Tariff Hikes are Set to Shake Up Supply Chains Globally; Supplier-Focused Risk Management Platforms will be Essential Tools to Establish Proactive Resilience

New tariffs and trade restrictions from the Trump administration are set to have significant effects on supply chains, not just in North America, but across the globe. While they have been delayed by a month, new tariffs are set to include an additional 25% rate on imports from Mexico and Canada, and 10% on imports from China.

There are also expected changes to the ‘De Minimus’ exemption rule, which currently means duties and taxes can be avoided on goods under $800 in value. The US Customs and Border Protection have announced plans to collect more data on this type of imports, with more stringent policies and tariffs expected to be put in place as a result.

It’s difficult to keep up with what rate hikes are coming into force and when, but significant changes to both North America and global supply chains will be coming as a result of these changes. Just a few of the immediate impacts include:

• Many companies in the US have already started to frontload imports and stockpile inventory where possible to get ahead of the disruption. Storage costs in the US will rise if more companies continue to take up this strategy.
• Certain industries such as automotive, machinery, and chemicals could be significantly impacted in Europe, given current connections with the US. Major European carmakers with large operations in Mexico including Stellantis and Volkswagen are likely to see a significant hit to their competitiveness in the US market.

• Trucking rates in North America are likely to increase, and more companies will be looking to lock in longer-term contracts with transport providers in a bid to avoid price uncertainty.
• Changes to the ‘De Minimus’ exemption rule will be a strong blow to Direct-to-Consumer (D2C) supply chains. Many ecommerce players supplying the US will have to re-think their supply chains, either by reviewing suppliers or where they hold stock.
• Retaliatory policies by major trading partners are already coming into force or being considered. Canada have vowed a 25% tariff on US$106 bn worth of US imports, Mexico are working on a ‘Plan B’, and China have promised ‘countermeasures’ particularly focused on US energy.

A broader shift could come to the ‘nearshoring’ initiatives undertaken by US firms over the last couple years and ‘onshoring’ may need to be the new strategy, given the tariffs expected on Mexican imports. ‘Nearshoring’ in Mexico has been booming, and in 2023 Mexico supplanted China as the largest exporter to the US, accounting for 15% of US imports. Foreign Direct Investment (FDI) was up 30% on the previous year, and industrial property demand has grown around 80%, with the automotive and electronics industries driving a large part of this.

Another shake up to this trend is leaving companies around the world with new questions around best routes to market, and what is the best way to structure each stage of their supply chain that ultimately lead to the best cost. Nearshoring and onshoring intend to make supply chains simpler, but volatile policymaking is only seeing them add confusion and new risk.

Taking proactive measures to mitigate against any supply chain risk is easier said than done. The extensiveness of many companies supply chains, the lack of control, and the lack of visibility leave many unable to identify where risks are present, and which new policies will specifically affect them.

Risk management platforms have become increasingly effective with improvements in data processing and AI-supported analytics, mostly due to the sheer mass of data that needs to be processed to obtain visibility beyond just tier 1 suppliers. Larger organizations have partnered with such providers directly, but accessibility to most comes through the form of partnerships with established supply chain software providers. Examples include Infor and SAP with Everstream Analytics, O9 Solutions and Blue Yonder with Resilinc, and Kinaxis with Exiger.

On the other hand, the rising threat of tariffs and targeted international policies is creating an opportunity for risk management solutions that take a sharper focus on specific countries such as China, focusing more on supplier ties, regulatory risk, and compliance. Key providers include WireScreen, Strider Technologies, and Datenna. Strider Technologies for example have developed a platform that enables users to assess risk right to the start of their supply chains. The company gathers extensive data and documentation such as procurement records, to show how organizations are connected, exposing government ties, military ties, or foreign ownership. Such ties are essential to be aware of for many reasons, including ethical concerns such as ensuring good labor practices; security of supply and business continuity; and data privacy.

ABI Research also anticipates a number of Gen AI-based tools to be launched by risk management providers through 2025, mostly focused on providing written reports to users and text driven data analysis. But providers must also start providing ways for users to act on their data if they are to stand out. In the broader supply chain software ecosystem, solutions that provide not just visibility, but also actionable recommendations and tools to execute these in harmony with existing processes and systems are leaping ahead, and the same will be the case for the emerging risk management space.

For end users, its imperative to select a risk management provider that fits unique requirements. There is a lot of difficulty calculating Return-On-Investment (ROI) given the uncertainty of risk, so selection of a risk management solution should be considered based on provider specialisms, and what resources you have internally to get the most out of the insights available. Its also essential that companies start leveraging risk solutions as pro-active planning tools, rather than reactionary alert providers. Looking not just at suppliers, but suppliers’ suppliers can unearth ties to countries that are at high risk of incoming tariffs, exposing potential costs that are not always picked up by more generalized risk analysis.