Tariff Turbulence: How Hardware Companies Can Adapt At Speed – International Trade & Investment

According to the 2025 AlixPartners
Disruption Index, 69% of executives in the tech
industry say new tariffs are causing them to adjust their growth
strategies. The flurry of activity around potential tariffs on
Mexico, Canada, and China has jolted the markets—our
assessment suggests a 7% impact on average on cost
of goods sold (COGS) from currently announced tariffs across the
broader technology hardware ecosystem, with possibly more to come.
When added to the 9% increase in hardware prices
over the last four years from inflation and high interest rates,
companies may have less flexibility to raise prices in response,
thus eroding the majority of their operating income.

Gross margins across the broader hardware industry are generally
in the 35-50% range, with net margins typically 5-15%.
Specifically, personal computer and server manufacturers have a
25-35% gross margin and 5-10% operating margin. A 10% increase in
COGS due to tariffs could almost wipe out the full operating income
of PC and server vendors—risks are significant across the
technology industry, necessitating immediate action to safeguard
profitability.

Hardware players facing existing financial challenges will feel
further strain given the timeframe needed to reconfigure supply
chains and the difficulty of passing on cost increases to customers
in an inflationary environment. This underscores the importance of
applying tactical changes to weather the tariff impact in the near
term, which we believe they can do successfully by setting up the
right team and pulling the right levers.

Enacting a “tariff war room” to secure current
operating margins

Our experience suggests that companies have an arsenal of
operational levers at their disposal to lessen expected tariff
effects while retaining present supply chain networks. These
actions, typically implemented over 1-2 quarters, can mitigate
40-80% of tariff impacts on COGS.

To put these tactics into place, companies must launch
cross-functional “tariff war rooms” that review
alternatives and quickly make decisions. These teams should be
comprised of representatives from manufacturing, engineering,
procurement, supply chain, finance, pricing, and potentially other
functions.

Older tariff-mitigation tactics—such as duty drawbacks, de
minimis shipping, and HTS code shifts—will not work given the
broad nature of potential tariffs here. Nimbler, more complex
options are needed given the volatility of the situation across
multiple geographies—our war room playbook includes critical
levers and tactics that leaders must consider:

While tariff structures remain unclear, in our experience
it’s critical that companies proactively implement tactics that
protect their business and prevent a major dent to operating
income. Those that do so effectively will be in position to adapt
to whatever changes come next, reducing the impact that tariffs
have on their daily operations while still able to innovate and
stay ahead of the competition.

Long-term supply chain reconfigurations that utilize low-tariff
countries, along with a real-time view into supply chain
operations, remain crucial differentiators for savvy tech players.
But to succeed in this climate, we recommend all companies with
substantial tariff exposure draw up robust, flexible mitigation
plans with teams on call and ready to execute. Decisive, prompt
action will separate the companies that navigate the storm from
those that fall behind.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.