This has been a turbulent year for supply chain and logistics operators. In spite of a long-term growth trend driven by brands and OEMs’ increasing focus on direct-to-consumer e-commerce, pressures on supply chain stakeholders are mounting in the wake of new tariffs.
Following are some current leading indicators that signal the tariffs’ impact on supply chains.
Companies are being forced to focus on short- and medium-term risk mitigation to deal with a lack of economic predictability due to current trade policy. This comes at the expense of long-term execution and investment strategies for healthy growth, sensible consolidation, technology investments, and efficiency improvements.
Even before the tariffs came into effect, customers of logistics providers began asking for price concessions on pick, pack and ship services, despite having annual pricing escalator clauses in established multi-year contracts.
Brands and product companies have begun to forecast reductions in U.S. consumer demand for discretionary purchases, as consumers feel the effects of higher inflation, especially in urban areas. The result has been brands attempting to re-route product to Europe and other regions, away from the U.S. market.
What should operators do to mitigate potential further reductions in demand? Following are some chief financial officer-driven measures that any company should consider to mitigate risk and proactively manage future financial outcomes:
Stress-test revenue and gross margin forecasts with respect to overall profitability and cash flow outcomes, to ensure there’s sufficient “cushion” built into the business. This is especially important with respect to fixed-cost structure in operating expenses. In periods of such uncertainty, the importance of conservatism in financial forecasts cannot be understated;
Expect longer accounts receivable collection times, which will impact cash flow, further underscoring the importance of balance sheet-related stress tests in addition to those focused on profitability.
Be objective when looking at costs. Be prepared to make tough decisions and do more with less, to prepare for what could be an impactful recession. Operators will be happily surprised if it doesn’t happen, but will be glad they prepared months in advance if it does.
Be proactive about technology. This should be a top priority. Executed correctly, investments in technology and automation can improve operational efficiencies while simultaneously accommodating customers’ tariff-driven requests for price concessions.
While it’s still too early to tell if we’re headed into a U.S. recession, it’s critical that companies that have historically relied on China for supply evolve quickly, with respect to their supply chains, operations, finance and approach to technology. No one has a crystal ball, but there are increasing signs that 2026 won’t begin with the record growth in order and unit volumes that we saw in early 2025. Preparing for further tariff-driven shocks, as well as accelerating investment in technology and automation, are critical for business sustainability.
Seth Pinegar is regional director (West Coast USA) of The CFO Centre.