Future-proofing your supply chain against tariff disruptions

U.S. companies engaged in international trade are turning to supply chain finance solutions to navigate an array of emerging disruptions and challenges.

Traditionally, companies have leveraged supply chain finance with the primary goal of optimizing working capital. But more recently, faced with a global trade war and other supply chain disruptions, companies are partnering with their banks on a variety of supply chain finance solutions to achieve other strategic goals. Among them: responding to the uncertainty and unpredictability around supply chain disruptions, diversifying trading relationships, bolstering sales and better managing trade credit risk.

“CFOs and treasurers, along with their counterparts in procurement and sales, are seeing the value of working with a bank to select appropriate working capital financing tools to manage the uncertainty ushered in by supply chain disruptions, shifting supply chain partnerships and other challenges,” explains Dan Son, Head of Working Capital Finance at U.S. Bank.

The traditional role of supply chain finance

Supply chain finance has become a popular tool in the last decade-plus. Encompassing an array of payables and receivables financing strategies, supply chain finance allows buyers to increase their working capital while enabling suppliers to receive early payment for their invoices, often at a lower cost than traditional financing.

In a typical buyer-initiated program, U.S. buyers negotiate with suppliers to extend their payment terms, and in return those suppliers get paid sooner. How it generally works is the buyer approves invoices from its suppliers, who get the option of receiving early payment for those invoices. When they opt for early payment, the buyer’s bank pays the supplier the discounted invoice amount on day one, and then the buyer pays the full amount to the bank on the original invoice due date.

The buyer’s bank provides the supplier with receivables financing at an interest rate based on the buyer’s creditworthiness, which is often better than the rate the supplier could obtain on its own.

It's a win-win from a working capital perspective. Buyers extend their payment terms so they can hold onto their cash longer, and suppliers gain access to quick, predictable cash flow at favorable interest rates.

Suppliers can also work with their banks to initiate receivables financing providing the same benefits.

Grappling with new trade challenges

Companies continue to reach into the toolbox of supply chain finance solutions available from banks to meet working capital objectives. But increasingly they’re also using these tools to address a bevy of new challenges and goals.

One of the main challenges, since early 2025, has been the financial uncertainty created by up-and-down tariffs and the strain they’ve placed on trading relationships and cash flow.

Additionally, at the same time, companies are seeing major shifts in the favorability of trading with particular countries, creating the need to re-evaluate supply chain partnerships. For instance, for certain goods, China has been supplanted by countries such as Bangladesh and Viet Nam as the best-bet, low-cost provider. This has resulted in shifting trade corridors and trends such as nearshoring, compelling companies to diversify trading relationships.

Below are some of the ways U.S. buyers and suppliers are harnessing supply chain financing to address these changes and challenges.

Responding to tariff uncertainty

One impact of tariff uncertainty is that companies do emergency buying to avoid future tariff increases. They stockpile when there is a pause in tariff negotiations between the U.S. and another country, or before new or higher tariffs take effect.

“A company procuring more than the normal volume of goods can put a strain on its cash flow,” Son notes. “However, a buyer can get some relief by using a variety of trade and working capital finance tools to extend payment terms.”

When suppliers are filling more orders and waiting longer to get paid, they too can experience a cash flow strain. Getting paid promptly through some sort of receivables financing arrangement can address cash flow needs for suppliers as well, Son says.

Diversifying supplier relationships

As trade corridors shift to reflect the ascendancy of lower-cost and geographically advantageous providers, and buyers need to respond by contracting with new suppliers, supply chain financing can help them secure premium goods and relationships. For certain goods, there is a finite quantity of top-quality products available, and to be viewed as an attractive, A-list buyer by a desirable supplier, it helps if you can set yourself apart, Son says.

“Instead of demanding 60- or 90-day terms outright, you can start off on a very strong footing with a supplier by offering them early payment through one of these financing programs,” he says.

Sales enablement

Tariffs and other supply chain disruptions can put a crimp in sales to both new and existing buyers. In response, suppliers can leverage supply chain finance solutions to provide a sales incentive, Son says.

“Suppliers can use these tools to give buyers a little bit longer to pay to weather some of the tariffs,” he says.

Supplier-initiated receivables financing programs are simpler to establish and manage than buyer-initiated programs. In a buyer-initiated program, the buyer must go out and sign up as many of its suppliers as possible, onboard them and engage with them regularly about the program. In contrast, in a supplier-centric program, the supplier only must sell its receivables to the bank. “It’s a lot simpler from an operational perspective,” Son says.

Mitigating trade credit risk

U.S. suppliers are typically very concerned about trade credit risk when selling on open account terms to foreign buyers. Tariffs and new trading relationships are intensifying those concerns.

For cautious suppliers focused on risk mitigation, supply chain finance can provide payment certainty and predictability. Son gives the example of a U.S. supplier selling on 90-day terms to a new foreign customer. “Through a supply chain finance program, that supplier can get paid on day one – removing 89 days of uncertainty,” he says.

Strengthening the supply chain ecosystem

The common thread in supply chain finance programs – and why they can be so beneficial – is they all aim to strengthen the supply chain ecosystem. In uncertain times, it’s critical to create arrangements between buyers and suppliers that benefit both sides – delivering predictability for buyers around the availability, quality and cost of goods, and for sellers around payment timing and cash flow. This win-win aspect is critical, Son says.

“In global trade, you can’t take the position that if I’m winning, everything is good,” he says. “It’s an ecosystem. If any parties are struggling, you are all going to struggle.”

Taking the first step

Companies can access an extensive menu of payables and receivables financing solutions to address traditional working capital needs as well as respond to tariffs and other supply chain disruptions. But how do you determine if one of these solutions will help you achieve your strategic goals?

The best place to start is by having a conversation with your bank’s working capital finance experts. Talk to them about your business and priorities. Are you focused on working capital optimization? Is risk management at the top of your list? Are you looking to diversify your client or supplier base? Share your priorities and ask your bankers to educate you about supply chain finance strategies and tools that can help you achieve your goals.

If you want to learn more about how U.S. Bank helps companies mitigate risk in supply chain, contact your relationship manager for more information. Your partners can help find the right services to fit your needs.