US Tariffs: The latest in a long list of supply chain shocks

We can’t say we weren’t warned. These tariffs have been long signalled, as are future tariffs to come on the EU.

The New Tariffs: A Fresh Supply Chain Shock

President Donald Trump has introduced a series of impactful tariffs on imports from key trading partners, including Canada, Mexico, and China. These tariffs include a 25% levy on imports from Mexico and Canada, with an additional 10% tariff on Canadian crude oil and energy products. Chinese imports are also subject to a 10% tariff. The imposition of these tariffs is set to send ripple effects across global supply chains, forcing companies to reassess their sourcing, production, and logistics strategies.

While the political and economic justifications for these tariffs may be debated, one thing is clear: they represent another significant shock to supply chains. The reality is that disruptions of this nature—whether trade wars, natural disasters, or geopolitical conflicts—are no longer anomalies but the new normal. Supply chain professionals must take proactive steps to build resilience and prepare for future disruptions.

Short-Term Impact: The Immediate Fallout

In the short term, businesses will feel the impact of these tariffs in several ways:

1. Rising Costs: Companies reliant on imports from affected countries will see increased costs, which may either be absorbed internally or passed on to consumers in the form of higher prices.
2. Inventory Adjustments: Some businesses, anticipating the tariffs, have engaged in “front-loading”—stockpiling goods before the tariffs take full effect. This temporary buffer could lead to volatility in demand and supply imbalances.
3. Supply Chain Disruptions: With increased costs and uncertainty, companies may look for alternative suppliers, leading to short-term instability and inefficiencies as new sourcing relationships are established.
4. Logistics Challenges: Shipping volumes may spike initially as businesses try to move products before tariffs fully kick in, leading to congestion at ports and higher freight rates.

These immediate disruptions will force businesses to make rapid adjustments to maintain continuity and profitability. However, the longer-term effects are even more significant.

Medium to Long-Term Impact: Adjustments and Market Shifts (6-24 Months)

As the initial shock settles, the following trends are likely to emerge:

1. Supply Chain Reconfiguration: Businesses will increasingly look at nearshoring and reshoring to reduce dependency on affected regions. Countries with free trade agreements and more stable trade policies will become more attractive sourcing options.
2. Supplier Diversification: Companies that previously relied on single-source suppliers will accelerate diversification strategies to avoid over-reliance on any one country.
3. Increased Automation: Higher costs could push businesses to invest in automation and AI-driven supply chain solutions to reduce dependency on labor-intensive processes.
4. Consumer Price Inflation: Many industries will see rising costs trickle down to consumers, altering purchasing behaviors and demand patterns.
5. Trade Policy Adaptation: Governments and businesses will likely explore workarounds such as tariff exclusions, trade agreements, and lobbying for policy changes to mitigate long-term risks.

While these changes introduce complexities, they also present an opportunity for supply chain professionals to rethink and strengthen their operations.

Building Resilience: The Three Pillars of Supply Chain Adaptation

This should not come as a surprise. The nature of global trade is changing, and supply chains must become more resilient. Resilience can be viewed through three key perspectives: Responsiveness, Reliability, and Agility—all central to the SCOR framework.

1. Responsiveness: Reducing Cycle Time and Increasing Speed

The ability to respond quickly to disruptions is critical. One of the key SCOR metrics, Customer Order Fulfillment Cycle Time (RS.1.1), measures how long it takes to fulfill customer orders. Companies can improve responsiveness by:

• Enhancing Forecasting and Demand Planning: Implementing Sales & Operations Planning (BP.021) to anticipate shifts in demand and react proactively.
• Leveraging Digital Technologies: Using Supply Chain Control Towers (BP.126) and AI-driven predictive analytics to improve visibility and reduce reaction time.
• Optimizing Logistics and Distribution Networks: Investing in Dynamic Inventory Management (BP.201) and rethinking fulfillment strategies to minimize delays.

2. Reliability: Ensuring Consistency and Predictability

Reliability in supply chains means ensuring on-time, in-full deliveries with minimal disruptions. The SCOR metric Perfect Order Fulfillment (RL.1.1) assesses how well companies meet delivery performance expectations. To enhance reliability:

• Improve Supplier Collaboration: Engaging in Collaborative Planning, Forecasting, and Replenishment (BP.156) to improve alignment across the supply chain.
• Strengthen Risk Management: Conducting Supply Chain Risk Assessments (BP.174) to identify vulnerabilities and build contingency plans.
• Enhance Order Management: Using Electronic Data Interchange (EDI) (BP.159) and Robotic Process Automation (BP.190) to improve order accuracy and reduce errors.

3. Agility: Adapting to Unexpected Changes

Agility refers to how well a supply chain can adapt to sudden changes in demand or supply conditions. The SCOR metric Supply Chain Agility (AG.1.1) measures an organization’s ability to respond to unplanned events. Key strategies to enhance agility include:

• Scenario Planning: Implementing Scenario Planning (BP.184) to model different trade policy outcomes and prepare response strategies.
• Diversified Sourcing: Adopting Dual Sourcing (BP.276) and Make or Buy Analysis (BP.256) to maintain supply chain flexibility.
• Embracing Digital Transformation: Using Internet of Things (BP.182) and Big Data Analytics (BP.192) to gain real-time insights into supply chain performance and potential disruptions.

Conclusion: This Is Not a Surprise—Act Now

Supply chain shocks like these tariffs are not anomalies; they are the new normal. Businesses that fail to build resilience will continue to be caught off guard. However, those that proactively invest in responsiveness, reliability, and agility will navigate these disruptions more effectively and emerge stronger.

The good news? The playbook for resilience is well-documented. SCOR best practices, digital transformation, and strategic sourcing provide a robust framework to weather these storms. It is not a question of if another disruption will occur—but when. The time to act is now.