Tariffs are often discussed in binary terms. They are either good or bad, pro-manufacturing or anti-trade. In practice, the reality for manufacturers is more nuanced.
Manufacturers should not be ideological about tariffs, rather - be pragmatic. Companies want to maximize margins, control risk, and make long-term investments with confidence. Tariffs are simply another cost input that can be modeled and priced when the rules are clear. The real challenge arises when tariff exposure becomes unpredictable during the transition from offshore production to U.S.-based manufacturing.
Playing by the rules vs. not knowing the rules
Manufacturers can plan around tariffs when the rules are clear. If importing a component carries a known cost, that cost can be modeled, priced, and negotiated into contracts. The problem arises when tariff exposure can change quickly, with limited notice, while long-term investment decisions are already underway.
This uncertainty matters most during the early phases of onshoring.
Onshoring is not a single step
Moving manufacturing to the U.S. is rarely a clean cutover. It typically requires:
In many cases, the equipment required to start U.S. production is not available domestically. It must be sourced from established suppliers in Asia or Europe. When that capital equipment is subject to high or unpredictable tariffs, the upfront cost of building in the U.S. increases sharply.
At that point, companies are not choosing between “importing forever” and “building in the U.S.” They are choosing where to absorb transition risk.
A real-world outcome: manufacturing shifts, but not always into the U.S.
We recently saw this dynamic play out with a manufacturer that wanted to localize production in the United States. The intent was clear: build domestically, hire locally, and shorten supply chains.
However, the specialized equipment required to start production had to be imported from China. Tariffs on that equipment made a U.S. startup cost-prohibitive. Instead, the company located its initial manufacturing operation in Canada, imported the equipment there, and shipped finished parts into the U.S. under USMCA.
The result:
This was not a rejection of U.S. manufacturing. It was a rational response to uncertainty and startup economics.
Competing globally on a level field
For foreign suppliers evaluating the U.S. market, the concern is similar. Whether parts are coming from Europe, India, or elsewhere, tariff exposure applies broadly. In that sense, the competitive field is relatively level.
What gives companies pause is not knowing whether that exposure will remain stable over the life of a program. When pricing parts for automotive or industrial platforms that run five to ten years, sudden tariff changes can undermine carefully built business cases after commitments are made.
What this means for business development
From a business development perspective, the takeaway is not pessimism. It is realism.
Companies are still pursuing U.S. programs aggressively. OEMs are actively searching for global suppliers. Onshoring is happening. But decisions are increasingly shaped by:
Understanding these dynamics early allows companies to design entry and localization strategies that work within current policy, rather than reacting to it later.
Where TKD2 fits
At TKD2, we work at the intersection of manufacturing, supply chains, and policy. Our role is not to argue for or against tariffs, but to help companies:
Tariffs are part of the landscape. The winners will be those who plan for the transition, not just the destination.