For companies with global supply chains, this week has been a whirlwind. The Trump administration’s announcement of record-high reciprocal tariffs, up-and-down market reactions, and a sudden 90-day pause that still includes a 145% tariff on Chinese goods have made one thing clear: unpredictability is the new normal.

While the 90-day pause offers companies some breathing room, the pressure is still on. A 10% universal tariff remains in effect, and a 145% tariff on Chinese imports continues to pose serious risk to supplier health and operational stability.

To help our clients understand the potential consequences of tariffs on their operations, RapidRatings conducted a series of stress tests based on our knowledge of global supply chain structures and country specific tariff rates. The following analysis assumed that companies increased their prices to cover half the cost of tariffs. Here is what we found:

Universal 10% Tariff + 145% Tariff on Chinese Goods

We assessed the impact of tariffs on U.S. companies based on where their global supply chains are located.

• Significant Spike in Supplier Risk
  • High-risk and very high-risk public companies increased by 46%.
  • Private companies saw an 92% increase in high-risk classification.
• Financial Health Rating Decline: Public companies saw an average 6.1-point decline in their FHR, while private companies experienced a staggering 13.0-point drop.
• Hardest-Hit Industries:

Reciprocal Tariffs

We also looked ahead to understand the full impact once the 90-day pause ends, and retaliatory tariffs go back into effect. The outlook is extremely concerning:

• Sharp Rise in Supplier Risk: ‍
  • High-risk and very high-risk public companies jumped by 57%.
  • Private companies showed a staggering 111% increase in high-risk classification.
• Financial Health Rating Decline: Public companies saw an average 7.4-point decline in their FHR, while private companies experienced a shocking 15.7-point drop.
• Hardest-Hit Industries:

The Impact on Suppliers

The increased costs from tariffs comes at a time when suppliers cannot afford it.

Tariffs will significantly impact cash conversion cycles, the time it takes for businesses to convert cash flow from sales. Middle-market companies have already experienced a notable and negative increase in cash conversion cycles from 54 to 77 days since 2019, and this has deeply strained their working capital. This trend is likely to worsen with tariffs. Most private and middle market companies don’t have the power to pass on cost increases down to their customers. So just as they have had to absorb the costs of parts and wages, inflation, and higher interest rates, they will have to absorb the lion’s share of tariff costs.

This underscores the importance of digging down deep to better understand supplier financial health.

What Companies Should Be Doing Now

Companies that proactively manage risk by understanding their suppliers' financial health are best equipped to weather the storm of tariffs. In contrast, organizations with limited visibility into their suppliers' financial situations will face significant challenges and may encounter unexpected disruptions.

To mitigate the risk of tariffs, companies should take the following steps:

• Deep Supplier Understanding: Conduct thorough financial health assessments of suppliers to understand their vulnerabilities and identify support opportunities. If critical suppliers are lacking a financial health assessment, fill that gap now. If financial health assessments are based on out-of-date financial statements, refresh them immediately.
• Collaborative Risk Assessment: Involve your supplier category managers in collaborative financial health discussions with key suppliers to assess risks and develop mitigation strategies.
• Innovative Support Mechanisms: Explore innovative financial support options to help suppliers navigate these difficult and uncertain times.

The clock is ticking. With 90 days to act, now is the time to pinpoint vulnerabilities across your supply chain. Businesses that invest in supplier financial health assessments and foster transparent relationships will be far better positioned to navigate the turbulent road ahead.

In times of uncertainty, resilience is built through preparation. Start now.