Government Contracting in a Tariff Era: How AI, Automation, and Operational Data Give US-Based Firms the Edge
By TED ROSE, ROSE FINANCIAL SOLUTIONS
Update as of April 11, 2025:
Markets responded dramatically after President Trump partially reversed course and paused many of the newly imposed tariffs for 90 days. The S&P 500 surged 9.5% on the 9th —one of its biggest single-day gains since World War II—after the administration confirmed that most tariffs outside of China would be temporarily suspended. Treasury Secretary Scott Bessent clarified that while the 10% baseline tariff on global goods would remain, elevated rates on countries like the EU and Japan were being paused. However, tariffs on Chinese imports increased to 145%, signaling continued volatility.
This partial rollback does not change the overall trajectory: the administration remains committed to an “America First” trade policy. For U.S.-based government contractors, this underscores both the opportunity and the urgency to leverage technology and talent domestically.
The Trump administration’s April 2, 2025 update to its tariff policy marked a major shift in U.S. economic strategy. With sweeping new import tariffs—25% on non-USMCA goods from Canada and Mexico (which includes goods that don't meet North American content or production standards under the U.S.-Mexico-Canada Agreement), 125% on Chinese imports, and 10% on most global goods (source)—the message is clear: domestic production is now a competitive imperative.
For small and mid-size government contractors with a U.S.-based workforce, this creates a unique window of opportunity. But the real advantage comes when you combine your domestic position with AI, Automation, and Data enabling you to scale operations, cut costs, and outperform competitors in a market reshaped by protectionist policies.
As Warren Buffett wisely noted:
“Only when the tide goes out do you discover who’s been swimming naked.”
Here’s how you can ensure you’re not only fully clothed—but thriving through the disruption.
Tariffs and the US Labor Workforce: What’s Changing?
These tariffs go beyond goods—they reflect a broader “America First” strategy that is likely to influence services and labor as well. Experts forecast a 40–50% chance of foreign labor restrictions over the next 12–18 months, potentially in the form of visa fee hikes or outsourcing taxes. For government contractors, this shift presents both risks and rewards.
1. Rising Demand for Domestic Talent
Federal buyers are under pressure to prioritize U.S.-made goods—and that mindset increasingly extends to services. If your team is already based in the U.S., you’re aligned with procurement trends and insulated from the instability of foreign labor pipelines.
2. Tightening Labor Markets
With U.S. unemployment at 4.2% as of March 2025 (up from 3.8% last year), specialized fields like cybersecurity, engineering, and AI are experiencing wage pressure. Contractors must protect margins while staying competitive.
3. Foreign Labor: A Growing Liability
If tariffs or restrictions target services or foreign workers, firms dependent on offshore teams could see costs rise 10–20%. Between tariffs, automation, and AI, it is clear that global labor arbitrage is at risk. Rapid transitions to onshore models are complex—and often disruptive. Waiting until the last minute comes with its own risks.
4. Strategic Advantage for US-Based Firms
A domestic workforce offers regulatory alignment, cost predictability, and less exposure to geopolitical volatility. But rising wages and labor shortages mean staying competitive will require more than just a zip code. A trained team, comprehensive datasets, and the right technological solution is critical.
How AI, Automation and Data Reinforce Your Competitive Advantage
This is where technology and data become the force multiplier. Leveraging AI, automation, and comprehensive datasets to help you scale efficiently, adapt quickly, and deliver more with fewer people. The shift from labor arbitrage, as a cost reduction strategy, to automation is underway.
✅ Boost Efficiency
Automate routine tasks like data entry, compliance tracking, and invoice processing. This frees your team to focus on higher-value activities.
✅ Make Smarter Data-Driven Decisions
Use AI-driven analytics with comprehensive datasets to forecast labor needs, assess project risks, and refine your bidding strategy—giving you an edge in tight competitions.
✅ Scale Without Hiring
Automation allows you to expand output without expanding your headcount—a critical advantage as labor costs rise and hiring slows.
✅ Elevate Service Quality
AI-enhanced processes produce more accurate reports, faster responses, and stronger compliance—differentiating you from less tech-savvy competitors.
If Labor Tariffs Hit: The Game Changes Again
Should foreign labor tariffs or visa restrictions take effect, your domestic positioning becomes even more valuable.
- Cost Stability: Competitors relying on overseas talent will face rising costs—while you remain steady.
- Market Disruption: As others scramble to restructure global teams, your operations remain focused, compliant, and contract-ready.
- Future-Proofing: AI and Automation insulate your operations from wage hikes and labor shortages, ensuring long-term resilience.
What You Can Do Now: Building a Moat Around Your Business
To turn today’s disruption into long-term strength:
1. Audit Your Workflow
Identify repetitive, manual tasks that can be automated—especially in finance, compliance, and project management.
2. Invest in Smart Tech
Focus on proven automation tools tailored to the federal contracting space, such as invoice automation, timekeeping systems, and AI proposal writers.
3. Upskill Your Team
Train your staff to work alongside AI. Empowering your workforce boosts retention and productivity.
4. Highlight Your Advantage
In your proposals, emphasize your domestic team, AI-driven efficiency, and capacity to scale without risk—positioning yourself as a reliable, cost-effective partner.
5. Partner with a Technology Partner
In your proposals, emphasize your domestic team, AI-driven efficiency, and capacity to scale without risk—positioning yourself as a reliable, cost-effective partner... Read more in the ROSE Community.
Want to read the full article?
📢 Join ROSE Business Forum & Events to gain exclusive access to industry insights, discussions, and networking opportunities tailored for GovCons, Nonprofits, and Growing Businesses.
Ted Rose
In 1994 Ted Rose founded Rose Financial Solutions (ROSE), the Premier U.S. Based Finance and Accounting Outsourcing Firm. In 2010, the Blackbook of Outsourcing named ROSE the #1 FAO firm in the world based on client satisfaction. As the president and CEO of ROSE, he provides executives with financial clarity. Ted has also acted as the CFO for a number of growth companies and assisted with various rounds of financing and M&A transactions.
Share this article:
Visit Us On:
