5 Ways to Reduce US Import Tariffs with Smarter Manufacturing Strategy

2. Know What US Import Tariffs and Trade Agreements Apply to Your Product

One thing many brands still misunderstand or underestimate is how complicated modern tariffs have become. It’s no longer just a flat “tariff.” Depending on the product category, modern US tariff structures can layer and stack, meaning multiple duties can apply to the same product simultaneously. Imports may be affected by:

• Section 301 tariffs on Chinese-origin goods (7.5-25%, with some categories at 50-100%)
• Section 232 tariffs on steel and aluminum (25-50%)
• Section 122 surcharges (10% on imports from certain countries, effective February 24, 2026)
• Product-specific anti-dumping or countervailing duties
• Base MFN duty rates

Recent US trade developments, including ongoing tariff reviews and expanded investigations into multiple manufacturing regions, continue to affect how companies structure their supply chains. For Chinese-origin goods specifically, stacked duties can reach 35-60% depending on product category and classification. This means two similar products can end up with very different landed costs depending on:

• HS code classification
• Component origin
• Final assembly location
• And trade agreement eligibility

In other words, supply chain structure now directly impacts profitability.

It is also worth noting that as of February 24, 2026, the US eliminated the $800 de minimis exemption globally. Every single import shipment, regardless of value, now requires formal customs entry with HTS classification, country of origin verification, and full duty payment. Even small sample shipments or prototype orders now carry the full tariff stack.

3. Split Production Across Multiple Countries

One of the biggest sourcing shifts in recent years has been the rise of the “China + 1” strategy. Instead of fully leaving China, many brands are diversifying portions of production into countries like:

• Vietnam
• Bangladesh
• Indonesia
• Malaysia
• Mexico

For example, apparel production, electronics assembly, or packaging and finishing processes may shift into different country or regions to improve trade eligibility and reduce tariff exposure.

The goal is usually not to eliminate China entirely. In many industries, China still offers strong manufacturing infrastructure, mature supplier ecosystems, and production capabilities that are difficult to replace. Instead, brands are building more flexibility into their supply chain. Diversifying production across multiple regions can help reduce supply chain risk and improve flexibility when trade policies shift.

However, diversification itself requires planning. Different countries come with different lead times, compliance standards, production strengths, and trade considerations especially those involved in the new USTR Section 301 investigations that launched in March 2026. Brands diversifying into these markets should monitor USTR announcements and have contingency plans if tariff conditions change.

Country strategy works best when it’s approached as part of a broader sourcing plan, not just a reaction to tariffs alone. In some cases however, the best strategy is not moving production entirely but involve splitting manufacturing across regions instead, restructuring final assembly, or diversifying suppliers to reduce concentration risk.

Of all the China+1 destinations, one stands out for US companies in particular.

4. Mexico as a Strategic Option

For US companies specifically, Mexico has become one of the most strategically important manufacturing locations. Under the United States-Mexico-Canada Agreement (USMCA), qualifying goods are currently exempt from Section 122 surcharges, which is one of the key reasons Mexico remains attractive right now, especially for:

• Consumer electronics assembly
• Automotive-related manufacturing
• Packaging and final-stage production
• Nearshoring strategies for faster US fulfillment

Beyond tariffs, Mexico also offers shorter shipping timelines and easier logistical coordination compared to overseas freight routes. However, using Mexico does not automatically eliminate tariffs. The product still needs to meet origin qualification standards, including Regional Value Content (RVC) thresholds and tariff shift requirements.

It is important to note that the USMCA itself is under review. In July 2026, the US, Mexico, and Canada will hold a joint review to assess the agreement’s performance and determine its future. Outcomes could include renewal, revision, or even termination. Brands building long-term manufacturing strategies around USMCA should factor this uncertainty into their planning.

5. Know Which Countries Make Sense for Different Products

Not every product sourcing benefits from the same country strategy. The right manufacturing location depends on your product category, materials, tariff classification, trade agreements, and where your supply chain can realistically support production.

As a general starting point:

• Apparel and textiles: Vietnam and Bangladesh remain strong options for cut-and-sew operations.
• Consumer electronics: Malaysia and Mexico are commonly used for final assembly.
• Packaging and finishing: Shifting final-stage processes to a different country can sometimes change the product’s country of origin and improve trade eligibility

The right answer is rarely one country. It’s usually a combination, structured around where your specific product gets the best balance of cost, compliance, and reliability.

How We Approach This at ISS