In the ever-evolving landscape of global trade, the recent imposition of new tariffs and sanctions is leaving many business leaders concerned about the future of their supply chain strategies. Navigating through the complexities of today’s global trade environment presents a multifaceted challenge for businesses. While, in the short term, consumers will bear the brunt as importers include tariffs in their prices, this moment also presents an opportunity for supply chain leaders to diversify and digitize their supply chains for greater resilience. In earlier research, we outlined three steps that business leaders should take to digitally transform their supply chains.

Tariffs are just one element shaping global trade flows, especially in a world of increasing regulation and compliance mediated by shared data about materials, methods, and treatment of labor. Meanwhile, the COVID-19 pandemic and the ongoing war in Ukraine demonstrate that the location of manufacturing still matters and that companies need to diversify their supply chains to maintain an optimal balance between cost and flexibility. In another recent blog, we already discussed how prospective tariffs might impact supply chain processes and supporting applications.

Industries That Are Being Challenged To Scale Up Domestic Production Face The Greatest Risk

  • Manufacturing: Manufacturers in automotive, pharmaceutical, and consumer electronics are most heavily impacted by tariffs. COVID-19 demonstrated the risks of exclusive reliance on global supply chains, susceptible equally to disruption from war, pestilence, or tariffs. Manufacturers like Ford and General Motors consider all risks including exposure to tariffs in their sourcing strategies and use local suppliers to mitigate risk. Other manufacturers such as HP build optionality into their supply chain strategies. This buys options on production capacity in case a particular product offering takes off, but it also avoids outright commitment to subcontractor capacity in case of weaker demand. You can actually measure the business value of your supply chain optionality using Forrester’s Total Economic Impact™ (TEI) methodology.
  • Agriculture: The agricultural sector suffered from tariffs imposed on US exports such as soybeans, dairy, and pork. China, one of the largest markets for US agricultural products, retaliated against earlier US tariffs by imposing its own duties on these goods, significantly reducing demand. Some farmers sought new markets, while others cut production or shifted to alternative crops. The ripple effect of tariffs on agriculture extends beyond farmers, affecting global supply chains and consumer prices. The situation is exacerbated by the current export challenges faced by Ukraine, historically known as the breadbasket of the world.
  • Semiconductor-dependent industries: The US’s efforts to curb China’s strength in embedded electronic components, together with the EU’s sovereign cloud initiatives, force global manufacturers to manage a technology stack for each imperial block. Manufacturers must carefully choose their markets of operation. For example, the Dutch tool maker ASML obtained exemption from US sanctions only after negotiations between their governments. Meanwhile, Chinese firms placed $16 billion orders with NVIDIA ahead of tighter export regulations.
  • Life sciences: The pharmaceutical and life sciences sector faces its own set of challenges with the US pushing toward domestic production of critical drug ingredients. The adoption of advanced supply chain tools, such as TraceLink, reflects the industry’s move toward greater transparency and resilience.

The Role Of Logistics And Freight Suppliers Will Further Increase

In a climate fraught with trade uncertainties and slowdowns, logistics and freight suppliers emerge as crucial navigators. Their expertise in customs clearance and compliance becomes invaluable, guiding businesses through challenging terrain. Continual maintenance of enterprise master data (for example, ship-to and ship-from addresses) helps master attributes such as sustainability or country of origin. The adoption of global trade management solutions like those provided by SAP and Oracle exemplifies the strategic measures that companies can take to ensure smooth operations amid the complexities of global trade.

I look forward to hearing your viewpoint on how to best deal with current uncertainty and flourish in the next four years. In the meantime, please book a guidance session to discuss how you can leverage our research and tools to create better supply chain resilience.

I also want to thank Forrester Research Associate Lorenzo Annicchiarico, who contributed to this blog.