Tariff Turbulence: Why CFOs Must be the Anchors of Clarity

Recent trade measures, especially those from large economies, such as the U.S., are directly influencing input prices, disturbing procurement contracts, and reconfiguring worldwide pricing models. Tariff increases on components like electronics, engineering products, and auto components are immediately exerting pressure on gross margins and compelling supply chain adjustments.

Recently, a survey found that 59% of respondents expect tariffs will negatively affect their organizations. Around 85% reported that continued uncertainty surrounding tariffs has already influenced their business planning to some degree.

It is now incumbent on CFOs to deliver accurate SKU-level visibility into tariff exposure, model cost shifts, and analyze the downstream effects on product-level profitability, sourcing decisions, and working capital cycles. Meeting these demands requires closer alignment between finance and sourcing, and the capacity to connect procurement data, classification codes, and trade documentation with financial planning systems - an area where most organizations continue to experience operational and technology disparities.

India's dual exposure in the global tariff environment

For Indian companies, the tariff effect has two sides. India is both a major exporter to tariff-sensitive markets and an emerging alternative sourcing destination under the global "China +1" strategy. This dual positioning creates compliance complexity, increases documentation scrutiny, and exposes Indian companies to sudden cost hikes, especially those operating in high-volume, globally integrated manufacturing sectors.

CFOs are being asked tough, real-time questions:

• How exposed are we to sudden tariff revisions across critical input categories?

• What’s the financial risk of accelerating our sourcing diversification strategy?

• Can vendor agreements absorb this level of policy volatility, or do we need to renegotiate?

• Is our current forecast still valid under the new trade assumptions?

• How fast can we model alternate supply routes without disrupting fulfillment timelines?

To respond effectively, CFOs should focus on five immediate priorities: 

1. Model trade scenarios dynamically
Develop simulations to pilot different duty rates, shifts in sourcing, and product classifications. Consider this: shifting 20–30% of China sourcing to Vietnam or Mexico can minimise tariff exposure up to 12%. CFOs need to offer real-time landed cost visibility, margin impact analysis, and mitigation alternatives to support agile, data-backed decisions.

2. Turn supply chain data into financial insight
Integrate procurement intelligence like country of origin, HS codes, Bill of Materials (BOM), and payment terms of suppliers, directly into financial models. This degree of detail is necessary: without it, tariff effect modeling, pricing precision, and risk prediction are disconnected from the operational dynamics of international trade. A well-structured BOM not only dictates cost estimates but also aids in the identification of high-risk components and supplier dependencies, essential for CFOs wanting to embed resilience into pricing, fulfillment, and margin planning.

3. Protect liquidity under pressure
Tariff increases often drive-up working capital requirements through inventory buildup and early payments. For instance, a 90-day lead time increase on components due to trade friction can tie up millions in inventory holding costs. CFOs should tighten DSO, renegotiate supplier terms, and actively track working capital KPIs to stay agile.

4. Govern tariff risk like a strategic exposure
Incorporate tariff volatility into your ERM framework with clear escalation protocols and board-level triggers. Today, only 18 % of ERM leaders say they have high confidence in identifying and managing emerging risks, highlighting a significant governance gap.* Embedding tariff risk into this evolving risk architecture ensures leadership can act before a supply chain shock becomes a financial crisis.

5. Break down silos across functions
Finance needs to collaborate closely with legal, tax, supply chain, and procurement to agree on tariff categories, contract updates, and margin safeguards. When cross-functional responsibilities are ambiguous or communication fails, organisations can risk missing latent cost leaks and compliance risks. Fortifying these collaborations keeps CFOs ahead of trade-driven volatility and safeguards enterprise value.

Converting Trade Risk to Financial Preparedness

Tariff choices may be taken in policy rooms, but it's finance that must contend with the consequences. This is where CFOs must rise to the challenge, bringing discipline, velocity, and anticipation to the game. Those who incorporate trade risk into their day-to-day planning now will be the ones leading their companies through the uncertainty later.