Renegotiating terms to offset tariffs? Consider adding supply chain finance

By Jeremy Jansen, Head of Supply Chain Finance Originations, and
Kiley Kunkler, Global Receivables and Trade Finance, Executive Director, Wells Fargo

2025 may well be remembered as the “Year of the Tariff.” No matter how final trade negotiations resolve, tariffs are upending long-settled buyer-supplier relationships and prompting the global supply chain to come together in ways not seen since the COVID-19 pandemic. 

The silver lining? As import/export costs rise, buyers stockpile inventory, and new supply chain relationships form, there’s an ideal opportunity to discuss financing tools and contract terms that can be beneficial for all parties. Offering a supply chain finance program can alleviate stress and optimize liquidity for buyers and sellers alike. 

A resilient supply chain applies learnings from the pandemic

U.S.-based manufacturers and their global suppliers are still assessing the impact of new tariffs. Fortunately, the global supply chain remains remarkably healthy. Most companies developed strong playbooks during the pandemic which can now serve as the foundation for new strategies. 

Post-pandemic, there’s also more awareness and intentionality around sourcing. Companies have used the ensuing years to learn, reduce vulnerabilities, and create a much more resilient supply chain. 

While country-by-country trade negotiations continue, more companies are taking a proactive approach and thoughtfully calibrating inventory levels. As a result, many end consumers have yet to feel the full impact of higher costs. 

However, holding raw materials and finished goods for longer periods can quickly erode working capital. Shipping and storage expenses add up; cash flow remains tied up in inventory. Final tariffs may further stress liquidity and margins for buyers and suppliers alike. 

One way for buyers to offset these rising costs is to stretch out payment terms. But, with continued uncertainty, suppliers may be hesitant to extend Days Sales Outstanding (DSO). 

In stressful economic cycles, suppliers also need to bolster their cash reserves. Yet with elevated interest rates, offering early-pay discounts to key customers can be cost-prohibitive. As supply chain partners renegotiate contracts to address the impact of tariffs, invoice and payment timing will be key points for suppliers and buyers alike. 

Aim to reduce risk, improve liquidity with supply chain finance

Supply chain finance can hold the answer for both sides. These well-established programs can improve agility and help keep balance sheets healthy. 

In supply chain finance, a credit-worthy buyer contracts with a bank or other intermediary. The bank quickly settles supplier invoices on the buyer’s behalf—usually in as little as 10 days. This provides quick-turn cash for suppliers. Buyers then reimburse the bank at a later date, enabling them to benefit from extended payment terms, without adding stress to supplier relationships.

Suppliers also benefit from access to cash at a potentially lower financing cost that’s based on the buyer’s credit profile and their cost of capital. 

Efficient technology streamlines invoicing and provides near real-time visibility for everyone involved.

Buyers benefit from:

• Extended Days Payable Outstanding (DPO)
• Stronger supplier relationships

Suppliers enjoy:

• Reduced DSO
• Reduced risk
• Access to a flexible (and often lower cost) financing tool that’s not debt

Look for global reach and high-touch, personal service

Supply chain finance is an important long-term strategy to help mitigate risk and create more positive supplier relationships. Many global suppliers already participate in one or more supply chain finance programs offered by their largest corporate customers, making it easy to introduce the concept. 

With tariffs prompting so many to review and renegotiate contracts, it’s an ideal opportunity to add supply chain finance to vendor agreements. It can be especially beneficial to attract and onboard new suppliers. 

Choosing the right provider is vital. Wells Fargo is one of the few banks with the strength of balance sheet and proven track record to administer a successful supply chain finance program—while at the same time, providing the ongoing relationships and service. This holistic approach ensures global reach and high-touch, personal service. 

The Wells Fargo team brings decades of knowledge and experience, which can be particularly valuable when entering relationships with new suppliers in various countries. Today’s programs are flexible and customizable, enabling each company to tailor the approach to meet the specific needs of their business. Wells Fargo also offers a market-leading factoring product that can integrate seamlessly with supplier finance programs.