Controlling Rising Manufacturing Costs

As tariffs and labor constraints shape the economic landscape, manufacturers are exploring process streamlining, domestic hiring, and nearshoring as key strategies for the rest of 2025. 

For manufacturers unclear on the best way forward, experts recommend a long-term perspective — especially since such investments will carry costs beyond the year’s end. 

Gregory DeYong, associate professor of operations management at Southern Illinois University said manufacturing leaders have and should continue to make investments with longevity in mind. 

“Whenever manufacturing [organizations] make a decision, that's kind of long-term. I tell my students, when Ford builds a plant, they expect it to run for 100 years. They're not looking at tomorrow or next week or next month when they're making these decisions,” DeYong said.

As such, manufacturers who align investments with broader strategic goals, and keep reactionary decisions in check, will see the most long-term benefits. 

Combating tariffs with leaner processes and nearshoring

The arrival of tariffs earlier this year brought only marginal clarity to the economic future of the industry, instead ushering in a pause in deal activity and decision-making, said Streamliners Management Consulting CEO Andreas Haag. 

Considering the volatility of the tariff landscape — and the uncertainty of their extent or even existence in the future — Haag predicts that manufacturers will only invest in those solutions that might benefit them regardless of the fate of tariffs. 

For many, that’ll involve following trends such as nearshoring, or relocating production closer to markets, and optimizing existing processes to absorb cost increases.

“My expectation is they will do cost reduction initiatives that are positive, even if the tariffs fall one day,” said Haag. “A lot of management focus is going to be on improving output and improving efficiencies to get your unit costs to offset the price increases from China.”

For others, nearshoring will help cushion the shock of tariffs — and may pay dividends even if they disappear in 2026. 

“Nearshoring to say, Mexico or Central America (electronics in Costa Rica, for example) is justified when tariff costs outweigh savings from low-cost countries like China or there are short product life cycles due to new editions, models, etc, [making] response time to market key,” said Ted Stank, co-executive director of the Global Supply Chain Institute at the University of Tennessee Knoxville.

Unlike process streamlining, though, experts say nearshoring is not a bandwagon everyone should hop on, and is a trend that requires a little more nuance in its consideration. Depending on your product, investing in a new production facility entirely might actually be the more beneficial option.

“Investing in a new factory or warehouse makes more sense [when] establishing long-term production stability for industries with high-volume, long life cycle products, such as semiconductors or EVs,” says Stank. 

That’s because downtime in such production facilities — or even a disruption in their volume of production — can translate into high costs. 

“A good example is all the investment in computer chip manufacturing in the last four years, [such as] TSMC’s $40 billion investment in Arizona for advanced chip manufacturing — motivated by geopolitical tensions, security concerns, and U.S. subsidies,” said Stank. 

Such investments make sense regardless of where manufacturers and their suppliers stand next year. 

Commenting on the volatile situation that catalyzed such trends, DeYong said, “From a U.S. manufacturing standpoint, [this] is ‘good uncertainty,’ because this is the kind of thing that gives people an impetus to maybe make some calls that they were waiting on.” 

Haag said whether manufacturers nearshore, or opt to source in the U.S., they shouldn’t cut ties with Chinese manufacturers. 

“Make sure you have very good communication with your Chinese suppliers, maintain the relationships, and explain to them why you are now sourcing in the U.S., and that your intention is to switch back to them when or if the tariffs come down,” he said.

Labor shortages will press the deportation topic

According to a joint study by Deloitte and the Manufacturing Institute, American manufacturers could be short by as many as 3.8 million new workers by 2033, with 1.9 million of those roles going unfilled if today’s labor gaps go unaddressed.

Stricter immigration enforcement during 2025 has also caused sudden vacancies in critical operational roles, especially low-wage, physically demanding jobs that are difficult to fill, Stank said. 

“This is a very significant issue,” Stank said. “In places where labor-intensive operations exist — particularly in the Southeast and Midwest — the reliance on immigrant labor is substantial. Workforce shortages can cause limited supply of products that will ultimately raise prices.” 

Stank also said this activity could lead to rising wages. 

“To attract domestic workers, companies have had to raise wages and offer additional benefits, increasing operations expenses. Remember what happened with wages in some industries during COVID? Same thing here!” he said.

But even with such incentives, Stank said some industries “struggle to recruit domestic workers for roles that are seen as undesirable due to working conditions, like meat processing, some construction (roofing for example), or agriculture field work.”

Some additional ways to adjust, according to Stank, include "focusing on hiring documented immigrants, including through visa sponsorship, or developing partnerships with community colleges or workforce agencies aim to retrain local populations."

"Will it be enough?” he asked. “Time will tell."

A new tax law, signed on July 4, has many implications for manufacturers beyond locking in a 21% corporate tax rate. Now, companies are sorting through major changes that could allow them to write off investments in equipment, factories, R&D and more.

The law, known as the One Big Beautiful Bill Act, retroactively extends 100% bonus depreciation for qualifying machinery and other property acquired after Jan. 19, 2025. This means businesses can immediately deduct the full cost of such investments from the year’s taxable income. 

President Donald Trump’s 2017 Tax Cuts and Jobs Act, or TCJA, also offered 100% bonus depreciation, but the deductions were scheduled to be phased down starting in 2023 and only allow manufacturers to deduct a decreasing amount upfront with each passing year. The new law reverses the phase-down schedule and lets businesses claim a full and immediate deduction going forward. 

Several of the law’s clauses are set to result in major cash flow benefits for the industry. However, the uncertainty brought on by the tariff landscape — as well as the untested nature of certain tax code changes — makes its full benefits unclear. For now, tax experts say there’s still plenty of reason for optimism.

This is especially true for manufacturers that buy a lot of expensive equipment, said Kevin Boeving, partner and Midwest tax market leader at large accounting firm Armanino. “When you think about somebody that’s buying $1, $5, or $10 million worth of equipment every year, the ability to write that off immediately versus over 10 years is a huge advantage from a cash flow perspective,” said Boeving, whose firm works with manufacturing clients, among others.

Other provisions that could boost cash flow include deductions for domestic research and development, which small businesses can apply retroactively to tax years after Dec. 31, 2021; a 20% tax rate for pass-throughs (or a business where profits “pass-through” to the owners and are taxed on personal tax returns) that was set to expire in 2025; and expanded interest deductibility limits. All three provisions are now permanent, according to Boeving.

The catch? It might be a while before the full set of rules will be interpreted and enforced through federal regulations and guidance. 

“[After a big reform], it often takes several years for these rules to be implemented,” said Eric Zwick, professor of economics and finance at the University of Chicago Booth School of Business. 

How investment and R&D deductions are changing

While some degree of bonus depreciation has been in place every year since 2001, with the exception of the 2005 to 2007 period, Zwick said the new tax provision is significant in both its permanence and its 100% coverage. 

“Even though there was sufficient bipartisan support that [these provisions] tended to get extended over and over again, nobody loved the uncertainty at the end of the year,” he said.

The bill’s long-term effects are considered positive for manufacturers and offer a welcome respite from such volatility, according to trade groups.

“Increasing domestic manufacturing investment and making America a manufacturing superpower starts with smart tax policy that provides more certainty for all manufacturers,” said Allison Edwards, director of advocacy communications for the American Chemistry Council, in a statement.

With 100% bonus depreciation, businesses can immediately write off investments in the year they’re placed in service, as long as they’re “qualified property” and acquired after the cut-off date. 

The provision effectively lowers businesses’ tax liability, said Boeving, noting that companies which spend millions on such investments per year could now free up resources to “expand, hire more people [and] buy equipment.”

Companies will also see a lift from full R&D deductions. Under TCJA, immediate deductions of R&D spending ended after 2021. This meant businesses had to amortize, or space out, their domestic R&D investments across five years. 

Now, under the new law, manufacturers can benefit from an immediate deduction of domestic R&D costs in the year they are incurred. Small businesses (making under $31 million in gross receipts) could also benefit from a special provision allowing them to retroactively deduct domestic R&D costs in tax years 2022 and beyond via an amended tax return. 

Whether such deductions will accelerate the pace or type of innovation — or simply benefit cash flow — remains to be seen. While there is evidence that R&D tax credits have some effect on patenting, such experimental projects are ones that “the firm would be doing anyways,” said Zwick. 

“Innovation and patenting is driven by a lot of other forces [other than taxes]. These projects are either going to be hugely successful with a small probability, or they’re going to fail,” he said. “You don’t know up front whether that’s the case when you’re doing them [and] that’s not a setting where tweaking the tax rate is going to change whether people take on those projects or not.”

Boeving expects clients will still make certain business decisions independent of tax benefits.

“Don’t run your business based on the tax code. Run your business based on whatever the right thing to do for your business is,” he said, adding that accelerated investment decisions should only be made if, at some future point, Congress decides to eliminate the benefit. 

Navigating variable tariffs and tax code decisions

Tariffs, as well as interpretations of the tax law itself, could still influence the value or timing of potential tax benefits.

“Deductions are only so valuable as you have a tax base to deduct them against,” said Zwick. “Anything that causes firms to make less money by selling less or having to pay more for inputs is going to reduce their profits before taking into account these investment incentives, and that’s going to be a first-order [factor] that’s going to affect it.”

Businesses that need materials for their operations or products can only get around the tariffs so much, according to experts, meaning the costs will be felt eventually.

“If you need it to run your business, you need it to run your business. You really can’t avoid it. You can only play with the timing a little bit,” said Boeving, who noted that some manufacturers have been trying to avoid the most significant of tariffs by delaying deliveries, holding them at a port, or ordering from countries with lower tariffs.

In general, when it comes to tariffs, Zwick said that businesses will best be served by delaying decisions as long as possible, “until the uncertainty washes away.”

At the same time, experts also said businesses will need to get used to some amount of uncertainty as the new tax code is worked out between manufacturers and federal regulators. That's especially the case for companies affected by the law's appeal of energy-related tax credits.

The law moves the phase-out timelines for energy tax credits forward by several years. “These rules could have significant implications for supply chains and investment decisions, and we are awaiting further guidance from the U.S. Department of the Treasury to assess their full impact," said ACC’s Edwards.

In the absence of specific guidance, Zwick said, it’s likely that the larger companies will take a position, “in terms of how they interpret [the tax code]” and “wait for the IRS to object.” Such conversations will lead to a clearer framework to the kind of documentation and qualifications manufacturers will need to abide by to access the fullest range of tax savings. 

Until then, Zwick said having a good accountant is key. “Make sure they’re ethical people and follow their advice,” he said, adding that “there are scenarios where the aggressive position ends up being honored and you benefit from that. It's not clear that the incentive system is towards caution.”

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As tariff volatility continues to disrupt trade and commerce, companies are looking for effective ways to navigate the shifting backdrop.

Many are leveraging the latest technologies for enhanced decision-making and visibility into their supply chains. However, sometimes the best solutions can be relatively simple.

For example, regular monitoring of the U.S. Harmonized Tariff Schedule, a system used to classify traded goods, can yield significant cost savings opportunities, panelists said during sessions at Manufacturing Dive’s July 23 event, “Supply Chain Outlook: Trends and Risks to Watch in 2025.”

Venky Ramesh, director of sourcing and procurement transformation at business advisory firm AlixPartners, said he knew of a Vietnam-based battery manufacturer that recently lowered the duty rates of its exported goods from 55% to 30% by reclassifying to another eligible tariff code.

Previously, the company was importing its batteries into the United States under the HTS code for electric vehicles. Following an audit, Ramesh said the manufacturer realized it could legally switch certain products to a different classification with a lower duty rate. This is because the batteries are not just used for EVs, but for general power storage as well.

“Regular HTS auditing sounds a little boring, not that exciting, but it can sometimes make a huge difference,” Ramesh said.

Monitoring the tariff codes for updates is also key from a competitive standpoint. Adam Borchert, partner at Bain & Co., said it becomes an “important game” when sourcing from multiple suppliers or geographical regions.

“The moment that the tariff code changes and it’s [different] across your suppliers, it gives you the chance to be more responsive and take advantage of the changes,” Borchert said.

Beyond diligent monitoring, companies across the supply chain are leveraging artificial intelligence and machine learning tools for scenario modeling as a way to prepare for anticipated tariff disruptions.

With AI-driven technology, they can forecast what would happen to demand if they were to pass-through all of the tariff costs versus half to the customer, among other scenarios, said Dustin Burke, global supply chain leader at Boston Consulting Group.

Companies can also analyze their supply chain configurations, manufacturing footprint and supplier mix to see what areas are more robust under a range of potential outcomes, Burke added.

“When we're faced with things that we know will happen, but we're not really sure of the magnitude of impact, that's really where forecasting and bringing machine learning to bear makes sense,” Burke said.

Navigating the ever-changing tariffs can also be confusing, given the firehose of disparate information coming from the White House, news outlets and President Donald Trump’s social media posts.

From a compliance standpoint, Jenette Prince, vice president of U.S. trade control at Kuehne + Nagel, said the U.S. Customs and Border Protection’s Cargo Systems Messaging Service cannot update clients on any tariff-related changes until an executive order or federal register notice is published. However, those system updates can sometimes be outdated by a flurry of news reports and Truth Social posts.

“One of the issues that we’re really running into, especially with this administration, is everything seems to be immediate or you only have a day or two to program, and it’s just not realistic in the customs brokerage environment,” Prince said.

Jonathan Todd, partner and vice chair of transportation and logistics at Benesch, said clients often ask him what the real source of truth is in the current environment. The sequence of events is usually a post on Truth Social, then an update from the White house, followed by a publication in the Federal Register. But a lot can happen from start to finish.

“A lot of times we get questions earlier in that sequence,” Todd said. “The question is, well, how is it going to develop?”

Farm and construction equipment makers are keeping production low and destocking dealer inventories to align with demand.

In general, fewer people have been buying tractors, lawnmowers and other equipment during a period of high interest rates, input costs and tariff uncertainty. To offset the weaker sales and higher costs, companies have sought to rework their supplier networks and increase prices without sacrificing demand.

Here are some of the key takeaways from the latest earnings of Deere & Co., Agco Corp. and CNH Industrial.

Sales remain weak amid challenging agricultural backdrop

Weak sales driven by challenging agricultural conditions and tariff uncertainty continued to weigh on farm and construction equipment makers during the latest quarter.

Deere, the world’s largest tractor manufacturer, saw quarterly sales decline 16% to $4.3 billion in its production and precision ag business over the same period last year.

The business, which includes large and mid-size tractors, combines and other farm equipment, also reported operating profit of $580 million, down 50% from a year ago. The Moline, Illinois-based company attributed the declines to lower shipment volumes and unfavorable pricing for its products and services.

“Until there's more stability in the industry, [we] expect customers to continue to take a measured approach to capital investment,” Josh Beal, Deere’s director of investor relations, said on an Aug. 14 earnings call.

While Deere’s production and precision ag business struggled, other parts of the company performed better and lifted overall results. Global net sales and revenues, which includes tractors, as well as lawn mowers and construction equipment, fell 9% to $12 billion in the quarter compared to last year. Quarterly net income totaled $1.3 billion, a 26% decline from a year ago.

Agco and CNH also saw softer sales during the three months that ended June 30, citing challenging farm dynamics that affected demand across Europe and the United States.

Agco’s Q2 sales totaled $2.6 billion, down 19% year-over-year. However, net income improved to $325.3 million compared to a loss of $201 million last year. The Duluth, Georgia-based company recorded a $494.6 million loss during the period last year from its grain and protein business, which it later sold.

“Although government aid is helping, tight margins remain due to elevated input costs and reduced export demand,” Agco CEO Eric Hansotia said during a July 31 earnings call.

Meanwhile, CNH reported Q2 sales of $3.25 billion in its agriculture segment, down 17% YoY. As tractor demand stalled in most regions, notably North America, activity is picking up in South America, which has started to recover from the global farm down cycle.

Tractor makers are continuing to cut production and reduce dealer inventories

CNH, Agco and Deere are keeping production low in response to weaker retail demand. They have also continued to reduce their target dealer inventory levels ahead of an anticipated market recovery in 2026, executives said.

Overall production hours were down 12% YoY in agriculture and 15% in construction, CNH CEO Gerrit Marx said on an Aug. 1 earnings call. Meanwhile, Agco’s factory production hours were down 16% YoY on a global basis, according to investor slides.

“We are making good use of the down base and slow production pace to review our processes and take decisive actions to improve our manufacturing quality and consistency,” Marx said.

Earlier this year, CNH had elevated inventory of nearly $1 billion across dealers. The company has since worked to bring down those levels, shaving off $200 million from the total in Q2, Marx said. A lot of the destocking is happening across North America, where the company is seeing larger amounts of small and medium tractors, he added.

Agco’s production is down more than 50% in North America, Hansotia said on a separate call, where the company is “hyper-focused” on reducing dealer inventories. Supplies are hovering around a nine-month range, higher than the company’s six-month target.

Deere, on the other hand, is hitting a sweet spot with its output. Beal said factories are running well across the company, delivering on its production plans and hitting retail targets. After years of inventory reductions and underproduction, Beal said Deere is “done with underproduction this year” for large agriculture equipment.

“[We’re] happy with where new inventory levels are positioned across the globe,” Beal said.

Companies are taking actions to reduce the impacts of tariffs

Tariffs continue to weigh on equipment makers looking to limit the effects of fluctuating trade policies on customers.

Deere accrued tariff costs of $200 million in the recent quarter, bringing the total year-to-date trade expenses to roughly $300 million, Beal said. Looking ahead, the company is expecting an impact of nearly $600 million for the full fiscal year as rates increase on goods from Europe and India, he said. Tariffs on steel and aluminum imports have also recently doubled from 25% to 50%.

To mitigate these higher costs, Deere has worked to ensure its products are certified under the U.S.-Mexico-Canada Agreement. It has also made “no regret” sourcing decisions on certain components and incrementally increased prices to pass through some of the higher costs, Beal said.

“We'll work through the tariff costs that we have and both mitigate and make different decisions as we go forward,” CFO Joshua Jepsen said on the call. “But we feel good about the performance to date, and we're going to keep at it.”

Elsewhere, CNH is waiting on tariff impacts to fully materialize. CFO James Nickolas said the company is expecting a negative earnings hit in the back half of the year.

“We didn’t have tariffs affecting us in Q1 at all this year and very little in this past quarter,” Nickolas said.

CNH and Agco are also taking a similar approach to Deere in mitigating the tariffs, including sharing with suppliers and eliminating unnecessary costs.

“We will try to limit the effects on farmers by trying to minimize increases through supplier discussions and other supply chain adjustments,” Hansotia said. “We will implement price increases where appropriate and feasible.”

Times are not that fun for U.S.-based toy companies. Second quarter sales and profits were down compared to  last year as tariffs weighed on operational costs and resulted in delayed orders from retailers. While toy makers are optimistic about a rebound ahead of the holiday season, trade uncertainty is ongoing and complicating commerce.

Here are some of the key takeaways from Mattel, Hasbro and Jakks Pacific’s Q2 earnings.

Retailers delay purchases due to tariff uncertainty

Despite the summer slowdown, toy executives are anticipating a rebound in the coming months as customers prepare their inventories for the holiday season.

“I mean, Christmas is going to come, parents are going to buy toys, we know that [retailers] will be pulling the inventory,” Hasbro CFO Gina Goetter said on a July 23 earnings call. “It's just going to be later and in line with their shelf resets, which again, many of them push their shelf resets out of kind of Q2 into later within Q3.”

Hasbro’s Q2 revenue slid nearly 2% to $981 million compared to last year, buoyed by 23% revenue growth from its Magic: The Gathering segment as other parts of the company saw weaker results. The company reported a net loss of $856 million, citing a $1 billion goodwill impairment charge related to tariffs.

Meanwhile, Mattel reported quarterly net sales of $1 billion, down 6% over the same period last year. This was driven mostly by a 16% decline in North America as retailers pulled back on orders and tariffs ate into costs. The company posted net income of $53.4 million, down 6% year over year.

“Despite ongoing trade uncertainty in the U.S., Mattel's [point of sale] was up in all regions in the second quarter and first half of the year,” Mattel CEO Ynon Kreiz said on a July 23 earnings call.

Toy companies are passing through increased costs

As tariffs impact operations, the companies are implementing ways to mitigate and cut costs, including raising toy prices where possible.

CFO Paul Ruh said Mattel’s goal is to maintain affordability and keep nearly half of its products priced under $20. The company is anticipating a roughly $100 million tariff hit for the year based on global trade policies as of July 23.

To offset these costs, Ruh said Mattel is not only raising prices, but diversifying its supply chain and optimizing its product and sourcing mix. Mattel’s manufacturing facilities are primarily in China, Indonesia, Malaysia, Mexico and Thailand, according to its 2024 annual report.

“We feel very good about what the pricing actions are to precisely withstand some of the headwinds that we're seeing from a tariff perspective this year,” Ruh said.

Elsewhere, Hasbro is moving forward with plans to reduce its exposure to China. About 50% of its game and toy volume originates from the country, Goetter said, and Hasbro wants to bring that number down to less than 40% by 2027.

In addition to pricing and sourcing strategies, the company is also tailoring its stocking to consumer preferences and collaborating with retailers to manage risk and preserve profitability, Goetter said.

“We've activated a comprehensive mitigation playbook,” she said.

Jakks Pacific and Hasbro look to onshore production

As tariffs disrupt manufacturing, Jakks Pacific and Hasbro are also strongly considering ways to bring more production to the U.S. The downside is that it will likely cost them more.

CEO Stephen Berman said Jakks Pacific recognizes the “strategic value and realistic limitations” of U.S.-based production as it looks to remain agile and resilient in the face of evolving global trade dynamics.

“Based on what we know today, all of these solutions ultimately result in a higher cost of doing business due to the loss of scale, logistical efficiency and manufacturing proficiency,” Berman said about onshoring production.

“That higher cost is creating hesitancy with many U.S. customers that we see persisting until everyone is aligned as to what the new cost of doing business will be,” he added.

Most of Jakks Pacific’s products come from China, according to the company’s 2024 annual report. The company’s Q2 sales totaled $119 million, down 20% over last year. This was driven mostly by a 31% decline in U.S. sales as tariff uncertainty continues. Jakks Pacific reported a net loss of $2.3 million.

Hasbro is also looking to onshore sourcing and production where feasible. Goetter said the company will continue to source from Cartamundi in East Longmeadow, Massachusetts, which manufactures most of Hasbro’s U.S. games.

“These steps are strengthening our long-term supply chain resilience, while protecting margin performance,” Goetter said.

This isn’t Martin Pochtaruk’s first time navigating his company through a volatile trade environment under President Donald Trump.

The solar module manufacturer, established in 2010, began implementing changes to its production when Trump first placed 30% tariffs on solar modules and cells in February 2018.

Heliene has been preparing for the Trump administration’s heightened duties. In 2023, the solar module manufacturer expanded its manufacturing and assembly line at its Mountain Iron, Minnesota, facility. The company also raised $170 million the same year in an effort to expand and create clean energy manufacturing jobs within the clean energy transition.

In August 2024, Heliene and solar module maker Premier Energies announced plans to build a joint solar cell facility in the Minneapolis – St. Paul, Minnesota, area. The company also signed a module supply agreement with UGE, as well as a silicon wafer supply agreement with NorSun, set to begin in 2026.

Most recently, Heliene entered a multi-year contract with Origami Solar to offer steel-framed solar modules to the North America market, according to a Feb. 19 press release. Heliene’s 144 and 156 half-cut bifacial modules, as well as Origami Solar’s steel frames, will be available in April, along with aluminum frame options.

With all the actions Heliene implemented since Trump’s first tariffs go-round, the solar module manufacturer is prepared for the next changes.

“As the saying goes, fool me once, shame on you. Fool me twice, shame on me, so that’s not happening again,” Pochtaruk said.

Manufacturing Dive spoke with Pochtaruk to talk about Heliene’s strategy and how the tariffs may impact solar manufacturers.

MANUFACTURING DIVE: How did Heliene adapt when Trump imposed heightened tariffs during his first presidential term?

MARTIN POCHTARUK: We made the decision [in March 2018] to invest in a new manufacturing line in the U.S., here in Minnesota, and by October, we started it up. So that was the first investment … we call it, line one. Then by 2021, we decided to double down and invest in another line that was built and started up in November 22. Then, because of the Inflation Reduction Act, we replaced the 2018 line with a brand new line . . . started up in November 2023.

So those are the two lines that we have and right now we are in the middle of the third investment in Minnesota for yet another line that will start up by the end of April.

The two lines that we have are in the same location, which is Mountain Iron, Minnesota. That is a mining area. So, 100% of the iron ore that is produced in this country comes from across the road from us. We’ve been there, proving that the diversification of the economy with the energy transition is possible. We employ 340 people on that site. The next facility is on the outskirts of Minneapolis.

Trump made plans to impose tariffs again, particularly on steel and aluminum. How would that impact solar manufacturers and the industry as a whole? 

It will affect the industry by increasing costs. Everything is made of steel and aluminum, and then the frames of the modules are aluminum or steel. If you buy imported, it will be 25% more expensive. But what always happens when there is a restriction on the market, is that the domestic price also goes up [adjusting] to that cost increase. Market price increase will happen. 

Costs will not only be placed on the company but also passed on down to the customers.

Always does, right? So, if somebody has a fixed price contract . . . then they will need to absorb this cost increase. But if they work like us on costs, we sell the module on cost plus the contribution, so we make our costs transparent. 

How did the Origami Solar deal come about? And was this in the process before the proposed tariffs?

It [took] a year, because one of the things that Origami claims is that the modules made with steel frames versus aluminum, which is what we've been using since 2010, have a higher mechanical resistance. So we had to make samples, right? Those samples had to be put into modules, and those modules have to be tested. Some of the testing that we do takes 2000 hours, which is four months. We’ve been testing these modules for six months, and then we started negotiating the contract. So it has been a one year ongoing thing. We started, I would say, February or March 2024.

What advice can you give to other solar manufacturers on how to adapt and on what to do to keep customer relations and still make a profit despite the tariffs?

Well, it's major cost transparency, right? Work open book so your your client can see that your contribution, what you are making, is not offensive but the margins that we have are slim and that, I think, this is impossible to absorb. 

[We] show [customers] what the costs are, what is the change and again, in an era where everybody will fight you legally for one penny, you need to be able to have your contracts written in a way that if there is an increase in costs, those could pass through. That's why I mentioned if companies have a fixed price contract, then they wouldn't be able to pass through any people.