The global supply chain’s reaction to the Trump tariffs: Crash, maneuver & stand-by
With the announcement of President Trump’s latest round of tariffs — and subsequent pausing of some of them — we spoke with the CEO of a global supply chain company to hear what’s happening on the ground floor
The global supply chain just can’t seem to catch a break. First, there was the pandemic that began in late-2019 in China then developed into a global health emergency which caused unprecedented levels of chaos and adaptation. Then, there was the friendshoring trend, a global reworking of the supply chain along geopolitical lines in response to Russia’s invasion of Ukraine in early 2022. And now, U.S. President Donald J. Trump’s tariffs and trade wars are upending an economy that was seemingly finally returning to normal, whatever that is supposed to mean.
Brian Wenck, CEO ofFlat World Global Solutions, a global supply chain management and logistics company, has got his finger on the pulse of how the global supply chain is performing, and he paints a picture of the current state of the global supply chain as one of a system already greatly disrupted by tariffs changes and which was feeling the strain as it worked to adapt.
The state of the global supply chain today
Foremost, the global supply chain is experiencing a moment of immense distress as multiple factors work to disrupt it on both a short- and medium-term perspective. Most immediately, tariffs have disrupted the accuracy of demand forecasting and inventory planning within the global supply chain. Fortunately, its technological sophistication has greatly evolved over the last few decades, as the global supply chain now see companies increasingly leveraging data and information to better forecast demand and plan inventory.
“A supply chain is a never-ending loop, right? That’s the purpose of the supply chain, and anybody who wants to improve their supply chain is really looking to better forecast the demand and then plan inventory to it,” explains Wenck. “The tariff activity impacts forecast accuracy, leading companies to pause or cancel orders and beg or plead with vendors.”
This accuracy is essential to just-in-time ordering, in which goods are received as needed in the production process to minimize inventory costs. However, current instability, characterized by tariffs and geopolitical tensions, is impacting this model.
Wenck says this instability requires companies to adapt, which can impact the efficiency and cost-effectiveness of just-in-time ordering, which is dependent on stable conditions to function optimally.
Due to this increased uncertainty, companies also are reducing their purchasing activities. Consequently, transportation rates are decreasing, and some logistics firms are facing challenges in maintaining operations amid fluctuating costs and disrupted supply lines.
The state of the global supply chain tomorrow
Already, some companies are significantly re-evaluating their processes and making significant changes to their supply chain strategies, Wenck observes, but not necessarily by moving production to the United States as is the stated goal of the Trump Administration. For instance, Wenck relates the story of a client that previously imported goods into the US and then distributed them to Canada. In response to the new tariffs, they are reorganizing their supply chain to import directly into Canada, avoiding double tariffs and managing distribution from afar.
An example Wenck offered was that of an importing company that years earlier anticipated significant trade disruptions and built a manufacturing facility in Mexico to significantly reducing their reliance on Chinese imports. That company was taken by surprise due to Mexico initially being a heavy tariff target, forcing it’s focus more on its Latin and South America businesses as a way of making up for the decreased potential of its North American market.
Flat World Global’s Brian Wenck
“Anybody who wants to improve their supply chain is really looking to better forecast the demand and then plan inventory to it. Tariff activity impacts forecast accuracy, leading companies to pause or cancel orders and beg or plead with vendors.”
The good news is that the global supply chain is still in arguably one of its most resilient stages in memory. The pandemic and geopolitical tensions since 2022 have reshaped it, driving companies to become more flexible and innovative in their approach. Wenck points out that businesses also are navigating these challenges by leveraging data and technology to make informed decisions, such as rerouting shipments to avoid impending tariffs as well as bringing producers into closer, more informed relationships with their supply chains.
“The pandemic taught us we need to allow flexibility in our supply chains, maybe at the cost of pennies,” says Wenck.
Ultimately, while tariffs and trade wars pose significant challenges, Wenck says he remains optimistic about the resilience and adaptability of the global supply chain. Once stability returns, Wenck says, he believes the supply chain will recalibrate and continue to function, albeit with new strategies and cost structures in place. Of course, this rosy prediction depends on the assumption that the current period of instability will be transitory and short.
On April 2, President Trump announced his Liberation Day tariff package, imposing staggeringly high tariffs on the entire world, including 20% or higher tariffs on major US trading partners. A week later, he paused some of these tariffs. The whipsaw impact of these actions is still being felt, and the reaction from financial markets, major banks, and other trade-oriented organizations suggests it was far more significant than they had anticipated.
As Trump’s trade wars continue to escalate — and if barriers to trade become so high the supply chain cannot economically overcome them — the picture becomes more complicated and the potential on the horizon murkier to discern. In that case, the entire global economy is basically in stand-by mode, watching to see what the Trump Administration does next and how other countries respond.
If indeed this disruption is temporary, similar to the one during the first Trump administration, the global supply chain might have already endured the worst of it. However, if these disruptions continue to manifest as an effort to isolate the United States from the global economy andreshuffle the global trading network, this current period might be considered relatively uncomplicated in hindsight.
