A mid-market engineering firm delivering 18% of its revenue to US industrial customers. In late March 2025, the sales team raised the first red flags: buyers were requesting discounts to “offset upcoming tariffs.” On April 2, President Trump signed Executive Order 14257. On April 5, a universal 10% tariff took effect. On April 9, the EU-specific rate was set to rise to 20%. Within weeks, margins on those US contracts had been cut in half.
This scenario played out across thousands of European businesses in 2025. The challenge is not merely commercial — it is an operational management question. Companies whose ERP recalculates landed cost in real time, simulates scenarios, and flags loss-making contracts before delivery absorb the shock. Others discover it at the quarterly close.
The Liberation Day Shock and the 2025-2026 Tariff Landscape
An Unprecedented Disruption Since the 1930s
On April 2, 2025, the White House declared “Liberation Day” and announced a regime of “reciprocal” tariffs covering all US trading partners. The stated rationale: correcting the structural trade imbalances Washington claimed to have borne for decades.
For the European Union, the impact was immediate. A universal 10% tariff entered into force on April 5, 2025. An EU-specific rate of 20% was scheduled from April 9, but a 90-day suspension — announced on the same day following sharp market turbulence — opened the door to bilateral negotiations.
On July 27, 2025, the EU and the United States concluded the “Turnberry deal”: a baseline rate of 15% on the majority of European exports to the US, compared to an average of 1.2% in 2024 (EU-US trade deal explained, European Commission). The deal was broadly welcomed as a compromise that avoided the worst outcome, but it still represents a twelvefold increase in the average tariff rate on European exports.
Sector-Specific Rates the Agreement Leaves Unresolved
The Turnberry deal does not apply uniformly across all trade flows. Three sectors remain outside the 15% baseline:
- Steel and aluminium: Section 232 tariffs, raised to 25% in February 2025 and further increased to 50% in June 2025, continue to apply outside the scope of the agreement. The Section 232 scope has been extended to more than 400 derivative products, including machine tools, industrial fasteners, and machined components.
- Automotive: A 25% tariff on vehicles and automotive parts, in force since April 3, 2025, remains in place.
- Pharmaceuticals and semiconductors: The 15% rate applies under the general agreement.
Raw Exposure for European Exporters
The numbers tell an unambiguous story: the EU exported EUR 531.6 billion in goods to the United States in 2024, representing 21% of its total merchandise exports (Eurostat, March 2025). The top five product categories account for 49% of those exports: pharmaceuticals (22.5%), road vehicles (9.6%), general industrial machinery (6.4%), electrical machinery (6.0%), and specialised machinery (5.0%).
The measured outcome for 2025 leaves no room for doubt: the effective tariff rate applied to EU exports to the US rose from 1.2% in 2024 to 8.5% in 2025 — an increase of 7.2 percentage points. Against this backdrop, EU exports to the US (excluding Ireland) fell 4.1% over 2025, while exports to the rest of the world grew 1.5% (ING Think, tariff impact analysis 2025-2026).
Five Concrete Impacts on European Mid-Market Supply Chains
1. The Collapse of Landed Cost Planning
Before 2025, procurement and supply chain teams calculated the “delivered destination USA” cost on the basis of stable, near-zero tariff rates. The landed cost for a mechanical component exported to a US customer included the sale price, international shipping, insurance, and a marginal tariff line of 1-2%. That line represented negligible risk, typically absorbed in overheads.
With tariff rates now at 15% (25% for automotive parts, 50% for steel products), the tariff line has become the largest variable cost component in the landed cost calculation. Any business whose ERP does not automatically recalculate this figure using current rates is navigating its export margins blind.
2. The Disruption of Fixed-Price Contracts
Many European mid-market exporters had signed annual or multi-year contracts with fixed prices and no tariff revision clause. When rates increased by 13 percentage points in a matter of weeks, those contracts turned loss-making. The ERP must be able to identify in bulk all commitments whose margin has turned negative after applying the new rate — before the next scheduled delivery.
3. Rules of Origin Under Pressure
The tariff logic is more complex than it first appears for businesses that source components from third countries (China, India) and incorporate them into products assembled in Europe. The applicable US tariff depends on the product’s substantial origin — not simply the country of shipment. A European product containing Chinese components that have not undergone “substantial transformation” in Europe may be subject to the US rate applicable to China (31.1% in 2025) rather than the EU rate of 15%.
This dynamic is pushing procurement directors to reassess their supply chains at a deeper level, introducing a geopolitical dimension that was absent from historical sourcing decisions.
4. Bullwhip Effects Driven by Tariff Anticipation
Successive tariff announcements generated massive pre-buying behaviour. US importers accelerated orders ahead of each announced deadline, creating demand spikes followed by sharp troughs. For European exporters, these anticipatory cycles disrupted production planning, inflated finished goods inventories, and strained cash flow forecasts.
The ERP must be capable of distinguishing structural demand from speculative stocking demand, and adjusting production plans accordingly.
5. The Multiplication of Documentary Obligations
Each US tariff proclamation adds product categories, exclusion procedures, and exemption request forms. The extended Section 232 now covers more than 400 steel and aluminium derivative products. An exporter of mechanical products must verify, for each order line, whether its HS code falls within the Section 232 scope, the standard 15% reciprocal tariff, a negotiated sector exclusion, or a preferential origin rule under the EU-US agreement.
What Your ERP Must Do in the Face of Trade Barriers
Dynamic Landed Cost Recalculation
Landed cost is no longer a static parameter updated once a year. In an environment where US tariff rates changed five times in twelve months, the ERP must incorporate customs duty rates into the full cost calculation at every transaction.
Technically, this requires the purchasing module to store the HS code for each item, the logistics module to record the actual country of origin (not the country of shipment), and the cost engine to calculate the applicable duty by cross-referencing these two data points against the rate in force for the destination country. The ERP then triggers an automatic alert whenever the recalculated landed cost pushes an order below the minimum configured margin threshold.
Tariff Scenario Simulation
Simulation capability is the second indispensable pillar. Before signing an export contract or responding to a US tender, you need to model multiple tariff assumptions: the current rate (15% or 25% depending on sector), a potential escalation, a sector exclusion if negotiations succeed, or a return to a lower universal rate.
This simulation must inform three distinct decisions: setting the sale price with a tariff revision clause; deciding whether to absorb the tariff cost (and its margin impact), pass it on (and its competitiveness impact), or offset it through logistics or sourcing optimisation.
In April 2025, Rootstock Software launched Tariff Management Central, a dedicated module for manufacturers that integrates these functions: scenario simulation, landed cost recalculation by supplier and region, real-time margin alerts, and comparison of alternative sourcing scenarios.
HS Code Reclassification to Reduce Tariff Exposure
Not every product falls into a single HS category. A machined component may be classified differently depending on whether it is treated as a general industrial machinery part or an automotive part — with markedly different tariff rates. HS reclassification, when legally grounded in a real product transformation, can significantly reduce exposure.
The ERP must allow simulation of the cost impact of a reclassification on a specific order line, and must document the justification for each classification for US customs audits. An undocumented HS classification is a potential reassessment during a US importer audit.
Using a Foreign Trade Zone (FTZ) in the United States offers an alternative route: products imported into an FTZ can be assembled or transformed on-site before entering US customs territory, with the option to apply the most favourable tariff rate between the original input and the finished product. The ERP must be able to model this calculation to determine whether an FTZ strategy is economically viable.
Supplier Diversification Management
The most common strategic response to a discriminatory tariff is to source from a country with a preferential rate. If a component of Chinese origin carries a high effective tariff rate embedded in the final product exported to the US, an equivalent component sourced from a country with a US trade agreement may benefit from different treatment.
But supplier diversification is not free. It involves qualification costs, different lead times, quality risks, and often higher minimum order quantities. The ERP must enable comparison of the total landed cost of Component A (country X, rate Y, lead time Z, quality cost W) against an equivalent Component B, incorporating all these variables in a full 12-month cost calculation.
This is the supplier rebalancing function present in advanced tariff management modules: displaying tariff-adjusted cost by supplier and region to drive sourcing decisions based on data rather than commercial intuition.
Real-Time Monitoring of Tariff Changes
Between February and August 2025, the US tariff rates applicable to EU exports changed at least four times. No procurement team can manually track these changes and recalculate their impact across the entire supplier base in real time.
The operational response is to integrate a real-time tariff data feed into the ERP — either via the US HTS (Harmonized Tariff Schedule) database API, or through specialist solutions such as Avalara AvaTax. These feeds update rates automatically and trigger threshold-based alerts: when the rate on a given HS code exceeds a configured level, an automatic notification is sent to procurement, supply chain, and finance teams simultaneously.
What the Leading ERPs Offer
SAP S/4HANA with Global Trade Services
SAP GTS is the most comprehensive module for international trade management. It covers HS classification, customs duty calculation, landed cost simulation, and integration with national customs systems. Against the backdrop of US tariffs, it enables configuration of tariff rules by geography, modelling of preferential origin rules under the EU-US agreement, and alerts when an item crosses a configured tariff exposure threshold (SAP Global Trade Services, community documentation). The limitation remains the entry price: GTS is sized for mid-market and enterprise businesses with significant export volumes and dedicated IT resources.
Oracle Cloud SCM with Global Trade Management
Oracle GTM enables simulation of landed cost with current and hypothetical tariffs, evaluation of alternative sourcing scenarios, and automation of export customs documentation (Oracle Global Trade Management). Its compliance rule engine covers tariff exclusion procedures and preferential trade agreements, making it a strong tool for actively reclassifying HS codes and optimising exposure on a tariff-by-tariff basis.
Microsoft Dynamics 365 Finance and Supply Chain
Dynamics 365 includes a native Landed Cost module that allocates customs charges across multiple purchase orders and accounts for commitments on goods in transit. It supports management of US HTS codes for identifying reduced-rate categories. For complex supply chain use cases, partner modules (Descartes, Integration Point) extend the platform with rate monitoring and tariff exclusion management.
NetSuite (Oracle)
NetSuite integrates a landed cost module covering automatic calculation of import duties and taxes, along with a scenario planning feature for comparing multiple sourcing assumptions side by side. Integration with Avalara AvaTax adds automatic HS code assignment and real-time calculation of applicable customs duties based on declared country of origin. This is a compelling option for SMEs and mid-market companies seeking full functional coverage without the SAP GTS entry cost.
Odoo
Odoo handles multi-currency natively and has community modules for basic customs classification. For complex US tariff management (Section 232, reciprocal tariffs, sector exclusions), third-party modules or connectors to specialist platforms are required. Odoo remains the most accessible starting point for an SME looking to automate basic landed cost before moving on to advanced simulation capabilities.
A 3-Phase Roadmap
Phase 1 (0 to 60 Days): Audit Your Real Tariff Exposure
Begin by quantifying actual exposure — not estimated exposure. Export all US order lines from the past 12 months. Cross-reference each line with its HS code and country of origin, then recalculate landed cost using current rates. The gap between the contractualised cost and the recalculated cost is your gross tariff shock exposure.
In parallel, identify ongoing fixed-price contracts that contain no tariff revision clause. These are the most urgent engagements to renegotiate. This phase takes 30 to 45 days when ERP data is clean (HS codes populated, countries of origin documented). It can take two to three times longer if the item master has not been maintained.
Phase 2 (60 to 180 Days): ERP Configuration and Simulation Setup
Deploy or configure the landed cost module in your ERP with current US tariff rates. Set up a rate update feed from an authoritative reference source (the US HTS database or an approved tariff data provider API).
Configure simulation scenarios for your five main export product families: current rate (15% standard, 25% automotive, 50% steel), escalation to a higher rate, return to a universal 10% rate. These scenarios allow you to respond to an export tender in 48 hours rather than two weeks, with a calculated margin rather than an estimate.
Start evaluation of an alternative supplier in a preferential-rate geography for your two or three highest-exposure items. The ERP compares the total landed cost of both options, incorporating qualification costs, different lead times, and quality risks.
Phase 3 (6 to 18 Months): Structural Resilience
Phase 3 means embedding tariff management into standard business processes — not treating it as a one-off project. Landed cost becomes a supplier selection criterion alongside lead time and quality. Tariff simulations are part of every international tender response kit. Regulatory tariff monitoring is automated through data feeds, not managed by email.
For multi-entity groups with intragroup flows between Europe and the United States, this phase includes revision of transfer pricing policy to reflect new tariff realities, and an audit of preferential origin rules under the EU-US agreement to maximise the benefits of the 15% rate.
The risk scenario to model in your ERP remains another tariff escalation, whatever its political cause. Businesses that build this operational resilience into their information systems will absorb the next shock in weeks, not quarters.
To go further, see our complete guide to ERP and international trade for an end-to-end view of customs management (HS codes, intra-EU VAT, CBAM, sanctions screening) and our guide to CSDDD and ERP supply chain compliance for the supplier due diligence obligations that sit alongside these tariff challenges on the same supplier base.
