Tariffs Shake Up Global Supply Chains: What Businesses Can Do Next

April 3, 2025 – The new round of tariffs announced by President Trump, which imposes a 10% baseline levy on imports from countries like the UK, Singapore, and Brazil, alongside higher reciprocal tariffs on the EU (20%), China (54%), and Vietnam (46%), represents what can only be described as an economic ‘Liberation Day’ for the United States – the second in just four months.

This move, part of a well-planned policy shift driven by Trump’s trade team, represents a system shock that will lead to long-term change, regardless of whether it’s viewed as ‘unfair’ or ‘seismic.’

Tariffs serve a legitimate purpose in trade, often reflecting a nation’s developmental status, economic power, and political strategy. Historically, the United States has had lower tariffs compared to nations like China and India, but with the rise of new manufacturing powerhouses, many argue the current system is outdated.

For global businesses, the tariff shift will trigger price hikes, production slowdowns, and tough strategic decisions. Companies must decide whether to absorb costs, pass them onto consumers, or adjust their supply chains. Premium brands may mitigate price rises, but low-margin businesses will struggle, making cost control critical for the next 12-18 months.

One option for businesses is to accelerate localization by investing in the United States or other key markets. This strategy is likely to be pursued by large organizations with a strong U.S. presence or those targeting North America.

However, high-cost labor markets may deter investment unless the policy shift is deemed long-term, leading some companies to invest in automation.

For those relying on third-party nations for raw materials, partial set-ups in the United States could be a solution, balancing cost and specialization in the production process. This shift may lead to more OEM and contract manufacturing in the United States, especially in high-tech, high-margin sectors.

Companies may also leverage tools like transfer pricing and tariff engineering to navigate the system. However, the uncertainty around when the system will stabilize and for how long makes it crucial for companies to consider global business dynamics and explore trade agreements, such as the growing China–Japan–South Korea Free Trade Agreement, to strengthen ties between key nations.

What’s clear is that the U.S.’s protectionist strategy, while controversial, could shift the global balance. The long-term impacts of these tariffs are still uncertain, and that’s the challenge with economic policy: It’s full of variables, and predicting the future is never easy.

What we do know is that this strategy is a bet, and as with most bets, there will be a winner and a loser. Companies should brace for increased costs, shifts in the global supply chain, and the potential for a global recession. In such volatile times, businesses must adapt quickly to safeguard their future.