The goal of tariffs is to encourage domestic manufacturing by making imported goods more expensive; however, the ultimate consequences are intricate and not yet fully understood. The interplay of trade policies, political maneuvers, and their resulting impacts is too intricate to predict with high certainty. However, at this stage, recent shifts have generated widespread fears across the manufacturing, distribution, retail, and automotive industries due to the changing costs of production, creating instability in supply networks and eroding general competitiveness.
An estimate by Tax Foundation suggests that proposed tariffs by the United States on China, Mexico, and Canada are expected to reduce economic output by 0.4% and increase taxes by $1.1 trillion from 2025 to 2034.
Despite the ongoing disruption and economic uncertainty, change remains inevitable. For companies in manufacturing, distribution, retail, and automotive sectors, this lack of predictability erodes efficiency, and it is efficiency that drives competitiveness, sustainability, and growth.
Businesses will most probably face higher raw material costs and the need for rapid operational adjustments. However, this doesn't necessitate passive acceptance of reduced profit margins or declining revenues. Instead, the current moment calls for proactive preparation for challenges, and here are some key concerns worth addressing.
This article will discuss the top three impacts to prepare for and the tools within Epicor's portfolio that can help position your organization for success in a tariff-affected economy.
1. A considerable erosion of margins
The increased tariffs, including the 125% duty on Chinese imports, are expected to raise costs for businesses that depend on Chinese goods. For example, manufacturers of machinery and electronic components rely heavily on Chinese goods. Although there is currently a temporary suspension on electronics tariffs, this pause offers only short-term relief, and uncertainty persists. Businesses may consider sourcing from countries with lower tariffs than China, but the difficulty in finding alternative suppliers is whether they can match China’s lower prices or whether the new alternative suppliers are reliable.
To add to this, a significant squeeze on margins will create a cascade effect. Not only will individual product profitability suffer, but the inevitable rise in sales prices will likely curtail demand, resulting in a considerable drop in total revenue and, consequently, total profit. This could force businesses into difficult choices, including layoffs, expensive reshoring or onshoring efforts, and fundamental business overhauls.
For distribution companies, higher import prices may mean higher purchase prices, which will hit margins, ultimately forcing price increases. Consequently, that will impact competitiveness, especially for businesses with low-margin products.
The winners in this new reality will be those who demonstrate agility and speed in overhauling their cost structures, relentlessly seeking efficiencies across the board.
Epicor Solutions to Guide You Through Financial Performance Tracking
Navigating the impact of tariffs requires a multifaceted approach due to their wide-ranging consequences. Businesses must have robust financial tools to safeguard profitability. At Epicor, we provide a comprehensive suite of financial solutions designed to address diverse financial needs, including protecting margins.
- For Financial Insights & Margin Analysis: Epicor Financials + Epicor Financial Planning & Analysis (Epicor FP&A) – Epicor Financials and Epicor FP&A offer real-time financial insights through detailed reports and analytics. Epicor Financials ensures the accurate recording of all financial transactions, while Epicor FP&A enables granular tracking of costs, including the direct impact of tariffs on imported goods and raw materials. This helps businesses identify where costs are rising. Additionally, Epicor FP&A allows businesses to model various tariff scenarios and their potential impact on margins, facilitating proactive risk identification and informed decision-making on pricing, sourcing, and production strategies.
- For Visualization of Tariff Impact: Grow Business Intelligence (Grow BI) – Grow, with its 150+ data connectors, including a Universal REST API connector, can integrate data from various sources, including your ERP, CRM, e-commerce, and supply chain systems, to provide a holistic view of how tariffs are affecting different parts of the business. With real-time dashboards, you can visualize key metrics like landed costs, duty expenses, and margin erosion at a granular level (product, region, supplier), allowing for immediate identification of challenging areas. Further, you can use Grow to analyze the direct and indirect costs associated with tariffs, highlighting which products or materials are most affected and the overall financial impact. Grow’s no-code transformations and unlimited user access make it a perfect fit for teams across finance, sourcing, and pricing to build the insights they need—fast—incorporating external data from a volatile, rapidly changing market, all without IT bottlenecks.
- For Tariff Impact Alerts: Epicor Automation Studio, Powered by Workato – When tariff-driven cost increases begin to squeeze margins, manufacturers need to move quickly within their ERP system, driven by information from the broader ecosystem of tools and portals they rely on, for which Workato offers 1000+ platform connectors, including AI connectors. Workato-powered integration-led automations can pull supplier pricing updates from sourcing platforms, vendor portals, FX fluctuations, or procurement feeds outside the ERP, comparing those inputs to baseline product costs. When increases breach defined thresholds, automated workflows can trigger alerts, flag impacted SKUs for re-pricing, or update cost data in the ERP. These same automations can initiate collaboration workflows in tools like Slack, Teams, or email, helping procurement and finance teams respond before margin erosion worsens.
- For understanding tariff Impact on inventory: Epicor Inventory Planning & Optimization (Epicor IP&O) – Epicor IP&O will help businesses understand the tariff implications on your inventory. IP&O can help you mitigate tariffs by calculating stocking policies by region, product, or service level that minimize holding costs.
- For quick content updates: KYKLO - With KYKLO’s content-driven digital solution, manufacturers can stay ahead by ensuring that accurate, up-to-date product content reaches the right people at the right time, helping maintain sales, protect margins, and strengthen channel relationships. With margins squeezed, KYKLO enables intelligent cross-selling and alternative product suggestions, ensuring your partners always have something to offer their customers.
- For rapid employee training or reskilling: Acadia - Any fundamental business shift creates a need to rapidly train employees to adapt to the new reality on the ground. Reskilling remaining employees to take over the responsibilities of those laid off or onboarding new hires to increase throughput in onshore facilities is easier when employees can access critical information on the job. Acadia provides multimedia policies and procedures to employees at the frontline, ensuring they can react to change at a moment’s notice. It also tracks employee capabilities as they learn, providing a dynamic record of which employees have been trained to new standards and where the organization has gaps.
2. Supply Chain Challenges
Manufacturers may need to re-evaluate their supply chains as the cost of essential materials increases. Suppliers in tariff-affected countries might become less competitive in the market. Distributors should anticipate potential delays due to customs processing bottlenecks, which could affect inventory levels, customer deliveries, and overall logistics. Retailers might need to seek alternative suppliers, which could be more costly and less dependable. For automakers, tariffs on imported components can increase production costs, impacting vehicle pricing and necessitating reshoring or movement to countries with lower tariffs.
Epicor Solutions to Guide You Through Supply Chain Disruptions
- For accurate demand forecasting: Epicor Inventory Planning & Optimization (Epicor IP&O) - Epicor IP&O uses sophisticated statistical algorithms and machine learning to improve demand forecast accuracy. This is crucial in a tariff economy where price fluctuations and supply chain disruptions can significantly impact demand patterns. Epicor IP&O will help your business calculate optimal safety stock levels and reorder points that balance the risk of stockouts with the higher carrying costs associated with tariffed goods. With Epicor IP&O’s ability to forecast demand accurately and optimize inventory policies, businesses can reduce the accumulation of excess and obsolete inventory, which can be particularly costly when tariffs have inflated the initial purchase price.
- For scenario planning and quantifying of financial impact: Epicor Financial Planning & Analysis (Epicor FP&A) – Epicor FP&A can integrate financial data with operational data from supply chain systems, which can provide a holistic view of how tariffs and related disruptions are affecting financial performance. Further, Epicor FP&A will also allow businesses to create various financial models that incorporate different tariff scenarios (e.g., different rates, application to specific goods, and potential retaliatory tariffs). This enables businesses to quantify the potential impact of these tariffs on their cost of goods sold (COGS), gross margins, and overall profitability. Lastly, Epicor FP&A will help facilitate the comparison of actual financial performance against budgeted or forecasted figures that have accounted for tariffs. This helps identify deviations caused by disruptions and allows for quick course correction.
- For visual supplier performance tracking: Grow Business Intelligence (Grow BI) – Grow’s visual and interactive dashboards can help show the true cost of imported goods or landed costs. It can help track supplier performance as well as visualize the geographical impact of tariffs on the supply chain, highlighting affected regions, suppliers, and distributors.
- For rapid integration and realignment of workflows: Epicor Automation Studio, Powered by Workato – Tariff-related supply chain shifts often require rapid integration of new vendors, realignment of procurement workflows, and improvements in how inventory is tracked across regions. Epicor Automation Studio helps orchestrate these transitions by connecting your ERP with supplier portals, customs tracking systems, and logistics providers. For example, automation can onboard new suppliers by syncing their product catalogs, lead times, and terms into the ERP while flagging any gaps in compliance or certification. Automation Studio can also pull shipping status updates or customs delays from external logistics APIs and notify operations teams in real time. These integration-led automations enable businesses to pivot sourcing strategies and maintain supply continuity without manual re-entry or delays.
- For shipment delay monitoring: Epicor Quick Ship – With rising costs and potential delays in customs processing, Epicor Quick Ship allows businesses to monitor shipments of tariffed goods and identify potential delays or issues early on, enabling proactive communication with customers and adjustments to production or inventory plans. Quick Ship can also provide data on shipping costs and carrier performance. This data, when combined with overall financial data in Epicor, can help analyze the financial impact of tariffs and related shipping disruptions.
- For real-time display of inventory lead times and inventory: KYKLO - Supply chain issues often lead to stockouts. KYKLO allows real-time display of inventory and lead times, helping customers make informed purchasing decisions based on current availability. In addition, if the primary supplier is affected by tariffs or global disruptions, businesses may need to pivot quickly to new suppliers. KYKLO makes that easier by allowing businesses to quickly onboard and organize new supplier product content, no matter the format. It will then make new products immediately shoppable and accurately categorized within your commerce platform.
- For rapid communication of policy changes and procedures: Acadia - Rapid change in supply chain policies requires employee awareness and compliance with new standards. From new procurement strategies to changes in production and the revamping of warehouse operations, Acadia is a single source of truth for all employees, enabling rapid communication of policy and procedure changes and the ability to track whether new guidelines are being followed.
3. Pricing Volatility and Disruptions
Increasing tariffs can create significant disruptions for companies in industries dependent on raw materials like aluminum and steel, for example. Pricing departments, usually focused on long-term strategies, will need to adjust prices quickly to respond to market changes. This may result in delayed quotes, slowed contracts, and renegotiation of special pricing agreements. Businesses that cannot adapt swiftly may lose customers to more agile competitors.
Many companies today struggle with rapid changes due to outdated tools or rigid systems, highlighting the need to strengthen pricing infrastructures. Additionally, manufacturers relying on stable material costs for production forecasting and budget control will face challenges in this unpredictable environment.
Epicor Solutions to Guide You Through Pricing Volatility and Disruptions
- For factoring tariff rates and policies in pricing: Epicor Configure Price Quote (Epicor CPQ) – Epicor CPQ is an award-winning solution that allows for the creation of complex pricing rules that can factor in tariff rates, the origin of goods, and any changes in tariff policies. This automation ensures that pricing is accurate and up to date, reducing the risk of quoting incorrect prices that erode margins or lose deals. Epicor CPQ can also be implemented to model different tariff scenarios. Businesses can simulate the impact of various tariff rates or the imposition of tariffs on new product components to understand the potential effects on pricing and profitability. Epicor CPQ can support tiered pricing structures that adjust based on factors like order quantity or customer type. This can be leveraged to offer different pricing for domestic versus international customers or to provide volume discounts that might help offset some of the tariff impact.
- For granular financial analysis: Epicor Financial Planning & Analysis (Epicor FP&A) – when it comes to pricing volatility, Epicor FP&A can break down the COGS into granular components, specifically isolating the impact of tariffs on raw materials, components, and imported sub-assemblies, which allows businesses to track how tariffs are inflating their production costs for each product line. Epicor FP&A will also allow the performance of sensitivity analysis, showing how profit margins will be affected by different levels of tariff increases on key product lines. Lastly, Epicor FP&A, alongside Epicor IP&O, can help model how changes in prices (due to increased import costs from tariffs) are likely to affect consumer demand for different product categories.
- For tradeoffs analysis: Epicor Inventory Planning & Optimization (Epicor IP&O) - In a tariff environment, the cost of holding inventory of tariffed goods might increase significantly. Epicor IP&O can help balance the risk of stockouts with the higher carrying costs, suggesting inventory policies that minimize total cost while maintaining desired service levels. This might involve holding less inventory of high-tariff items or strategically timing purchases.
- For tariff rates synchronization and updates: Epicor Automation Studio,Powered by Workato – Once Epicor FP&A has been used to model the impact of various tariff scenarios on product margins, Automation Studio can step in to help businesses act on those insights. For example, Automation Studio can regularly sync the latest tariff rates from external sources like the U.S. Harmonized Tariff Schedule and current exchange rates from financial APIs. Based on predefined margin thresholds or tolerance ranges, these automations can adjust pricing in the ERP system and push updates to CRM systems like Salesforce. This ensures customers always see accurate pricing—even as external cost drivers fluctuate—and reduces the risk of underquoting or margin erosion due to outdated information.
- For quick pricing and content updates: KYKLO – KYKLO allows quick pricing and content updates across the online store to reflect new costs or availability. It will also make the management of alternative SKUs or substitute products easy when certain items become unviable due to cost or sourcing restrictions.
- For internal direction and alignment: Acadia – Communicate and ensure adherence to changes in order-to-cash processes from sales to fulfillment, invoicing, and collections. Acadia helps you provide direction to your entire team across all departments, ensuring new directives are adopted and deployed quickly.
Partnering with Epicor Software
While the immediate effects of tariffs, such as higher costs and supply chain disruptions, are evident, the full impact remains uncertain. Manufacturers, distributors, retailers, and automakers must stay agile and proactive to ensure their success.
Fortunately, with Epicor, you have a trusted partner with over 50 years of industry expertise. We continuously monitor regulatory changes so we can help businesses navigate uncertain times with care and strategic insight. While we do not offer operational or legal advice, we will work to make sure we can provide and fine-tune our business applications to make sure we are setting your business up for success.
Reach out to your account managers to learn more about how our solutions can support your business.
