s yearly equipment is delivered to U.S.-based customers and the company buys little from China.

Iridium’s Tariff Mitigation Strategy

Matt Desch, an 11-time Wash100 Award winner and Iridium CEO, estimated that a minimum U.S. tariff of 10 percent on Thailand would cost Iridium roughly $3 million in 2025. In this situation, Iridium would eat the cost and not increase prices.

But Iridium could have as much as $7 million in extra costs if Trump raises tariffs on Thailand to 36 percent, which was previously proposed before being tabled.

“While we could choose to mitigate some of the remaining import costs through equipment surcharges to our customers, at this time, we prefer not to undermine our strong market position and business momentum,” Desch said.

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Tariff Management Recommendations for Global Supply Chains

The consulting firm McKinsey & Company recommends businesses with global supply chains create a geopolitical nerve center with an uncommon structure. This is to create all-inclusive plans structured across timeframes instead of simply strategizing immediate responses. This nerve center should have cross-functional organizations that target the entirety of possible tariff impacts on different divisions of the company.

These teams should span multiple time zones to make sure the company can tackle emergency issues and other challenges that extend into the future. Lastly, a planning group informed by original analytics should work with initiative teams to allow rapid decision-making. Companies should broadly target these initiatives, though they may vary depending on the company:

• Cost reduction and cash preservation. The goal of this initiative is to slash costs and conserve cash so an organization is prepared for different scenarios. Too many organizations discover the need for better efficiency in the short- to medium-term in light of potential reduced demand from price hikes, a possible macroeconomic slump and cost increases on purchases due to supplier pass-throughs of tariffs.
• Inventory and supplier operations. The accuracy of supplier filings will be important given the boost in criteria complexity that shipments must meet at border crossings. This team should target improving oversight of these filings, making sure enough orders of important stock will have limited tariff exposure. It should also create an apparatus for providing data to suppliers.
• Stakeholder engagement. This team should let government agencies and other stakeholders know, when appropriate, about the operating realm and consequences tariffs are having on individual organizations and industries.

How to Reduce Tariff Shocks

Moody’s, a provider of data, intelligence and analytical tools to business leaders, recommends a number of proactive strategies for companies to balance the operational and financial shocks from tariffs. These approaches include:

• Better supplier awareness. With tariffs creating precariousness, it’s important for companies to better understand their suppliers, including their financial health and regulatory issues. Devices such as financial fitness probes and compliance audits can provide advanced notice of potential trouble.
• Pricing and contract changes. Firms will have to adjust supplier agreements to adjust for tariff-related cost hikes. Changing pricing models because of new cost arrangements can help ensure profit margins while maintaining clarity with customers.
• Working together across the supply chain. Improving associations with suppliers and performing collaborative planning can help combat mutual challenges from tariffs. Better communication and joint risk mitigation strategies can create better relationships and strengthen supply chain flexibility.

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