For mid-sized distributors and manufacturers, tariffs are a reality that have a significant impact on your business. And yet, many companies are treating tariffs as temporary headaches instead of strategic variables that demand real-time visibility and control. In 2025, it’s critical that you respond to tariffs at the order and line-item level, where profit is won or lost.
Tariffs Are Reshaping the Profit Equation
As of 2025, the United States’ average effective tariff rate has reached 22.5%, the highest level since 1909. This spike has directly contributed to a 2.3% increase in consumer prices, translating to a loss of $3,800 in purchasing power per household when adjusted to 2024 dollars (Yale University Budget Lab, 2025). Tariffs are not just policy—they are cost centers that compound daily across your SKUs, customers, and orders.
And it’s hitting the middle market the hardest. U.S. midsize businesses are projected to absorb $82.3 billion in tariff-related costs in 2025, with import-heavy distributors among the most affected (JPMorgan Chase Institute, 2025).
Legacy ERPs Can’t Keep Up
Standard ERP platforms like Microsoft Dynamics GP or Business Central—without enhancement—aren’t equipped to surface how tariffs are slicing into margins. They don’t alert your team when profit thresholds are breached. They don’t show you real-time margin performance at the SKU level. And they certainly don’t automate workflows to help you respond before the damage is done.
That kind of agility doesn’t come from monthly reports or spreadsheets. It comes from software that treats every order as a profit opportunity—and every line item as a data point that matters.
Visibility Alone Isn’t Enough—Action Is the Difference
Leading distributors are using modern tools to go beyond visibility and create workflows that react to margin risk. They:
- Monitor landed cost fluctuations across tariffs, freight, and vendors
- Automatically flag margin erosion when tariffs spike
- Prioritize fulfillment for high-margin orders when supply is limited
- Adjust purchasing behavior in real time based on margin thresholds
This is not just about protecting your bottom line. It’s about unlocking strategic margin advantages that competitors can’t see, much less act on.
Tariff Strategy = Sales Strategy
Sales teams quoting based on outdated cost data are flying blind. In today’s climate, every inaccurate quote isn’t just risky—it’s a margin liability. When your reps have real-time access to item-level profitability (including tariff impact), they can:
- Quote with confidence
- Protect margin proactively
- Shift deals toward higher-yield SKUs and customers
Giving sales the tools to see and react to margin risk isn’t a luxury—it’s the new standard.
The C-Suite Imperative: Make Tariffs Part of Your Margin Model
CFOs, CROs, and CEOs must stop treating tariffs as unpredictable externalities and start treating them as core variables in their operating model. If your ERP doesn’t reflect this reality, you’re not running lean—you’re running blind.
Tariffs are not going away, but with the right visibility and automation layered into your ERP, your business won’t just survive—it will outperform.
Get a Clearer Picture of Your Profitability—One Line Item at a Time
Talk to a profit expert today and build a margin strategy that strategically manages tariffs, allowing you to protect your margins and maintain a competitive edge.
References
JPMorgan Chase Institute. (2025). Midsize businesses face $82 billion tariff tab. Axios. https://www.axios.com/sponsored/midsize-business-face-82-billion-tariff-tab
Yale University Budget Lab. (2025). Where we stand: Fiscal, economic, and distributional effects of all U.S. tariffs enacted through April 2025. https://budgetlab.yale.edu/research/where-we-stand-fiscal-economic-and-distributional-effects-all-us-tariffs-enacted-2025-through-april