For 2025, the trending topic throughout the global manufacturing sector has been tariffs. When will new tariffs take effect? How high will they go? Pretty much every corner of the industry is faced with uncertainty in anticipation of new tariffs or increased rates on existing tariffs.
However, tariffs are just one part of a much larger equation. When choosing the most cost-effective location for production, we constantly have to weigh the price of tariffs against a long list of other costs, both in manufacturing and logistics. For example:
- Shipping costs for your end products, as well as the cost of shipping machines and tooling to new locations versus the cost of paying tariffs in the current location.
- Material availability depending on location – i.e. not all materials will be readily available in different countries, or the cost may be prohibitively higher.
- The general challenges of establishing a new supply chain – setting up new production lines, establishing labor and manufacturing processes, all while navigating different government regulations along the way.
- There is also the potential for labor shortages further complicating the matter – if a substantial number of companies are reorienting their supply chains simultaneously (e.g. from China to Vietnam), labor costs will go up along with the risk of worker shortages.
These are just a few of the major challenges Panova faces as we strive to establish the most reliable, efficient, and cost-effective production processes for our customers’ projects.
Our established supply chains, combined with our expertise in materials and manufacturability, enable us to truly optimize each project for outsourced production. While many of our competitors struggle with lengthy turnaround times of 2 to 3 weeks for quotes, we can typically quote your project within 1 to 2 days. That level of responsiveness is just the first of many advantages of Panova’s comprehensive contract manufacturing solutions.
The Cost of Tariffs vs. Supply Chain Relocation
Tariffs are essentially taxes imposed by governments on imported goods from other countries. When a tariff is applied, the importer pays the additional cost. Whether it’s manufactured components or raw materials, higher import fees mean higher production costs.
However, it’s certainly not always more profitable to avoid tariffs by switching up your supply chain. As mentioned above, tariffs are just one of the many costs to consider. Manufacturing your products or importing from a different country with lower tariffs isn’t always easy or cost-effective – especially when larger industry trends are taken into consideration.
Right off the bat you have to contend with additional costs in shipping and logistics. We have seen customers’ freight charges increase anywhere from 5% to 30% when switching manufacturing locations, wiping out much or all of their expected cost savings.
Then there are potentially higher labor costs and shortages. For example, in response to the increased tariff on products manufactured in China that went into effect back in 2018, many domestic importers have switched to sourcing products from Vietnam. That has subsequently led to various labor challenges in Vietnam, which ultimately translate into longer lead times and increased costs for American businesses. You also have to factor in the time it will take to set up a new Vietnamese supply chain versus an already established supplier in China.
Panova: Navigating New Tariffs and Strengthening Your Supply Chain
A huge advantage to working with Panova is that we navigate these complex supply chain issues for you. We strive to consistently ensure the best price along with reliable on-time delivery of your products.
For nearly half a century, Panova has carefully established a robust international network of suppliers. The COVID pandemic taught the whole industry a lesson about the importance of supply chain sustainability, and we’ve worked hard to set up an even more reliable supply chain in the years since.
Of course, that doesn’t guarantee we’ll be able to avoid future tariffs on the materials and components we need to make your products. But we’ll continue to work closely with customers while keeping a close eye on the current tariff landscape. That way we can establish the most reliable, cost-effective supply of all critical parts and materials needed with respect to future tariff increases.
As always, Panova strives to keep your costs as low as possible while always keeping your project on time and on track.
Quality Contract Manufacturing Solutions Since 1977
For nearly half a century Panova has helped OEMs, contract manufacturers, assemblers, distributors and suppliers succeed with their projects. From new product development, engineering, and prototyping to full-scale manufacturing, Panova is your trusted partner.
Get in touch with our experts to discuss your unique sealing requirements.