Lessen the Impact of Tariffs with an EOR

The global trade landscape faces renewed turbulence as the Trump administration enacts aggressive tariff policies aimed at recalibrating economic relationships. Recent measures targeting key trading partners, such as China, Mexico, Canada, and the EU, reflect a strategy that prioritizes domestic industry protection through rapid-fire trade adjustments.

With new tariffs frequently announced, businesses face compressed decision windows to address shifting import costs, retaliatory measures, and fractured supply chains. According to the White House, “President Trump imposed a 10% tariff on all countries and individualized reciprocal higher tariffs on nations with which the U.S. has the largest trade deficits in order to level the playing field and protect America’s national security.”

These policies are forcing organizations to reassess fundamental operational strategies. Rising material expenses and complex compliance demands are squeezing margins across industries, while retaliatory tariffs complicate export-dependent revenue streams. Concurrently, reshoring initiatives are facing domestic talent gaps in critical sectors, creating workforce planning bottlenecks. Many companies now face difficult choices between absorbing higher costs, passing increased prices to consumers, or restructuring international operations entirely.

This volatility underscores a critical challenge: maintaining growth while adapting to trade policy whiplash. Traditional approaches like entity establishment or long-term contracts struggle to keep pace with abrupt regulatory changes. As protectionist measures reshape economic priorities, businesses need solutions enabling rapid geographical pivots without compromising workforce stability or market access.

The tariff landscape: Targeted trade relationships and retaliation risks

Current tariff policies extend beyond economic protectionism, weaponizing trade to advance geopolitical and domestic policy goals. Duties on Canadian and Mexican imports are now explicitly linked to U.S. border security demands, while escalating tariffs on China aim to decouple strategic industries, such as semiconductors and energy. Even companies that offshored manufacturing to Vietnam, India, or Mexico face new regional tariffs, creating a whack-a-mole scenario for supply chain planners.

Recent adjustments to foreign trade zones (FTZs) and the de minimis exemption further complicate operations. FTZ modifications lock duty rates at entry points, thereby nullifying the cost-saving benefits of in-zone processing. Meanwhile, the elimination of duty-free treatment for under $800 shipments from China—a lifeline for e-commerce platforms like Shein and Temu—forces rapid pricing overhauls and supply chain restructuring.

Retaliation risks loom large, particularly from China. Beijing has suspended exports of rare earth minerals and magnets, which are critical for the defense, automotive, and tech sectors—a direct counter to U.S. tariffs. Simultaneously, China’s agricultural tariffs on U.S. goods, such as poultry, wheat, and soybeans, aim to pressure politically sensitive industries. These moves expose vulnerabilities in sectors reliant on Chinese processing dominance and highlight the interconnectedness of modern supply chains.

The administration frames tariffs as tools to revive domestic manufacturing, but the collateral effects—fractured trade relationships, retaliatory measures, and rushed corporate pivots—reveal a high-stakes balancing act. As policies evolve unpredictably, businesses face a dual mandate: navigating immediate cost shocks while preparing for secondary ripple effects across global markets.

Why companies are restructuring supply chains and workforce plans

Global businesses face a dual imperative: mitigating tariff-driven cost surges and adapting to trade policies that have been weaponized for geopolitical leverage. With legacy tariffs from Section 232 (steel/aluminum) and Section 301 (China) still disrupting supply chains—and new duties targeting strategic partners—organizations are overhauling their operational blueprints to maintain competitiveness.

With a renewed focus on tariff-driven trade policy, organizations are facing several key hurdles, including:

• Persistent cost pressures. Existing tariffs on Chinese imports and North American metals continue to inflate production expenses, with downstream industries absorbing, on average, a 0.6% decline in output due to pricier inputs.
• Retaliatory domino effects. China’s export restrictions on rare earth metals and agricultural tariffs on U.S. goods force companies to diversify suppliers or risk production halts.
• Reshoring roadblocks. While 71% of U.S. CEOs plan supply chain shifts, domestic talent shortages in logistics and engineering hinder reshoring efforts, particularly in the automotive and energy sectors.

“Given the wide range of industries that would be affected by the high tariffs, many companies are in a wait-and-see scenario,” advises McGregor McCance, Executive Editor at the University of Virginia Darden School of Business. “If the U.S. imposes high tariffs on Mexico, China, India, and the European Union, and cuts off aid to major resource economies in Africa, there isn’t much room left for the global supply chain to move,” he adds.

Beyond tariff mitigation, businesses are restructuring trade routes to align with politically allied nations—a strategy highlighted in McKinsey’s 2025 trade analysis. More and more firms are prioritizing supplier partnerships in countries sharing their government’s geopolitical stance, even if this increases logistical costs. Despite these movements, the actualization of tariff-adapted operational shifts will be a long-term effort that could take years for organizations to achieve.

Tariff impact on the global workforce and hiring decisions

Rising tariffs are forcing organizations to reconfigure global workforce strategies amid compressed timelines and fragmented trade relationships. Companies face mounting pressure to balance cost containment with the deployment of agile talent, often while navigating unfamiliar regulatory environments. Key impacts include:

• Margin compression triggering hiring freezes. Escalating import costs are squeezing profitability, and HR teams are reporting increased scrutiny over headcount budgets, particularly for roles tied to imported material-dependent processes. Goldman Sachs predicts that the tariffs will create approximately 100,000 manufacturing jobs at the expense of 500,000 others.
• Accelerated relocation without infrastructure. Businesses rapidly shift production to lower-tariff countries like Mexico or Vietnam but struggle to establish compliant payroll, benefits, and HR support in these new markets.
• Entity establishment bottlenecks. Setting up legal entities in alternative markets can often take several months, which delays critical workforce deployment and leaves projects understaffed.
• Skills mismatch in reshoring efforts. Seventy-one percent of U.S. employers in tariff-impacted sectors, such as automotive and energy, report severe shortages of trade compliance specialists and logistics engineers—roles critical to navigating new tariff regimes.
• Compliance complexity across borders. New tariff rules and retaliatory measures require expertise in localized labor laws, customs regulations, and export controls—skills in short supply globally.
• Strategic pivot to hybrid workforce models. Companies combine localized hiring for tariff-advantaged regions with remote global talent pools, resulting in a 31% year-over-year increase in cross-border white-collar recruitment.

These pressures underscore the need for workforce solutions that decouple geographical constraints from talent access, enabling organizations to adapt without sacrificing compliance or operational continuity.

How an EOR lessens tariff-related disruption

An Employer of Record (EOR) is a third-party partner that legally hires and manages talent in foreign markets on a company’s behalf. Acting as the official employer, the EOR assumes responsibility for payroll, tax compliance, benefits administration, and adherence to local labor laws. This model enables businesses to deploy talent swiftly in new regions without establishing a legal entity—a critical advantage amid shifting trade policies.

EORs enable companies to pivot operations to regions with favorable trade conditions, bypassing punitive tariffs. Here are a couple of examples of EORs in action:

• Relocating manufacturing from China to Vietnam or India. An EOR hires skilled engineers and production staff locally, enabling companies to sidestep tariffs on Chinese imports while maintaining supply chain continuity.
• Shifting logistics hubs from Mexico to the UK or Japan. Businesses leverage EORs to recruit regional operations managers and customs specialists within weeks, avoiding extensive entity setup processes and retaliatory border security-linked tariffs.

Key benefits for tariff-impacted companies

Employers of Record provide a strategic toolkit to transform tariff challenges into competitive advantages. By eliminating traditional barriers to global expansion, EORs deliver five critical capabilities for businesses navigating trade volatility:

• Rapid workforce deployment. EORs accelerate hiring in emerging markets, allowing companies to staff production lines or logistics hubs within weeks rather than months. For example, automotive firms shifting operations to tariff-advantaged regions can onboard local engineers and technicians immediately to maintain supply chain momentum.
• Avoid entity setup delays. Establishing foreign legal entities often creates costly delays—a critical liability when tariffs escalate abruptly. EORs enable businesses to bypass incorporation processes, deploying teams in strategic markets like Mexico or Vietnam without infrastructure investments.
• Compliance safeguards. EORs mitigate regulatory risks by ensuring adherence to localized labor laws, tax codes, and benefits mandates. This prevents penalties related to misclassification, payroll errors, or workplace standards—common pitfalls when entering politically volatile regions.
• Scalable hiring flexibility. Companies gain the ability to scale regional teams up or down in response to shifting trade policies. This agility is vital for industries like retail or electronics, where sudden tariff changes can necessitate rapid workforce adjustments.
• Reduced legal exposure. By managing employment liabilities—from severance obligations to visa compliance—EORs insulate businesses from risks in unstable markets. Teams operating in geopolitically sensitive regions benefit from localized expertise on labor disputes and contractual safeguards.

This approach transforms tariffs from a disruptive force into a navigable challenge, allowing companies to maintain operational agility while protecting margins. By decoupling talent access from geographical constraints, EORs offer a strategic buffer against the unpredictability of trade policies.

EOR vs. entity setup: Why flexibility matters in uncertain times

Amid rapid tariff shifts and geopolitical volatility, businesses require workforce solutions that prioritize agility over permanence. EOR services and traditional entity establishment represent divergent approaches to global expansion—one optimized for speed, the other for control.

EORs excel in scenarios demanding immediate action, such as relocating production to tariff-advantaged regions or hiring specialists to navigate new trade compliance rules. By contrast, entity establishment suits organizations with proven market demand and resources to absorb prolonged setup timelines.

The pay-per-employee model of EORs eliminates sunk costs, allowing businesses to scale teams up or down as tariffs evolve—a critical advantage when retaliatory measures or policy shifts demand abrupt operational changes. Meanwhile, entities remain viable for companies that prioritize complete control over long-term investments, although they risk obsolescence if trade dynamics shift unexpectedly.

In volatile markets, EORs act as shock absorbers, enabling companies to redirect resources toward tariff mitigation strategies rather than bureaucratic compliance. This flexibility is particularly valuable for industries like manufacturing and tech, where trade policy changes can disrupt supply chains overnight.

FAQs: Tariffs, EORs, and global hiring

Businesses navigating tariff volatility are posing pressing questions about leveraging EOR solutions. Below are answers to common concerns about operational shifts, workforce scalability, and strategic market selection.

What happens if I move operations to a new country without a legal entity?

An EOR serves as the company’s legal employer in the target country, handling payroll, benefits, and compliance without requiring the setup of an entity. This allows for the immediate hiring of production teams or managers while avoiding months-long incorporation delays—critical when tariffs demand rapid relocation. For example, companies facing sudden Chinese export restrictions can use an EOR to staff Vietnamese factories within weeks, maintaining production continuity while exploring long-term entity options.

Does an EOR help with manufacturing or just admin roles?

EORs support both shop-floor and corporate hiring, including skilled technicians, engineers, and logistics staff. Manufacturers relocating production from China to Mexico, for instance, use EORs to hire bilingual quality control supervisors and machine operators in compliance with USMCA wage rules. This flexibility extends to specialized roles like customs brokers or tariff classification experts, ensuring end-to-end operational support.

Are EORs only for temporary hiring?

While ideal for short-term tariff pivots, EORs also facilitate permanent hiring in politically unstable or rapidly evolving markets. Companies testing new regions often use EORs for 12–18 months before transitioning to entities, while others retain the model indefinitely for its compliance safeguards. In markets like India or Brazil, where labor laws are frequently changing, EORs provide ongoing regulatory updates, thereby reducing legal risks for long-term operations.

What countries are best for tariff mitigation and hiring through an EOR?

Vietnam (electronics and textiles), Mexico (automotive under the USMCA), and India (semiconductors) are leading EOR destinations for their skilled labor pools and trade agreement advantages. Taiwan’s advanced manufacturing sector offers tariff-neutral tech production under the U.S.-Taiwan Initiative, while Japan’s new foreign worker visa programs simplify hiring engineers for reshoring projects. EORs in these regions also streamline compliance with Local Content Requirements, maximizing tariff exemptions.

Maintain a thriving global workforce amid a shifting geopolitical climate

As a leading EOR operating in over 185 countries, Velocity Global eliminates the delays and costs associated with entity setup, enabling companies to swiftly hire talent in targeted regions. They’re platform ensures compliance with local labor laws, manages payroll and benefits, and mitigates risks associated with shifting trade policies, allowing organizations to pivot operations or relocate teams within weeks. By streamlining global hiring and shielding businesses from compliance pitfalls, Velocity Global lets companies focus on growth while maintaining workforce flexibility amid geopolitical and economic turbulence. Get in touch to learn more.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

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