Localization in the USA: Winning Strategy to Bypass Tariffs?

With the introduction of 15% tariffs on European products starting August 1, 2025, and the prospect of further increases, European companies must urgently review their strategies for the U.S. market.

But is localizing production in the USA a strategic and sustainable solution to bypass tariffs and build a lasting competitive advantage?

Let’s try to take stock of this rather complex issue.

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The new U.S. tariffs: a point of no return for European sellers (at least, for now)

Let’s start in order. The first thing that stands out is that the current situation is profoundly different from the past.

The new round of tariffs has in fact allowed Trump to turn the clock back a century. The European Union will now pay the United States a 15% tariff rate, even on cars and auto parts, pharmaceutical products, and semiconductors. However, tariffs on certain sectors such as steel and aluminum will be even higher.

There is, however, a small clause that opens up interesting scenarios for those who want to localize. The ad-valorem tariffs set out in the executive order apply only to the “non-U.S. content” of each product, provided that the U.S. content accounts for at least 20% of the good’s value. In other words, if a company manages to reach 20% American content in its product, tariffs apply only to the non-American part, thus reducing the tax impact.

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What are the advantages of localizing in the USA

What has just been mentioned, and what we will specify in the following lines, leads us to reflect on the advantages of localizing in the USA. A scenario that perhaps most of our readers had never considered before. But one that now instead emerges as an opportunity worth evaluating.

So let’s see what the main benefits of U.S. localization are for a European Amazon seller.

Supply chain control and greater operational flexibility

The pandemic and recent geopolitical tensions have highlighted the fragility of global supply chains. In this context, localizing in the USA means building a sort of operational fortress that protects against global geopolitical storms.

Greater flexibility and resilience is not merely a matter of operational continuity. Rather, it is a fundamental piece of strategic control. Having local production allows companies to directly oversee every aspect of the production process, from quality to delivery times. This eliminates dependence on distant suppliers and complex logistics chains.

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The “Made in USA” premium and brand perception

An element often underestimated by European sellers is the power of the “Made in USA” brand in the American market. 70% of American consumers actually prefer Made in America products, and 50% are willing to pay 10% more for domestically manufactured products. In short, another factor that can transform localization from a cost into a revenue enhancement opportunity.

Localization therefore not only eliminates tariff costs but can actually increase revenues through premium pricing. And indeed, many European companies have discovered that the premium pricing of “Made in USA” not only offsets the additional costs of local production but generates higher margins compared to the traditional export strategy.

Speed of response and American customer service

The typical American customer, very attentive to service, wants the assurance of supply continuity within relatively certain timeframes. American business culture greatly values speed of response and service reliability. Therefore, a voicemail or email with a reply after several days is unacceptable by American standards.

For consumer products, this reality is even more pronounced.

When and how to localize

So far, we have spoken of localization in deliberately generic terms. However, localization is a strategy that deserves to be addressed specifically. Let’s look, for example, at some insights depending on the most relevant sectors for European sellers.

Consumer products and e-commerce

For the consumer products and e-commerce sector, localization is a competitive opportunity that can truly amplify competitiveness. In the United States, marketing is fundamental—even for food products—and this marketing becomes ineffective if not supported by efficient local logistics.

Success in U.S. retail also requires the ability to immediately respond to demand fluctuations and customization needs. Companies that rely solely on exports from Europe are constantly at a competitive disadvantage compared to those that can guarantee fast deliveries and local customer service.

The winning strategy for this sector includes:

• strategically positioned distribution hubs
• fulfillment centers dedicated to e-commerce
• customer service teams operating in U.S. time zones

The initial investment is quickly amortized through tariff elimination and increased sales due to better service.

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Machinery, industrial equipment, and B2B

The industrial machinery sector presents very significant opportunities for European sellers. The U.S. infrastructure renewal plan foresees $1 trillion in investments over the next ten years. And it is no coincidence that some European countries, such as Italy, have their export pillar in:

• machinery
• industrial goods
• plant-related products/services

which can ensure a long-term relationship between parties thanks to after-sales services such as maintenance.

For this sector, localization can be implemented gradually:

1. Start with service hubs for maintenance and technical assistance.
2. Proceed with final assembly of components produced in Europe.
3. Gradually increase local content to reach the critical 20% threshold.

This gradual approach allows companies to test the market, build relationships with local suppliers, and develop specific operational expertise before committing to larger production investments.

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Food sector

Things are even more specific for the food sector. This segment has particular dynamics that require a selective approach.

The optimal strategy in this case involves distinguishing between products that can be localized without losing perceived value and products that must maintain their country-of-origin identity. Processed products such as industrial pasta, preserves, and prepared foods can benefit from localization. Identity products such as DOP wines, traditional cheeses, and premium extra virgin oils maintain their value precisely thanks to their origin.

Some food companies are experimenting with hybrid models, where primary production remains in the country of origin but final processing and packaging take place in the USA, allowing optimization of both authenticity and logistics.

Localization models: from warehouse to integrated production

Localization in the United States can take place through different organizational and industrial models. Let’s look at the main ones together.

The logistics hub model

The simplest and lowest-risk model to start localization involves creating an American logistics hub. The approach requires relatively modest investments and can be implemented in 3–6 months. The hub is used for storing finished products, fulfillment to end customers, and first-level customer service.

Although this model does not completely eliminate tariffs (products are still imported as finished goods), it offers significant advantages in terms of:

• delivery speed
• customer service

Many companies use this stage as a market test to assess local demand before proceeding with larger investments.

The assembly and finishing model

A second level of localization is the creation of assembly and finishing centers that combine components imported from Europe with local processing. The model, implementable in 6–12 months with medium investments, offers the best balance between costs and benefits for many companies.

The strategic objective is to reach at least 20% American content to benefit from the aforementioned reduction of the tariff base. This is not an impossible goal: it can be achieved through final assembly, product customization, local quality control, and integration with U.S. suppliers for specific components.

Many companies discover that this model not only reduces tariffs but also improves the perceived quality among U.S. customers, who appreciate customization capabilities and faster response times. The assembly model also allows companies to maintain control over core components and proprietary technologies, which remain produced in Europe.

The full local production model

The most advanced level of localization involves creating a complete production facility in the USA. This approach requires significant investments and implementation times of 12–24 months. In return, it offers maximum benefits in terms of tariff elimination and access to the “Made in USA” premium.

Full local production allows companies to fully integrate into the American industrial ecosystem, developing direct relationships with local suppliers and accessing market-specific expertise. The model is particularly advantageous for companies with high volumes and high-value-added products.

The operational sovereignty offered by this model protects companies not only from current tariffs but also from future trade escalations. Companies that reach this level of localization effectively become domestic players in the U.S. market, with all the competitive advantages that entails.

Financial analysis of localization

To understand the economic viability of localization, let’s consider the case of a typical European company exporting €10 million annually to the USA. In the current scenario, with 15% tariffs, the company faces €1.5 million in additional annual costs for tariffs. In addition, it incurs about €300,000 in international logistics costs. In total, €1.8 million in additional annual costs.

Implementing an intermediate localization model (assembly and finishing), the company must sustain an initial investment of €2–3 million, plus annual operating costs of about €500,000. However, it can reduce tariffs by 80% (saving €1.2 million annually) and logistics costs by €200,000 annually. This results in a net annual saving of €900,000.

The payback period is therefore 2.5–3 years. An acceptable time horizon considering that the benefits extend far beyond simple tariff savings. The analysis must also take into account the additional quantifiable advantages of localization.

The “hidden” benefits of localization

Beyond direct tariff savings, localization generates benefits often underestimated in traditional analyses. The premium pricing derived from “Made in USA” can increase final prices by 5–10%, generating a revenue increase that alone can justify the investment.

The reduction in delivery times also allows for 20–30% inventory optimization, freeing up working capital and reducing warehouse costs. Many companies also experience a 15–25% market share increase thanks to better customer service and greater responsiveness to market needs.

Improved customer satisfaction translates into higher retention rates and an increase in average order value. Benefits which, although difficult to quantify precisely ex-ante, significantly contribute to the overall ROI of the localization operation.

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A roadmap to implement localization in the USA

Let’s now share a short roadmap for implementing a localization strategy in the USA, starting with analysis and planning.

Phase 1: strategic analysis and planning

The first step toward successful localization is a thorough analysis of the U.S. market, specific to the sector in question. The United States represents one of the most important markets for European exports, but maintaining these volumes cannot be taken for granted. Consolidation in fact requires a deep understanding of local dynamics.

The analysis must include:

• a detailed assessment of the local distribution chain
• identification of specific regulatory requirements for the sector
• a deep understanding of American consumer behavior

Unfortunately, many companies underestimate cultural differences in business practices, which can determine the success or failure of the initiative.

The geographical choice is also an important, often overlooked factor. Understanding in which state the business will succeed is one of the fundamental things to think about. Factors such as:

• proximity to target customers
• state tax incentives
• availability of skilled labor
• logistics infrastructure

must be carefully evaluated.

Phase 2: legal and operational setup

Once the strategy has been defined, the company must navigate the American legal landscape. The U.S. operates under a federal system consisting of the individual jurisdictions of its 50 states, plus the District of Columbia. This complexity requires specialized expertise to avoid costly mistakes.

The establishment of the appropriate corporate structure (LLC or Corporation) must align with the company’s fiscal and operational objectives. Obtaining the EIN (Employer Identification Number) and setting up the tax and accounting system require a thorough understanding of federal and state regulations.

Location selection must consider not only direct costs but also available incentives. Many U.S. states offer significant incentive packages to attract foreign investment, which can substantially reduce startup and initial operating costs.

Phase 3: operationalization and team building

Launching operations is the third and most critical phase of the entire process. Building a competent local team requires a deep understanding of the U.S. labor market and local compensation dynamics:

• legal and commercial rules
• business practices and customs

are profoundly different from those in Europe.

Setting up the local supply chain also requires identifying and qualifying U.S. suppliers who can meet European quality standards. And it is no coincidence that this stage often reveals opportunities to improve production processes through the integration of American technologies and methodologies.

The implementation of IT systems must ensure integration with existing European systems while maintaining compliance with U.S. privacy and data security regulations. The testing and optimization phase allows operational problems to be identified and resolved before full-scale launch.

Phase 4: scale-up and continuous optimization

Finally, we arrive at the fourth phase, scale-up, which allows companies to maximize the benefits of localization. The gradual increase in production volumes must be accompanied by an expansion of the range of localized products and the development of an increasingly integrated local supplier network.

Developing local innovative capabilities enables companies to adapt products specifically for the U.S. market. This creates competitive advantages that are difficult to replicate by competitors operating only through exports. The continuous optimization phase must constantly monitor market evolution and adapt strategy accordingly.

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How to manage risks

As is evident, such a complex process as localization exposes entrepreneurs to risks of various kinds and magnitudes.

The first and greatest obstacle is linked to the complexity of U.S. regulations. Each state has its own jurisdiction, which adds to the federal government’s system.

Human resources management is another important element, as it requires significant cultural adaptation. In fact:

• American workers’ expectations
• compensation dynamics
• standard benefits
• labor regulations

differ substantially from those in Europe. Building a corporate culture that integrates European values with American expectations requires experienced leadership and cultural sensitivity.

Maintaining European quality standards in a U.S. production context presents technical and organizational challenges. Training local staff, adapting production processes, and implementing quality control systems require significant investments of time and resources.

How to mitigate risks

An effective strategy to mitigate risks is undoubtedly the development of strategic partnerships with local companies that can accelerate the learning process and reduce operational risks. Many successful European companies have used joint ventures or strategic alliances to quickly access local expertise and established distribution networks.

Using specialized consultants with sector-specific experience can also prevent costly mistakes and significantly accelerate implementation times. Choosing consultants who understand both the U.S. market and the peculiarities of European business is therefore crucial to the success of the operation.

The gradual approach makes it possible to limit risks through progressive learning. Starting with limited operations and gradually expanding based on acquired experience reduces financial exposure and allows for correcting strategic mistakes before they become costly.

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Alternatives to full U.S. localization

Full localization in the USA is a solution to bypass tariffs, but not the only one. Mexico, for example, is an interesting alternative to direct localization in the USA thanks to the NAFTA/USMCA trade agreements. Companies from the U.S. and Canada are relocating part of their services to the country, with benefits for both parties. The strategy can in fact offer preferential access to the U.S. market with lower labor costs and reduced regulatory complexity.

Mexican nearshoring allows European companies to benefit from preferential tariffs for U.S. market access, while also keeping operating costs lower compared to direct localization. However, this strategy may not offer the same advantages in terms of:

• brand perception
• “Made in USA” premium pricing

Another alternative approach involves developing strategic partnerships with American producers already established in the market. Collaborations may take the form of:

• joint ventures for specific projects
• licensing technologies for local production
• co-manufacturing agreements combining European expertise with American production capabilities

Partnerships allow quick access to:

• local production capabilities
• established distribution networks
• specific market expertise

significantly reducing entry times and costs. However, they require careful management of intellectual property and commercial agreements to avoid future conflicts.