Tariff Turbulence: Why Betting on Reversals Could Backfire

U.S. businesses are in limbo. Faced with ongoing tariff uncertainty, many are choosing to stockpile inventory and delay payments—some anticipating that current policies may ease over time, others preparing for long-term continuation. But leaning too heavily on short-term tactics while waiting for political clarity is a risky bet.

April’s historic 55.5% drop in the U.S. trade deficit, reflects something deeper than temporary fluctuation. It points to a sudden pullback in imports, an early sign that short-term tactics like stockpiling are reaching their limits and that the real cost of ongoing tariff volatility is beginning to surface.   

As someone who works closely with finance and credit professionals across North America, it's clear that companies are navigating uncharted waters. Some are switching suppliers, while others are renegotiating payment terms or delaying renewals to preserve cash flow. But surprisingly, few businesses are taking a long-term, structural view of what tariffs could really mean for financial health and supply chain stability.

A fragile strategy: wait, stockpile, hope

In recent conversations, I’ve heard from many businesses that are banking on this moment being temporary. Many are ramping up inventory buys to beat the tariffs. The logic is simple: buy now, buffer costs and wait for the politics to settle. But this strategy is not only unsustainable, it could create a dangerous domino effect.

Stockpiling might delay the pain, but it doesn’t completely eliminate it. When inventories run dry in three or six months, companies may find themselves without the capital or flexibility to respond. Even worse, if every business hits that cliff at once, we could see a cascading effect of supply chain strain, delayed payments and credit defaults across the board.

The same applies to supplier relationships. We’re seeing companies starting to deprioritize payments to suppliers they expect to stop working with. If you’re preparing to walk away from a supplier in favor of an alternative supplier, paying the old supplier may become a lower priority. That may make sense in isolation, but multiplied across thousands of businesses, it weakens the commercial credit chain and introduces systemic risk.

Early signs of financial stress

One of the clearest warning signs of tariff shock waves we’re tracking is the rise in Days Beyond Terms (DBT) across industries, which is how late companies are paying invoices past agreed upon payment terms. DBT is often an early signal of cash flow strain, especially when the DBT starts to climb across sectors.

At the same time, there’s been a notable shift in how companies are prioritizing payments. Historically, businesses pay financial obligations such as commercial loans and credit cards first, then pay suppliers. But that behavior is shifting. We’re now hearing from partners that many companies are choosing to pay key suppliers on time while deferring payments to financial institutions. In industries where maintaining supply chain continuity is mission-critical, ensuring those suppliers are paid is taking precedence.

This is where the contradiction emerges: some companies are continuing to pay strategic or local suppliers promptly to safeguard operations, while deprioritizing payments to suppliers they expect to replace or move away from. It’s an approach where some suppliers are prioritized, and others are sidelined, and it introduces new risks on both ends of the relationship.

Long-term solutions start now

It’s understandable that business leaders want to wait for clarity, but the more sustainable path is to build resilience now. That means:

• Supplier diversification: Reducing dependency on politically vulnerable sources lowers long-term risk.

• Proactive credit monitoring: Tracking DBT and collection activity gives businesses real-time insight into financial stability and instability among customers and suppliers.

• Scenario planning: Incorporating tariff models into financial planning may feel premature, but those who plan now will be better positioned if volatility continues.

Most importantly, companies must move out of reactive mode. As long as tariffs remain a topic of conversation, businesses need to design operations that can withstand swings, rather than scramble to adjust each time the rules change.

There’s a growing divide between companies that are proactively adapting and those taking a wait-and-see approach. The former will likely emerge more resilient, more flexible, financially sound, and better positioned to respond to future shocks. The latter may find themselves increasingly exposed to rising costs, constrained cash flow, and fragile supply networks.

Tariff policies may change, or they may not. But building business resilience shouldn’t hinge on the outcome of any single administration’s trade stance. Companies that act now to strengthen their operations will be better prepared, no matter which way the political winds blow.