Turning Tariffs into Opportunity: Industry Insights for Middle Market Businesses

Recent tariff expansions have raised significant concerns for middle market businesses. Increased duties on steel, aluminum, and a wide array of imported goods have affected global supply chains and cost structures. Middle market leaders must quickly adapt to protect their profit margins, secure their supply chains, and maintain competitive pricing.

With tariffs on steel and aluminum increasing approximately 15% to 25% and new duties on imports from key trading partners like Canada, Mexico, and China, middle market leaders must act now to protect margins, secure supply chains, and maintain competitive pricing.

But tariffs aren’t just a cost challenge — they represent an inflection point for your business strategy. By understanding the wide-ranging and industry-specific impacts of these tariffs, you may be able to transform disruption into opportunity. Here’s a comprehensive look at the tariff landscape, the industry sectors most affected, and the strategies businesses can deploy to mitigate risks and find growth amid uncertainty.

A Macro View: The Middle Market Squeeze

The latest CBIZ-Hofstra University CEO Survey found that more than half of middle market CEOs are deeply concerned about the financial impact of tariffs. This concern reflects broader economic uncertainties affecting strategic planning and investment decisions.

Unlike large multinationals, middle market businesses often have limited pricing power and narrower margins, making them more vulnerable to cost fluctuations. The Trump administration’s 25% tariffs on steel and aluminum and potential duties on goods from China, Canada, and Mexico are changing cost structures in various sectors. Additionally, removing the de minimis exemption for low-value imports has made it more challenging for businesses that rely on cost-efficient sourcing strategies.

Tariff increases don’t just hit margins — they force businesses to rethink everything from supplier contracts to pricing models.

Industry-Specific Impacts: Winners, Losers, and the Adaptive Few

Understanding how tariffs impact industries differently is crucial for developing effective strategies. This section highlights the sectors that are most affected, as well as the tactics businesses can adopt to stay profitable.

1. Manufacturing: A Costly Chain Reaction

Manufacturers face immediate cost pressures, especially those reliant on imported components and raw materials like semiconductors, steel, and aluminum. Unlike their larger counterparts, mid-market companies may lack the capital to establish new relationships with alternative international suppliers. However, these manufacturers are also more agile in exploring alternative strategies.

Key Strategies:

• Diversify suppliers to regions with more favorable trade terms.
• Negotiate and build strong relationships with suppliers, which can lead to better terms and prices, helping offset tariff costs.
• Invest in automation to reduce labor costs and offset increased material expenses.
• Partner with CBIZ technology advisors to evaluate how technology, such as cloud-based supply chains, can offset new challenges.
• Collaborate with CBIZ advisors to explore duty drawback programs and optimize tariff classifications.

“To navigate the challenges of increased tariffs, companies must adopt a proactive approach by diversifying their supply chains, investing in automation, and exploring innovative pricing strategies.” Michael Sacco, CBIZ Consumer & Industrial Products National Leader

2. Construction: Delays, Disruptions, and Margin Pressures

The construction industry will see raw material costs climb sharply, with higher steel and aluminum prices raising the cost of structural elements like beams and pipes. Supply chain disruptions will also slow project timelines, increase labor costs, and complicate financial planning.

Key Strategies:

• Identify alternative suppliers in non-tariffed regions to reduce dependency on affected imports.
• Explore alternative materials not subject to tariffs.
• Consider forward contracts to lock in prices for materials.
• Stockpile essential materials before tariff implementations to mitigate short-term price hikes.
• Conduct a thorough cost impact assessment and adjust pricing models accordingly.
• Secure long-term contracts with domestic suppliers to stabilize pricing.
• Adopt technology tools for real-time supply chain monitoring.
• Build and strengthen supplier relationships to better manage tariff complexities.

“It will be critical for contractors to understand the country of origin for the materials they purchase for ongoing projects and determine whether materials can be sourced more efficiently from alternative manufacturers.” Joseph Natarelli, CBIZ Construction National Leader

3. Commercial Real Estate: Strategic Adjustments and Cost Management

Real estate developers have already been experiencing an increase in construction costs due to tariffs on building materials like steel, lumber, and imported goods. More expensive development may lead to a slowdown in construction activity or a push for developers to seek less costly alternatives, reducing the supply of new commercial spaces. With higher rents to recoup high construction costs, multifamily rental rates could stagnate or decline.

Key Strategies:

Diversify your supply chain by sourcing materials and strengthening relationships with domestic suppliers.

• Determine where you can make pricing adjustments, carefully weighing the pros and cons of shifting partial increases to buyers and renters or adjusting rental prices for long-term leases.
• Apply hedging strategies such as contracts that lock in material prices.
• Consider whether you can switch to other building approaches, such as modular construction.
• Engage in industry efforts to advocate for possible exemptions from certain tariffs.
• Take advantage of incentive programs, such as those that reward builders for energy-efficient buildings, to offset cost increases due to tariffs.

4. Retail and Consumer Goods: Pricing Pressures and Sourcing Shifts

Retailers dependent on Chinese-made electronics, apparel, and household goods will experience cost increases that many are hesitant to pass on to consumers in an inflation-sensitive market. Companies may consider shifting sourcing to Vietnam and Cambodia, though limited capacity and uncertainty around potential tariffs in these regions lingers.

Key Strategies:

• Partner with your professional advisors to conduct a country-of-origin analysis to minimize risks and develop a contingency plan for expanded tariffs and counter-tariffs.
• Negotiate with existing suppliers to lower costs.
• Optimize inventory management.
• Explore alternative sourcing options in countries with more favorable trade agreements.
• Develop flexible sourcing models that can quickly adapt to changing tariff structures.
• Introduce dynamic pricing strategies to protect margins while maintaining consumer trust.
• Collaborate with customs consultants to maximize tariff classification efficiencies.

5. Food and Beverage: A Cascading Cost Impact

The food and beverage sector will see significant price increases, particularly for imported seafood and produce. Tariffs on imported ingredients, packaging materials, and equipment will pressure the industry.

Key Strategies:

• Stockpile critical ingredients before tariff implementations.
• Examine your product mix, eliminating less profitable products.
• Identify domestic or alternative international suppliers.
• Invest in supply chain analytics to track and manage tariff-related cost changes.
• Maintain strong relationships with suppliers, distributors and retailers and communicate changes early to achieve mutually beneficial outcomes.
• Apply comprehensive pricing analytics to help determine pricing that will maintain profit margins.

6. Technology: Managing Costs and Supply Chain Risks

Due to tariffs, the technology industry faces rising costs for imported components, particularly in semiconductors, hardware, and specialized equipment. Businesses in this sector must act strategically to mitigate disruptions.

Conversely, tariffs could offer advantages for the tech sector, especially as numerous other industries pivot toward automation to cope with cost increases and supply chain diversification issues. As other sectors increasingly rely on advanced technology solutions to enhance productivity, the demand for innovative technology and automation products will likely surge. This trend can potentially increase revenue streams for tech companies that have or are close to commercialization, offsetting the tariff induced cost escalations. Nonetheless, technology firms will need to navigate the same cost escalations and supply chain obstacles as others, necessitating strategic planning and robust risk management practices.

Key Strategies:

• Evaluate and diversify supply chains to reduce dependency on single countries or vendors, minimizing potential bottlenecks.
• Conduct detailed cost analyses and review contracts to understand cost escalation clauses and opportunities to renegotiate terms.
• Increase inventory of key components to cushion the immediate impact of tariffs and avoid price volatility.
• Streamline operations through technology and automation to offset rising costs and improve efficiency.
• Engage in advocacy efforts through trade organizations and industry groups to push for favorable trade policies.

“Overall, tariffs will lead to higher costs for imported components, squeezing profit margins if similar materials cannot be sourced from other jurisdictions at similar terms. But in the end, technology companies could win the ultimate “tariff prize” with revenue growth, should other industries shift toward the use of advanced technology and automation to help with productivity, personnel shortages and efficiencies.” Michael Brooder, CBIZ Technology Industry National Leader

7. Life Sciences & Biotech: Addressing Tariff-Induced Disruptions

The life sciences and biotech industries face unique tariff-related challenges, including increased reagents, chemicals, and lab equipment costs. These added expenses can delay clinical trials, impact R&D efforts, and put pressure on profitability.

Key Strategies:

• Conduct a comprehensive supply chain analysis to identify vulnerabilities and alternative sourcing options for critical materials.
• Validate alternative suppliers outside of tariff-affected regions to maintain continuity in research and production.
• Increase the inventory of key inputs and components when feasible to prevent project delays.
• Assess regulatory landscapes in new sourcing regions to ensure quality and safety standards compliance.
• Proactively communicate with stakeholders, including investors, about tariff impacts and mitigation strategies.
• Consider raising capital to cover additional tariff costs to fund your ongoing project pipeline.

“Delays or increased costs in sourcing materials could disrupt ongoing or planned clinical trials, adding unexpected costs and time to an already long FDA process.” Michael Brooder, CBIZ Life Sciences and Biotech National Leader

Proactive Steps: Turning Challenges into Strategic Advantages

Many middle market CEOs are considering relocating production to avoid tariff-related costs. These shifts underscore the importance of proactive planning and adaptability. By integrating planning efforts, revisiting pricing structures, and investing in technology, companies can protect margins and position themselves for long-term growth.

While tariffs introduce significant challenges, they also provide opportunities for proactive, forward-thinking businesses to outmaneuver less agile competitors. Here’s how:

• Integrate Customs, Tax, and Supply Chain Planning: Historically, logistics teams managed tariff-related decisions independently of finance and tax departments. Aligning these functions helps optimize cost structures and avoid unnecessary duty payments.
• Revisit Supply Chain Planning and Align Tax and Transfer Pricing Planning With Overall Business Strategy: Middle market companies must adjust characterization of manufacturing, centralize procurement, and review customs methodologies. All of these strategies can reduce tariff liabilities, provided these changes comply with international trade laws.
• Invest in Technology and Automation: From predictive analytics tools for supply chain optimization to robotic process automation in manufacturing, technology investments can cushion the tariff blow by driving long-term operational efficiencies.
• Explore Trade Programs and Free Trade Zones: Utilize free trade zones and investigate eligibility for duty drawback programs to recover duties paid on re-exported goods. Review current customs methods and characterization.
• Scenario Planning: Work with financial advisors to model various tariff scenarios, assess potential profit impacts, and build contingency plans.

CBIZ: Your Partner in Tariff Strategy

At CBIZ, we understand that tariffs represent more than a headline — they’re a complex challenge that demands strategic foresight. Our interdisciplinary team of tax, trade, and financial experts collaborates with middle market businesses to navigate these shifting sands. From conducting supply chain audits to optimizing transfer pricing, we help companies safeguard profitability while uncovering growth opportunities.

Tariffs may be here to stay, at least for the foreseeable future. How your business responds today will shape your competitive position tomorrow. Connect with CBIZ to learn more about how we can help you adapt, innovate, and thrive in this new trade landscape.