The impact of increased tariffs on workforce planning: strategies for adaptation 

In an era marked by rapid economic and political shifts, the increased tariff environment has emerged as a pivotal factor reshaping the business landscape. Companies are no longer just grappling with the immediate financial implications of these tariffs; they are also forced to reconsider their operational strategies and workforce dynamics. As tariffs alter the cost structures and competitive advantages of various production locations, organizations must navigate a complex web of challenges that impact their workforce planning. This article delves into the effects of increased tariffs on workforce strategies, offering insights and actionable strategies for businesses to adapt and thrive in this evolving environment.

The influence of tariffs on production locations is significant and multifaceted. Companies looking to take advantage of the new tariff environment may consider relocating operations to countries or regions with lower tariffs or more favorable trade agreements. This trend is particularly evident in sectors like manufacturing, which often rely on global supply chains, including industries such as automotive, fast-moving consumer goods, and technology hardware.

As companies move operations, they face the dual challenge of finding qualified talent in new locations while managing the potential displacement of existing employees. A report by the International Labour Organization (ILO) emphasizes the importance of understanding local labor market dynamics to effectively plan for workforce needs (ILO, 2024). This understanding is crucial for identifying potential talent pools and assessing the skills available in new regions.

To navigate these challenges, organizations can conduct rigorous external labor market analyses, which provide valuable insights into local labor conditions. Such analyses help companies make informed decisions about where to locate operations and how to structure their workforce. Data often covers labor availability and associated skills, labor costs, labor relations trends, infrastructure, business climate, attractiveness, and risks.

^{Source: Mercer Total Remuneration Survey}

^{Source: Mercer Total Remuneration Surveys}

For instance, when examining total cash compensation for manufacturing production employees or finance management employees in relation to the tariffs proposed on April 2, 2025, significant variations emerge even within similar tariff levels. Therefore, having the right framework for prioritizing location decisions is as crucial as the data itself. A location favored by one company may be less attractive to another, depending on their specific priorities.

Once organizations have identified potential new locations, attracting and retaining talent becomes a strategic imperative. This process begins with assessing local labor market supply and demand, which involves understanding not only the availability of workers with the desired skills but also trends in skill supply and demand over time, along with associated costs.

Labor costs vary significantly by region, impacting compensation strategies. In markets with lower labor costs, organizations may find it easier to offer competitive compensation packages; however, they must also consider the overall cost of living and the expectations of local workers. Understanding trends in labor costs is essential for effective multi-year strategic workforce planning.

Drawing on compensation survey data can inform compensation strategies, promoting competitiveness in the market. Additionally, incorporating non-monetary benefits, such as flexible work arrangements and career development opportunities, can enhance talent attraction efforts. Furthermore, fostering positive labor relations through ongoing dialogue with employee representative bodies can help balance the needs of the business with those of the workforce. This has the added benefit of enhancing an organizations’ unique employee value proposition.

In this era of change, data analytics plays a crucial role in assessing local talent supply and demand. Leading organizations draw on analytics on both internal and external labor market data to gain insights into workforce trends and their associated business impact. Predictive analytics, which employs machine learning techniques to forecast future labor market needs, can further enhance workforce planning.

To illustrate potential insights from data, our survey sampling of client organizations in the semiconductor industry shows their employees are largely concentrated in, Southeast Asia and Pacific (Mercer | Comptryx, February 2025). Any movement of work location across countries presents both opportunities and challenges. While competition for labor may be more limited in certain countries for specific types of work, the downside is that skilled labor may be in short supply and require training by the organization.

Consequently, choosing and changing locations often becomes a multi-year, if not multi-decade, strategy. Deep strategic workforce planning enables organizations to align their workforce with business objectives effectively over the long run. This involves not only understanding current workforce dynamics but also anticipating future needs based on market trends and organizational goals. By integrating workforce planning with business strategy, companies can ensure they have the right talent in place to meet evolving demands. Equally important is the consideration of the skills possessed by the workforce versus the simple availability and cost of that workforce.

As companies adapt to new production locations, skills-based development becomes increasingly important. Upskilling and reskilling initiatives align workforce capabilities with business needs. Organizations that invest in employee development are better positioned to navigate economic uncertainties (ILO, 2024). By fostering a culture of continuous upskilling, companies can help their workforce to remain agile and capable of meeting evolving demands, especially given the fluid tariff environment.

Assessing current workforce skills and identifying gaps is essential for effective workforce planning. Tools such as skills assessments and skills taxonomies—structured frameworks that categorize and define the skills required for various roles—guide organizations in this process. By understanding the skills available within their workforce, companies can tailor their training and development programs to address specific needs. Utilizing skills libraries as a starting point greatly accelerates this essential process.

Work redesign is a critical strategy that enables organizations to enhance operational efficiency and adapt to changing labor market conditions. This process involves re-evaluating and restructuring job roles, processes, and workflows to better align with organizational goals and employee needs. By clearly defining job responsibilities, optimizing task allocation, and streamlining workflows, organizations can improve productivity while fostering employee satisfaction and engagement.

As businesses face challenges from increased tariffs and evolving market dynamics, work redesign becomes essential for enhancing agility and responsiveness. By modifying work processes, organizations can quickly adapt to external pressures and operational demands. Additionally, engaging employees in the redesign process allows them to express their needs and preferences, leading to greater job satisfaction and a more motivated workforce (Global Talent Trends, 2024-2025).

A well-designed work environment that prioritizes flexibility and employee well-being is crucial for attracting and retaining top talent. Organizations that create fulfilling roles and a positive work culture are more likely to succeed. Furthermore, aligning tasks with employee strengths not only boosts productivity but also enhances job satisfaction, which is vital for maintaining competitiveness in industries facing labor shortages. Moreover, as tariffs may lead organizations to increasingly compete for the same talent pool in certain locations, work redesign provides a transformational alternative to the question of workforce availability. 

Increased tariffs are putting prime focus on the need to align talent strategies with business needs. The complexities of workforce planning require a proactive approach, drawing on robust internal and external labor market analytics, skills-based development, employee research, and work redesign. Organizations must adapt their workforce planning strategies by:

1. Conducting Comprehensive Labor Market Analyses: Regularly assess local labor market conditions to inform location decisions.
2. Investing in Skills-Based Planning: Implement upskilling and reskilling programs to align workforce capabilities with business needs.
3. Embracing Flexible Work Models: Explore flexible work, and redesign jobs to attract a broader talent pool.

By embracing adaptability and continuous transformation, companies can navigate the challenges posed by tariffs and emerge stronger in an ever-changing economic landscape. 

The impact of increased tariffs on workforce planning is profound and requires organizations to rethink their strategies. Key takeaways include the importance of understanding local labor market dynamics, the need for skills-based development, and the value of flexible workforce models. As tariffs continue to evolve, organizations must remain vigilant and proactive in their workforce planning efforts. As with many things, adaptation will be key to long-term success.

^References

^{International Labour Organization. (2024). World employment and social outlook 2024: Trends 2024.}

^{Mercer. (2025). Global Talent Trends 2024-2025.}