Article 4 in the Series: Navigating Tariff Turmoil
As the U.S. has imposed aggressive trade tariffs on imports from countries such as China, Mexico, Canada, and the European Union, many of these trading partners have retaliated with tariffs of their own—specifically targeting American-made products. These retaliatory tariffs are designed to inflict economic pain in politically or economically strategic areas of the U.S., such as agriculture, automotive, manufacturing, and high-tech.
This fourth article in our series examines how exporters of U.S.-made products are being affected by retaliatory tariffs and how they can respond. It includes real examples from recent years, practical response strategies, and steps exporters can take to build resilience in this uncertain trade landscape.
1. The Scope of the Challenge: U.S. Exporters Under Pressure
Retaliatory tariffs are hitting U.S. exporters on multiple fronts:
- Loss of market competitiveness: Tariff hikes make U.S. products more expensive in foreign markets, often pricing them out against local or third-country alternatives.
- Uncertainty and market volatility: Exporters face the constant risk that new tariffs may be introduced with little notice.
- Supply chain disruption: Global value chains that rely on seamless cross-border trade are being disrupted by sudden cost increases.
Key sectors impacted include:
- Agriculture: Soybeans, pork, dairy, and corn have been directly targeted by Chinese and European tariffs.
- Automotive: Retaliatory duties on U.S. vehicles and parts have hit export hubs like Michigan, Ohio, and Tennessee. Note: General Motors late last week (May 2025) informed employees and dealers for its China export business it would stop shipping vehicles to China from the United States, the company said. The move comes as the United States and China continue discussions on tariffs and other trade issues.
- Industrial machinery and tools: Tariffs on high-value capital equipment have made U.S. exports less competitive in Latin America and Southeast Asia.
- Technology and electronics: U.S. tech exports to China and Europe have been hit by formal tariffs and informal regulatory pushback.
2. Real-World Examples of Exporters Affected
Harley-Davidson (Motorcycles and Parts)
When the European Union imposed a 25% tariff on U.S.-made motorcycles in response to U.S. steel and aluminum tariffs, Harley-Davidson estimated the additional cost per unit would be around $2,200. To avoid this burden, the company announced plans to move some production overseas to Thailand. This sparked domestic political backlash, but it reflected a hard business decision: maintain access to a key export market or face an unsustainable margin hit.
Soybean Farmers in the Midwest
In response to U.S. tariffs on Chinese electronics and machinery, China imposed a 25% retaliatory tariff on American soybeans, targeting a $14 billion export industry. U.S. soybean exports to China dropped by more than 70% in 2018 alone, forcing farmers to either store unsold grain, seek alternative markets (e.g., Brazil and Vietnam), or accept lower prices in other regions.
Boeing (Aerospace)
Although not always officially tariffed, Boeing has faced increasing barriers to selling aircraft in China, where its main competitor Airbus has gained a larger market share, aided by European neutrality in the U.S.-China trade dispute. This highlights how indirect retaliation—such as regulatory slowdowns and licensing delays—can serve as informal tariffs.
3. Exporter Responses to the Tariff Challenge
Exporters have adopted a variety of tactics to mitigate or avoid the worst effects of retaliatory tariffs. Each strategy involves costs and trade-offs, but in many cases, doing nothing is the most expensive option.
A. Relocating or Diversifying Production to Overseas Facilities
How it works: U.S. companies manufacture components or finished products in overseas facilities—either owned directly or via partners—in order to avoid “Made in USA” labeling that triggers retaliatory tariffs.
Example: Polaris Industries, a Minnesota-based maker of off-road vehicles, opened new facilities in Mexico to export to Europe and Asia without the extra tariff burden. The company cited the need to remain globally competitive as the core rationale.
Advantages:
- Maintains access to foreign markets
- Avoids retaliatory tariffs tied to U.S. origin
Challenges:
- Can cause domestic political controversy
- May require new supplier and labor relationships
B. Market Diversification: Reducing Dependence on One Export Market
How it works: Firms actively seek new overseas markets that are not involved in tariff disputes, spreading risk and potentially uncovering new demand.
Example: After China imposed tariffs on U.S. agricultural products, the U.S. Meat Export Federation began aggressively promoting American beef and pork in Japan, South Korea, and Colombia—markets not affected by the trade dispute. In 2020, U.S. pork exports to Vietnam surged by over 180%.
Advantages:
- Builds resilience to country-specific trade risks
- Increases brand visibility in new markets
Challenges:
- Requires local partnerships, certification, and marketing
- Initial costs can be high with uncertain return
C. Reclassifying Products for Tariff Reduction
How it works: Exporters may redesign or relabel products to fall under different Harmonized System (HS) codes that are not subject to tariffs.
Example: A small Ohio-based tool manufacturer re-engineered the metal composition of a wrench to qualify for a different HS classification that carried only a 5% tariff instead of 20% in the EU.
Advantages:
- Can be a quick fix with no relocation needed
- Legal and strategic if carefully documented
Challenges:
- Risk of audit or penalty if misclassified
- Engineering costs and compliance risks
D. Using International Trade Agreements to Bypass Tariffs
How it works: Firms take advantage of trade agreements like USMCA (formerly NAFTA), the U.S.-Korea Free Trade Agreement (KORUS), or the Generalized System of Preferences (GSP) to export through or to countries that offer preferential treatment.
Example: A Kentucky-based manufacturer of precision instruments rerouted some exports to Singapore and Australia—both of which had favorable trade terms—through a bonded warehouse in Mexico, taking advantage of layered treaty benefits.
Advantages:
- Legal route to tariff reduction
- Maintains international sales without full relocation
Challenges:
- Requires trade legal expertise
- Could incur logistical or storage costs
E. Building Local Partnerships and Joint Ventures Abroad
How it works: Instead of exporting finished goods, U.S. firms partner with local entities to manufacture and distribute products within tariff-imposing countries.
Example: Whirlpool Corporation entered into a joint venture with a Chinese appliance maker to co-manufacture air conditioners locally in response to tariffs affecting exports from the U.S.
Advantages:
- Avoids tariffs altogether
- Builds local goodwill and market insight
Challenges:
- Sharing intellectual property or profits
- Regulatory and governance risks in foreign countries
F. Financial Strategies and Government Support
In addition to operational changes, exporters are turning to financial tools and public support mechanisms:
- Tariff mitigation grants: The USDA has allocated billions under Market Facilitation Programs (MFP) to support impacted farmers.
- Currency hedging: Exporters are managing exchange rate volatility, particularly where currency fluctuations are driven by trade tensions.
- Trade credit insurance: Protects exporters from non-payment due to political or tariff-related disputes.
- Government lobbying: Export coalitions have formed to pressure Washington to remove or reduce certain tariffs—especially when U.S. companies are “collateral damage.”
5. Practical Steps Forward for U.S. Exporters
Given the unpredictable nature of trade policy, U.S. exporters must adopt a proactive, multi-faceted response strategy. Here are some practical steps to consider:
- Conduct a tariff risk audit: Identify which markets and products are currently or potentially affected by retaliatory tariffs.
- Evaluate alternate markets: Target secondary and tertiary markets for expansion that offer trade stability.
- Invest in local intelligence: Understand foreign regulations, customer preferences, and logistics for potential overseas production or JV models.
- Collaborate across functions: Sales, legal, finance, logistics, and government relations must coordinate on response strategies.
- Monitor policy and political developments: Track trade negotiations, especially around major elections or global summits.
Conclusion – Be Prepared
Tariff turmoil is not just a concern for importers—it has deep consequences for U.S.-based exporters, many of whom have been drawn into global trade conflicts through retaliatory measures. By adopting a mix of tactical adjustments and long-term strategic planning, exporters can maintain international competitiveness and find new paths forward.
While there is no one-size-fits-all answer, success will increasingly depend on agility, market intelligence, and the willingness to reinvent legacy export models.
Coming Next:
Article 5: Protecting Individual Investors and Small Businesses from Tariff Turmoil
In our final article, we’ll turn the spotlight to individual investors, small business owners, and entrepreneurial ventures. We’ll explore how tariffs are affecting equity markets, investment strategies, and small business supply chains—and what proactive steps individuals can take to protect their financial futures.
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