Navigating Tariff Volatility: Strategic Pathways for Emerging Life Sciences Companies

By Mile Iliev

What Happened

• New perspective from Gartner highlights that Chief Supply Chain Officers must plan for long-term volatility, considering potential countermeasures, escalations, and de-escalations.
• Gartner identifies five strategic pathways—Retire, Renovate, Rebalance, Reinvent, and Reinvigorate—to help companies navigate ongoing trade uncertainty.
• Gartner indicates that companies that reinvent or reinvigorate their operations will be best positioned for success in the face of rising tariffs.

Why This Is Important

Rising tariffs create financial, operational, and regulatory challenges for biotech firms. Like many other industries, companies must address higher costs, supply chain risks, compliance complexities, and potential strategic shifts to stay competitive. However, unlike many other industries, growing biopharma companies face unique challenges that impact which strategies are likely to be most successful in the long-term. Therefore, there are several implications that emerging biotech and pharma companies should consider as tariff policies take effect and others are potentially introduced in upcoming months.

1. Costs will increase for biotech materials and equipment.
   • Increased tariffs on raw materials, lab equipment, and active pharmaceutical ingredients (APIs) could significantly raise R&D and production costs.
   • Impact: Biotech firms must evaluate whether to absorb these costs, pass them on, or adjust their sourcing strategies.
2. Higher tariffs may disrupt global supply chains.
   • Supply chain disruptions caused by tariffs could delay clinical trials and commercialization efforts, affecting regulatory approvals and go-to market strategies.
   • Impact: Companies need backup sourcing strategies and contingency plans for essential materials.
3. The global regulatory and compliance landscape will continue to shift and introduce uncertainty.
   • U.S. Customs is increasing scrutiny on country-of-origin documentation, making compliance more complex.
   • Impact: Non-compliance could result in shipment delays, penalties, and regulatory scrutiny.
4. New opportunities will open for domestic manufacturing and partnerships.
   • Tariff uncertainty could drive biotech firms to invest in U.S.-based manufacturing or explore new trade-friendly markets.
   • Impact: Companies that reinvent their operations by shifting production closer to home or aligning with new trade incentives will gain a strategic advantage in the long run.

What You Can Do

Emerging and growing biotech firms should act strategically to minimize risk, ensure compliance, and create new opportunities. For these companies a focus on reinventing, rebalancing and reinvigorating will be more relevant and sustainable than Gartner’s options for retiring and renovating. To do this successfully, companies will need to reassess supply chains, ensure compliance, and leverage trade policy shifts as opportunities for supporting growth.

For companies facing higher costs on biotech materials & equipment

• Immediate: Assess how tariff increases affect your product costs and evaluate short-term cost-saving measures.
• Longer Term: Reinvent your sourcing strategies by exploring alternative suppliers in tariff-friendly countries or investing in domestic production to align with new trade incentives.

For mitigating potential supply chain disruptions

• Immediate: Identify critical materials that are at risk and establish inventory buffers for short-term protection.
• Longer Term: Rebalance your supplier networks by diversifying into low-tariff regions and forming strategic partnerships that enhance flexibility.

For minimizing compliance risks

• Immediate: Conduct an internal audit of country-of-origin classifications and import documentation to ensure compliance.
• Longer Term: Reinvigorate your compliance programs by working closely with customs brokers and trade consultants to avoid costly regulatory missteps.

For identifying and exploiting new strategic opportunities

• Immediate: Assess whether domestic production or new global partnerships could reduce your tariff exposure.
• Longer Term: Reinvent your supply chains to align with government incentives and emerging trade-friendly markets, turning tariff challenges into a competitive advantage.

By taking a proactive and strategic approach, biotech firms can move beyond reacting to tariff hikes and instead position themselves for long-term success.

For support with supply risk management and strategies for navigating tariff volatility, contact the Converge team today at info@convergeconsulting.com.