Tariffs are back, and this time the impact could be bigger than expected. Craig Reed, SVP of Global Trade at Avalara, says companies are confused, reactive, and unprepared for what’s coming next. In this Q&A, he shares what he’s hearing from global businesses, why the de minimis rule is being misunderstood, and what ripple effects we could see if China responds.
Supply Chain 24/7: What’s the biggest concern you’re hearing from businesses in response to recent tariff shifts?
Craig Reed: The best way I can describe the concern is overall uncertainty. Businesses are coming to us with a myriad of questions, spanning everything you can think of – rules of origin they’ve never had to think about before, breakdowns of what costs might look like, how to maintain compliance, and where exactly the points of disruption will be in their supply chains. The disruption is going to be large-scale, requiring nearly all organizations operating globally to adjust their business strategies and rework their supply chains in significant ways. However, at the moment, beyond Canada, Mexico, and China, the full tariff picture has not been revealed. No one knows what the long-term ramifications will be, which leads to uncertainty and decision-making paralysis.
SC247: Are companies treating this as a short-term disruption, or are they making long-term adjustments to their supply chains?
CR: At the moment, businesses appear to be focused on survival in the short term because of the uncertainty of the long-term outcome. Much of the immediate response from businesses is going to be deciphering how exactly the tariffs will impact them and what that might look like. With these impacts understood, businesses may adopt short-term strategies to shoulder increased costs and supply chain disruptions, such as temporarily switching suppliers or increasing the price tag for consumers.
Once the dust settles and businesses start to understand how the tariffs might affect them long-term, they can start to make those longer-term adjustments, like nearshoring and shifting where goods are manufactured to avoid tariffs, or changing the composition of their products so they no longer rely on goods from certain countries. I can’t emphasize enough how impactful the level of uncertainty is on making long-term decisions. In many cases, it has taken years to develop these supplier and supply chain relationships. Those will not be undone quickly and, especially given the “whiplash” we’ve seen, it will be hard for companies to feel comfortable that these changes are permanent, and a foundation on which to base sourcing decisions.
SC247: Which industries are feeling the impact the most right now?
CR: The industry that’s probably hurting the most right now is manufacturing. Whether for automobiles or personal technology devices, manufacturing necessitates extremely complex supply chains. Many of these supply chains are well-oiled machines that have been built over time, with intricacies that rely on unique suppliers that aren’t always easy to replace. Considering many manufacturers are building goods with hundreds or even thousands of smaller parts, you’d be hard-pressed to find someone who isn’t using at least one raw material or component sourced from either China, Canada, or Mexico.
SC247: What strategies are companies using to navigate this “tariff whiplash”?
CR: The weeks and months leading up to the implementation of these tariffs and changes to de minimis rules have certainly bestowed a feeling of whiplash on businesses operating across borders. Every day seems to bring a new “will they or won’t they” question, as new tariffs are introduced, revised, and repealed.
To stay on top of these changes, businesses are re-examining their sourcing strategies and implementing tariff engineering to keep pace. Tariff engineering entails restructuring supply chains in a way that minimizes the amount of exposure (and therefore risks) to goods from tariff-impacted countries like Canada, Mexico, and China. Businesses that want to stay ahead and afloat amid these evolving changes are investing in a technology stack that can track incoming policy changes, flag suppliers impacted by new trade laws, and identify alternative sources that will pose a low-risk, high-return. Companies armed with the right technology to stay compliant and competitive will be able to successfully navigate and succeed despite the current wave of uncertainty.
“The industry that’s probably hurting the most right now is manufacturing. Whether for automobiles or personal technology devices, manufacturing necessitates extremely complex supply chains.”
SC247: You’ve said that many businesses don’t realize that the de minimis rule applies to all goods made in China, not just those shipped from China. What are the biggest misconceptions companies have about these changes?
CR: A critical stipulation in the proposed changes to de minimis rule outlines that the rule will no longer apply to goods imported from China OR any goods made in China. A common workaround businesses have historically leveraged is utilizing a “middleman” country to import goods from China. However, this will no longer be a viable strategy, as any good manufactured in China will no longer be eligible for de minimis, no matter the country it is imported from.
Businesses importing goods made in China should thoroughly reexamine their existing supply lines and sourcing strategies to identify new and more diversified supplier pools that can be actioned in times of new policy disruption.
SC247: What ripple effects could this have on international trade beyond the U.S. and China?
CR: As two of the world’s largest economies, changes to trade policies between the U.S. and China will have a reverberating impact on a global scale. In the short term, we expect to see a disruption in cross-border trade and increased inflation as businesses scramble to account for new tariffs. In the long term, we expect to see an increased number of businesses turning to alternative countries with already established manufacturing infrastructure and low labor costs (such as India, Vietnam, and Bangladesh) to source from. What remains unclear is the level of tariffs that will be imposed on alternative supply countries.
SC247: You mentioned that “the other shoe has not yet dropped” and that China will likely respond—what do you predict that response will look like?
CR: China has historically been measured in its approach to trade retaliation, but when it acts, it typically targets industries where it holds leverage. And China’s response to American tariffs, so far, confirms its focus on agriculture. Responding to the U.S.’s 20% tariff on all Chinese imported goods, China instated retaliatory tariffs of 15% on chicken, wheat, corn, and cotton in addition to a 10% tariff on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products. China has historically been the biggest market for U.S. agricultural products, having imported $29.25 billion worth of U.S. agricultural products in 2024. These retaliatory tariffs make it clear that China will be looking to hit U.S. agriculture where it hurts.
Should tensions continue to escalate, the U.S. may experience new tariffs focused on critical minerals like lithium, graphite, and rare earth elements essential to the production of EV batteries, semiconductors, and clean energy technologies. Beyond minerals, China could expand export controls on steel, aluminum, and chemicals. In the past, they have already tightened restrictions on gallium and germanium, crucial for semiconductors. Further retaliatorily actions from China could increase costs, delay production times, and send shockwaves through key U.S. growth industries. If alternative supply countries, like Canada, are also facing high tariff levels, that will result in increased input costs, which will likely end up raising prices and driving inflation.
Uncertainty is the real challenge. The next wave of retaliatory tariffs is coming, whether through targeted export limits, tighter customs enforcement, or new trade barriers. What remains to be seen is what industry will feel its impacts next.
SC247: How could potential Chinese countermeasures impact supply chains globally?
CR: Even small disruptions in China’s trade flows can ripple across global supply chains with outsized consequences. If export restrictions or customs slowdowns come into play, we’ll likely see congestion at ports, erratic lead times, and sudden gaps in inventory availability. For companies that rely on just-in-time logistics, particularly in automotive, consumer electronics, and industrial manufacturing, this kind of unpredictability can uproot production schedules.
Beyond logistics, there’s the issue of supplier stability. China is deeply embedded in global manufacturing, not just as a producer but as a critical node in multi-tiered supply chains. If Chinese-made components or raw materials become harder to access, companies will have to source from alternative regions like Vietnam, India, or Mexico. Again, we don’t know yet what the tariff picture will look like for the rest of the world.
The real challenge here isn’t just tariffs or trade barriers: it’s the erosion of supply chain predictability. Businesses can adapt to new regulations, but when key inputs, logistics networks, and supplier relationships become moving targets, the entire system becomes more fragile. The uncertainty itself is the disruption: businesses can adapt to new rules, but it’s harder to prepare for a moving target.
SC247: Given your experience at both Avalara and Pitney Bowes, how has cross-border trade evolved over the past few years?
CR: In the past, businesses focused on speed and cost efficiency, assuming compliance was just paperwork. Now, with tariffs fluctuating, de minimis rules tightening, and customs enforcement ramping up, managing duties and tax calculations manually is no longer simply the cost of doing business; it’s become a beast of its own and a massive hurdle.
Automation is the golden ticket to scaling cross-border trade without getting buried in compliance headaches. Businesses that integrate real-time duty and tax solutions can classify goods instantly, calculate accurate costs, and clear customs smoothly all without slowing down operations. Instead of scrambling to keep up with shifting regulations, companies can expand confidently, knowing compliance is built into their supply chain.
SC247: If you were advising a company just starting to navigate global trade complexities, what’s the most important piece of advice you’d give them?
CR: The most effective way for businesses to prepare for tariff changes, whatever they end up being, is to automate customs duty compliance. Tariff policies are shifting faster than ever, and businesses that rely on manual processes or outdated compliance methods will struggle to keep up. With new de minimis thresholds, evolving country-of-origin rules, and unpredictable retaliatory tariffs, companies need a real-time, automated system that can track, calculate, and apply the correct duties and taxes at scale.
Automation is no longer just about efficiency. It’s about risk reduction. Governments are tightening customs enforcement, and errors in duty classification or underpayment can lead to shipment delays, penalties, and unexpected costs. Whether tariffs go up or down or get restructured entirely, businesses with a scalable, automated compliance framework will be positioned to adapt without disrupting operations.