The Impact of Tariffs on Industrial Machinery: Five Mitigation Tactics

5 Ways to Mitigate the Cost Crunch and Stay Competitive at the Same Time

In the roughly three months since the tariffs were instituted, costs for essential materials have risen sky-high and are beginning to take a toll on market leaders such as John Deere and Caterpillar. If the high prices are negatively impacting their production costs, supply chain resilience, and overall competitiveness, you can imagine the pressure middle-market manufacturers are feeling. That said, there are ways to mitigate the cost crunch and stay competitive at the same time. Our CEO, Bill Remy, advises in Industry Today that navigating tariffs and staying competitive isn’t a mission impossible for industrial machinery manufacturers:

• Assess the Impact

  Many anticipated the tariffs, and companies had a brief window to assess their impact—but real effects are only now becoming clear. Three months in, industrial machinery makers are being hit hardest. With steel, aluminum, parts, and electronics essential to their production, there’s little room to maneuver.

  Most precision components, like gears and hydraulic systems, still come from China, prompting more companies to consider near-shoring or reshoring operations. Chinese exports to the US dropped 20% in 2023 compared to 2022. Still, relocating manufacturing is costly, carries significant risk, and takes time—it can’t happen overnight.

• To Reshore or Not to Reshore?

  It’s an important question that requires careful consideration—especially for companies heavily dependent on these raw materials. Reshoring typically makes the most sense for high-value, complex products requiring advanced tech and skilled labor—resources already in short supply. For many, it may be wiser to negotiate with suppliers than take on the expense and risk of relocating or stockpiling inventory.

Five Mitigation Tactics to Navigate Tariffs and Stay Competitive for Industrial Machinery Manufacturers:

1. Diversify sourcing options: Map out supplier risk, seek alternative sources, and renegotiate contracts to reduce tariff exposure.
2. Recalibrate inventory management: Use strategic stockpiling and streamline inventory with smart technology to manage costs and disruptions.
3. Assess closer-to-home production: Consider reshoring parts of the supply chain but carefully weigh labor and skill challenges.
4. Communication is king: Maintain transparent, proactive communication with customers and suppliers to manage expectations and build trust.
5. Strategic contractual adjustments: Review and adjust contracts to add protections against price spikes and keep agreements flexible.

The industrial machinery sector faces a tough crossroads, with tariffs set to create lasting cost and supply chain challenges. Companies that stay proactive—focusing on planning, sourcing, and communication—will be best positioned to navigate these changes. Ultimately, those that leverage advanced smart technologies will gain the greatest competitive edge, as technology remains the top driver of productivity.

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