What is a tariff in supply chain?

A tariff in supply chain refers to a tax or duty imposed by a government on imported or exported goods. Tariffs are used to regulate international trade, protect domestic industries, and generate government revenue.

In supply chain management, tariffs directly impact the cost of goods, sourcing decisions, and trade flows. They influence which suppliers businesses choose, how products are priced, and the overall efficiency of global supply chains.

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How tariffs work in the supply chain

• Customs assessment: When goods cross international borders, customs authorities apply tariffs based on the product’s classification (using HS/HTS codes) and its country of origin.
• Tariff schedules: Countries maintain tariff schedules that list duty rates for different products and trade partners.
• Trade agreements: Free trade agreements (FTAs) or regional agreements (like USMCA or EU trade deals) may reduce or eliminate tariffs on certain goods.
• Cost impact: Tariffs increase the landed cost of goods, which includes the product price, shipping, insurance, and duties.
• Supply chain planning: Companies must account for tariffs in procurement, sourcing strategies, and pricing models.

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Why it matters

• Total cost of ownership: Tariffs can significantly raise the cost of imported goods, influencing sourcing decisions and profitability.
• Supplier strategy: Businesses may shift sourcing to countries with lower tariffs or under favorable trade agreements.
• Market competitiveness: Higher tariffs can make imported goods more expensive, affecting pricing and demand.
• Compliance: Proper classification of goods under HS/HTS codes ensures the correct tariff is applied, reducing risk of penalties or delays.
• Resilience: Understanding tariffs helps businesses adapt to trade policy shifts, such as new duties or tariff exemptions.

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Common questions about tariffs in supply chain

How are tariffs different from taxes?
Tariffs are specific to cross-border trade, applied to imports or exports. Taxes can apply to goods and services domestically.

Do tariffs apply to all imports?
Not always. Free trade agreements and exemptions may reduce or eliminate tariffs on certain goods from partner countries.

How are tariff rates determined?
Tariffs are determined by governments and published in tariff schedules. Rates depend on product classification and country of origin.

What role do HS/HTS codes play in tariffs?
HS/HTS codes classify goods and determine the tariff rate that applies to them at customs. Incorrect classification can lead to incorrect tariff charges or penalties.

How can companies manage tariff costs?
By leveraging trade agreements, using duty drawback programs, classifying goods accurately, and strategically sourcing from countries with lower tariffs.

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Putting it all together

Tariffs are a central factor in global trade and supply chain management, shaping costs, sourcing strategies, and competitive positioning. For businesses that import or export goods, understanding tariffs — and planning for them — is essential to maintaining profitability and resilience.

As global trade policies evolve, supply chains must remain agile, using visibility, accurate classification, and strategic sourcing to manage the financial and operational impacts of tariffs.

In short: a tariff in supply chain is a government-imposed tax on cross-border goods that directly affects costs, sourcing, and global trade strategies.