Strategic Intelligence: The Impact of Tariffs on Supply Chains

Strategic Intelligence: The Impact of Tariffs on Supply Chains

Summary

Tariff chaos is the nail in the coffin of hyper-globalization. The post-World War II global economy was categorized by 1) the acceleration of global trade, 2) the reduction of trade restrictions, and 3) the use of the US dollar as the default global currency. A global trade war and increased geopolitical tensions will end this era. Global interdependency created during hyper-globalization will not cease to exist. Globalization will continue, but it will look very different.

Key Highlights

• In the short term, tariffs will impact demand and inventory planning. To avoid initial tariff hikes, companies increased inventories in the US. Carrying larger inventories will become best practice if tariffs continuously increase, resulting in recurring price hikes for goods and services. Maintaining large inventories can be costly if demand declines rapidly. GlobalData expects demand to stay stable until the end of 2025 but may begin to dip in 2026 if the US economy enters a recession.
• Supply chains shift towards localization. Over the next five years, all major economies will try to reindustrialize and stimulate domestic demand. Trade restrictions and stimulus packages will incentivize, or even force, companies to reconfigure their supply chains. There will be a shift towards localizing supply chains to avoid the financial and operational penalties associated with offshoring production. Reconfiguring supply chains is a lengthy, complex, and expensive process.

• This report looks at how the US tariffs and a trade war will impact global supply chains. It examines the short-term and long-term consequences of tariffs on the global economy, from shifts in demand to the reconfiguring of supply chains.

• Examine how tariffs affect international trade. Understand the short-term and long-term impacts of tariffs on global supply chains. Learn how tariffs will accelerate industrial automation across different sectors. Assess the strategies companies are adopting when reconfiguring supply chains.