In April 2025, the United States introduced sweeping changes to its trade policy, increasing tariffs on Chinese imports to 145% and imposing new tariffs ranging from 10% to 25% on imports from the European Union, Canada, and Mexico. This move pushed average tariff levels to their highest in over a century, sparking a series of global retaliatory actions and intensifying economic uncertainty. The implications are far-reaching for global supply chains, business profitability, and economic stability.
In this complex environment, businesses, especially manufacturers and distributors, need advanced tools to assess financial risks, model scenarios, and formulate strategies. Epicor Financial Planning & Analysis (Epicor FP&A) enables organizations to navigate these challenges by integrating financial and operational planning across group and entity levels. This article outlines the economic impacts of these trade policy changes and how Epicor FP&A supports resilient, data-driven decision-making.
Economic Impact of the April 2025 Tariff Reforms
The new tariff regime has created an inflationary ripple effect across global markets. As tariffs function like taxes on imports, they raise the landed cost of goods, particularly intermediate goods and raw materials used in manufacturing. These costs often get passed on to consumers, fueling inflation. In response, the US Federal Reserve has indicated a more cautious approach to interest rate cuts, prolonging higher borrowing costs for businesses and consumers alike.
Furthermore, consumer behavior is expected to shift. While short-term spending may rise due to expectations of further price increases, a slowdown is anticipated in 2026 as persistent inflation weakens purchasing power. Retaliatory tariffs from countries like China add to the unpredictability, increasing the risk of further disruptions in trade and investment flows. Meanwhile, the financial markets have already reacted — US equity indices have declined, the dollar has weakened, and overall investor sentiment remains cautious.
How Tariffs Impact Manufacturing and Distribution Operations
Tariffs increase the cost of production inputs, squeezing gross margins for manufacturers and distributors. Companies sourcing heavily from tariff-affected regions must reassess their procurement strategies. Higher costs may also alter the bill of materials, require supplier changes, and influence where production facilities are located.
On the supply chain side, the combination of tariffs and retaliatory trade policies leads to delays, logistics complexity, and the need to evaluate nearshoring or reshoring strategies. Businesses must also reconsider their pricing strategy, balancing cost recovery with customer affordability and competitiveness. Additionally, forecasting becomes increasingly challenging as companies must account for inflation, volatile exchange rates, and shifting consumer demand in different regions.
Business Functions Most Affected by Tariffs
Several business functions experience direct and indirect impacts due to rising tariffs:
- Procurement and Sourcing
Material costs rise due to higher duties, compelling businesses to explore alternative suppliers, renegotiate terms, or diversify their sourcing base to reduce dependence on high-tariff countries.
- Manufacturing Operations
Production costs increase as materials become more expensive, impacting the cost of goods sold (COGS) and overall efficiency. Businesses may consider automation or relocating production facilities to reduce exposure.
- Sales and Marketing
Tariff-induced price adjustments require marketing teams to manage customer expectations, redesign pricing models, and potentially reposition value propositions to maintain competitiveness.
- Supply Chain and Logistics
Trade barriers can increase shipping times, customs delays, and overall transportation costs. Companies must evaluate new trade routes and fulfillment strategies to maintain service levels.
- Finance and Treasury
Cash flow, working capital, and profitability forecasting become complex under volatile cost and demand scenarios. Currency fluctuations and interest rate movements further impact financial planning.
- Executive Leadership and Strategy
Senior leadership must develop scenario-based strategies that account for geopolitical, economic, and trade-related risks. Decisions regarding capital investment, market entry/exit, and cost optimization become critical.
Strategic Analyses Businesses Must Undertake
In response to the evolving trade landscape, businesses must conduct in-depth financial and operational analyses:
- Cost Impact Assessment
Companies need to quantify how tariffs affect input costs, gross margins, and pricing strategies. Understanding product-level profitability is key to making informed pricing or sourcing decisions.
- Supplier Risk Evaluation
Exposure to suppliers in countries subject to higher tariffs must be evaluated. Businesses must assess supplier reliability, pricing power, and potential for local sourcing or regional diversification.
- Customer Demand Forecasting
Tariff-driven price increases may impact customer demand differently across regions. Understanding which customer segments are more price sensitive helps businesses target promotions and manage volume expectations.
- Feasibility of Reshoring or Nearshoring
Companies may explore relocating manufacturing operations closer to end markets to reduce tariff exposure. These decisions must be supported by financial modeling, including capital expenditure, labor costs, and time-to-market impacts.
- Capital Investment Planning
Business cases for automation, logistics restructuring, or new regional production facilities must be evaluated through ROI, payback period, and long-term cost-benefit analysis.
- Cash Flow and Working Capital Forecasting
Cash flow forecasts need to incorporate potential inflationary pressures, inventory build-up, and credit cycle changes. Working capital must be managed tightly to preserve liquidity.
- Scenario-based forecasting
Businesses must model the best case, base case, and downside case scenarios using different assumptions on tariff levels, retaliatory measures, FX rates, and interest rates to inform strategic choices.
How Epicor Financial Planning & Analysis Supports Resilient Business Planning
Epicor Financial Planning & Analysis (Epicor FP&A) offers robust features that empower finance leaders to respond proactively to economic disruptions like tariff shocks. It serves as a unified platform that connects financial and operational planning across all business functions and geographic entities.
- Scenario Modeling and What-If Analysis
Epicor FP&A allows organizations to build dynamic models to test various outcomes based on changes in tariffs, raw material costs, inflation, or consumer demand. These scenarios help in understanding the financial impact of key decisions and guide risk mitigation planning.
- Segment Costs and Profitability Analysis
Epicor FP&A provides detailed costs and profitability insights by department, cost centers/profit centers, production lines, business segments, and regions. This enables businesses to perform detailed analysis on cost vs profitability and identify unprofitable lines, reallocate resources, and optimize their costs and product mix to protect margins.
- Integrated Financial and Operational Planning
Epicor FP&A connects production, procurement, and sales plans directly with financial forecasts. When input costs rise, the platform updates with recent forecasts, cash flows, and profitability projections, ensuring alignment between operations and strategy.
- Group-Level and Entity-Level Planning
For multinational businesses, Epicor FP&A supports localized planning while providing consolidated group-level views. Local teams can input region-specific data (tariffs, inflation, FX), while corporate HQ retains oversight and strategic direction.
- Rolling Forecasting and Real-time or Near Real-time Dashboards
Epicor FP&A supports rolling forecasts that are continuously updated with near real-time business data. Decision makers can monitor key metrics like margin erosion, inventory buildup, and cash flow shifts using analytical reports and dashboards.
- Strategic Planning and Performance Monitoring
Epicor FP&A helps businesses track the impacts of strategic initiatives like cost transformation programs, supply chain re-engineering, and market diversification. It enables clear goal setting and progress monitoring through variance analysis and visual KPIs.
Planning Proactively in a New Trade Era
The resurgence of protectionist trade policies and global tariff wars marks a new era of uncertainty for businesses. Inflation, interest rate hikes, supply chain disruptions, and shifting consumer dynamics require organizations to be more agile and data-driven than ever before.
Epicor FP&A equips organizations with the capabilities to respond strategically, not just reactively, to changing global conditions. By providing integrated scenario modeling, deep profitability insights, and real-time planning capabilities, the platform helps businesses stay ahead of volatility, protect margins, and make sound investment decisions.
In a world where global economic policy is increasingly unpredictable, Epicor FP&A becomes not just a planning tool but a strategic partner for long-term resilience.
Senior Consultant - FP&A, FCA (SL) | ACA (EW) | BFP | ACMA(UK) | CGMA | ACCA (UK) | MBA (USQ) | BBA in Finance
Shammika Wijewardena, a Senior Consultant in FP&A, leverages 15+ years of diverse experience, expertise in IFRS and US GAAP, and a robust financial background to optimize business strategies and drive growth
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