Tariffs and Working Capital: How Businesses Must Adapt
For many companies, tariffs can no longer be treated as a temporary political disruption.
They are becoming part of the operating-cost structure.
The latest U.S. duties impose tariffs of 10% or 12.5% on goods from 60 trading partners covering 99.4% of American imports. Additional investigations involving excess industrial capacity, intellectual property, and strategic industries indicate that further actions may follow.
For executives, manufacturers, distributors, contractors, and retailers, the most immediate challenge is not only whether tariffs raise prices.
It is whether the business has enough liquidity to pay higher import and inventory costs before customers pay their invoices.
A company may preserve its profit margin eventually and still experience a serious cash-flow shortage immediately.
The tariff strategy is becoming more durable
Earlier tariff initiatives were overturned or challenged because of the legal authority used to impose them. The administration is now rebuilding its trade policy under more established laws, particularly Section 301 of the Trade Act of 1974.
On July 25, Reuters reported that the latest duties largely replace a temporary 10% global tariff that expired on July 24.
The new policy applies:
- A 10% rate to qualifying trading partners that have adopted or committed to enforced prohibitions on forced-labor imports
- A 12.5% rate to many other investigated economies
- Special net-rate treatment for certain products from the European Union, Taiwan, Japan, South Korea, and Switzerland
The Office of the U.S. Trade Representative confirms that the action covers the 60 largest U.S. trading partners, representing 99.4% of U.S. imports.
The current duties are also unlikely to be the final word.
USTR is conducting separate investigations into structural manufacturing overcapacity involving 16 major trading partners, including China, the European Union, Mexico, Japan, South Korea, Vietnam, India, and Taiwan. The investigations cover manufacturing sectors where subsidies, excess production, or other policies may be determined to burden U.S. commerce. USTR’s March 2026 announcement provides the scope of those proceedings.
Businesses should therefore prepare for continuing tariff exposure, even if individual rates, countries, or product exemptions change.
A lawsuit is not a working-capital plan
Two small businesses have challenged the latest tariff action in the U.S. Court of International Trade. The plaintiffs argue that using Section 301 against nearly all imports exceeds the authority Congress gave the executive branch.
The case may ultimately affect whether some duties remain enforceable or become eligible for refunds. But litigation can take considerable time, and the outcome is uncertain.
According to Reuters’ coverage of the lawsuit, Section 301 has been used regularly by previous administrations, although the plaintiffs contend that the current broad application has no historical precedent.
Businesses should preserve appropriate customs records and consult qualified trade counsel about protests, exclusions, and potential refund rights.
They should not, however, assume that a future court decision will solve today’s cash-flow requirement.
Tariffs must generally be funded when goods enter the country. Any potential refund may arrive much later.
The real pressure appears in the cash-conversion cycle
Consider an importer purchasing $1 million of inventory.
A 10% additional duty could create a $100,000 incremental cash requirement before accounting for freight, insurance, brokerage, storage, and domestic transportation.
If the company then sells that inventory on 30- or 60-day payment terms, its capital may remain tied up for months:
- The supplier may require a deposit before production.
- The remaining purchase price is paid before or upon shipment.
- Duties and customs costs are paid when the goods enter the United States.
- Inventory may sit before being sold.
- The customer may receive payment terms after delivery.
- The company must continue funding payroll and overhead while waiting.
The company’s income statement may eventually show a profitable sale. Its bank account may show a widening liquidity gap.
This pressure becomes more serious when a business is growing. Every additional order requires more cash for inventory and tariffs before the related receivable can be collected.
Growth can therefore increase the risk of a working-capital shortage.
Businesses need landed-cost profitability—not gross-margin estimates
Tariff-sensitive companies should calculate profitability based on total landed cost.
That calculation should include:
- Supplier price
- Tariffs and duties
- Customs and brokerage fees
- Freight
- Insurance
- Storage
- Domestic delivery
- Financing expense
- Quality-control costs
- Returns and warranty exposure
- Currency movements
- Inventory carrying time
Management should then measure profitability by:
- Product or SKU
- Customer
- Contract
- Supplier
- Country of origin
- Distribution channel
- Project or job
A product that appeared profitable under the original purchase price may become marginal or unprofitable after the full landed cost is included.
Broad price increases may not be enough. The company may need targeted pricing based on which products and customers are creating the greatest capital burden.
Contract terms deserve immediate review
Businesses should determine whether existing customer agreements permit them to pass through tariff-related increases.
Important provisions may include:
- Price-adjustment clauses
- Tariff or tax pass-through language
- Fuel and freight surcharges
- Change-in-law provisions
- Material-cost escalation clauses
- Force-majeure provisions
- Minimum-purchase requirements
- Cancellation rights
- Delivery schedules
- Deposit and payment terms
A contract that fixes the selling price while leaving the company responsible for all cost increases can become dangerous in a volatile trade environment.
Management should work with legal counsel to understand existing rights before changing prices or performance terms.
For new agreements, tariff allocation should be addressed explicitly. The business should not rely on the assumption that both parties will negotiate reasonably after costs have already increased.
Financing should match each stage of the supply chain
No single financing product solves every tariff-related capital need.
The proper structure depends on when the cash shortage occurs.
Purchase-order and trade financing
If the company needs capital to pay suppliers before goods are produced or shipped, purchase-order or trade financing may help fund qualified transactions.
The viability of this structure will depend on the customer order, supplier, transaction economics, documentation, and expected repayment.
Inventory and asset-based financing
An asset-based facility may provide borrowing capacity against eligible inventory and receivables.
Advance rates can vary significantly based on the inventory’s marketability, location, turnover, obsolescence risk, and liquidation value.
A lender will not necessarily advance against the tariff-inclusive cost dollar for dollar. The borrower may still need additional equity or liquidity.
Invoice factoring and receivables financing
Once goods have been delivered and an eligible customer invoice exists, factoring or accounts-receivable financing can help convert that invoice into immediate working capital.
This can shorten the period between the sale and customer payment, allowing cash to be recycled into new inventory, payroll, and operating expenses.
However, receivables financing generally addresses the post-sale portion of the cycle. It may not fully solve the earlier requirement to fund production, shipping, and tariffs.
Revolving credit
A revolving line can be useful when cash requirements fluctuate with purchasing and sales activity.
The company should determine whether its existing facility has enough availability for higher landed costs. It should also review whether tariff pressure could reduce margins, affect covenants, or change borrowing-base eligibility.
The strongest strategy may combine more than one source—for example, trade financing before shipment and receivables financing after delivery.
Commercial real estate and construction are also exposed
Tariffs can affect commercial real estate projects through the cost of:
- Structural steel
- Cement and related materials
- Electrical equipment
- HVAC systems
- Appliances
- Elevators
- Lighting
- Glass
- Plumbing fixtures
- Construction machinery
- Technology and security systems
A project budget completed before the latest duties may no longer provide a sufficient contingency.
Developers and contractors should update:
- Material budgets
- Supplier quotations
- Procurement schedules
- Construction-loan draw projections
- Interest reserves
- Completion guarantees
- Guaranteed-maximum-price assumptions
- Subcontractor agreements
- Project contingencies
Delays can create a second layer of pressure. If a developer changes suppliers or waits for domestic production, the project may incur additional interest, labor, and carrying costs.
A construction loan sized around an outdated budget may develop a funding gap before completion.
Capital providers will examine tariff resilience
Private-credit funds, family offices, and commercial lenders will increasingly ask borrowers to quantify their trade exposure.
Borrowers should be prepared to explain:
- What percentage of costs involve imported goods
- Which countries and suppliers are involved
- Current applicable tariff rates
- Whether alternative suppliers are available
- How quickly prices can be adjusted
- Whether customers have accepted tariff surcharges
- How much additional working capital is required
- Whether margins remain adequate after the increase
- What happens if tariffs rise another five percentage points
- Whether customer demand could decline after price increases
A vague statement that the company will “pass the cost through” is unlikely to satisfy serious underwriting.
Capital providers will want evidence that the customer can absorb the increase and that management can implement it before liquidity becomes constrained.
Family offices may find opportunity—but should examine the entire cycle
Tariff disruption can create demand for private working-capital facilities, inventory financing, purchase-order financing, and receivables-backed credit.
These opportunities may offer attractive returns, particularly when banks cannot respond quickly or the borrower’s need does not fit a conventional program.
But yield should be evaluated alongside:
- Collateral control
- Inventory eligibility
- Customer credit quality
- Supplier performance
- Gross-margin protection
- Currency and country risk
- Documentation
- Fraud controls
- Concentration
- Exit and repayment timing
A facility secured by receivables is only as reliable as the underlying invoices and account debtors. Inventory is only useful as collateral if it can be identified, controlled, and sold.
The source of repayment should remain clear throughout the transaction.
The Apex perspective: finance the new cost structure
At Apex Commercial Funding, we view the latest trade developments as a structural working-capital issue—not merely a political headline.
If tariffs remain part of the cost base, businesses need financing designed around the new economics.
That begins with four questions:
- When does the company have to pay cash?
- When does the company receive cash?
- Which assets exist between those two events?
- What financing structure can bridge the gap without eliminating the transaction’s profit?
Depending on the answers, the solution may involve purchase-order financing, trade finance, asset-based lending, equipment financing, invoice factoring, accounts-receivable financing, or a blended facility.
The goal is not to borrow around an unprofitable business model.
The goal is to preserve liquidity for a fundamentally sound company adapting to a more expensive supply chain.
Refinance the supply chain before liquidity becomes urgent
Businesses cannot control every tariff announcement, court decision, or trade negotiation.
They can control how quickly they measure the exposure, update pricing, renegotiate terms, and arrange appropriate working capital.
If your company imports products, depends on imported materials, or sells to customers on extended payment terms, now is the time to recalculate the full cash-conversion cycle.
Contact James Fillmore II at James@apexcommercialfunding.com or 240-535-9291 for a confidential working-capital assessment.
Financing is subject to underwriting, due diligence, lender requirements, and final approval. Businesses should consult qualified customs, trade, tax, and legal professionals regarding tariff obligations and potential remedies. This article is informational and does not constitute an offer of credit, legal advice, customs advice, or investment advice.
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