{"id":368830,"date":"2025-05-29T13:39:00","date_gmt":"2025-05-29T17:39:00","guid":{"rendered":"https:\/\/chiefexecutive.net\/?p=368830"},"modified":"2025-05-29T13:39:02","modified_gmt":"2025-05-29T17:39:02","slug":"the-coming-supply-chain-fallout-from-tariff-policy-and-what-to-do-now","status":"publish","type":"post","link":"https:\/\/chiefexecutive.net\/the-coming-supply-chain-fallout-from-tariff-policy-and-what-to-do-now\/","title":{"rendered":"The Coming Supply Chain Fallout From Tariff Policy And What To Do Now"},"content":{"rendered":"\n<p><strong><em>Editor\u2019s note: In an effort to help our community better future proof its supply chains, navigate tariffs and lead during rising economic uncertainty, we\u2019ve partnered with the team at AlixPartners.\u00a0<a href=\"https:\/\/www.alixpartners.com\/tariff-and-trade-disruption\/\">More information, insights and ideas ><\/a><\/em><\/strong><\/p>\n\n\n\n<p>Regardless of how the U.S. trade war evolves, we see impacts for retailers reliant on overseas sourcing. In the face of uncertainty over tariffs, many business leaders are choosing to wait and see, hesitating to act\u2014often without realizing that inaction may be riskier than making a few imperfect decisions.&nbsp;<\/p>\n\n\n\n<p>As things stand, October will see new fees imposed by the U.S. on Chinese built and owned ships. Freight volumes have&nbsp;<a href=\"https:\/\/www.alixpartners.com\/insights\/102k8yk\/trade-regulation-impact-on-supply-chain\/\">already dropped steeply<\/a>.<\/p>\n\n\n\n<p>In this article, we examine the second-order effects of today\u2019s volatile environment and offer a practical framework for decision-making for retailers.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">The next phase of tariff policy&nbsp;<\/h4>\n\n\n\n<p>On April 9, a\u00a0<a href=\"https:\/\/www.whitehouse.gov\/presidential-actions\/2025\/04\/modifying-reciprocal-tariff-rates-to-reflect-trading-partner-retaliation-and-alignment\/\">90-day pause on U.S. tariffs<\/a>\u00a0was granted to all countries except China, Initially, U.S. and Chinese tariffs stood at 145 percent and 125 percent respectively, but have been temporarily reduced to 30 percent and 10 percent for 90 days as negotiations commence between the two countries. The fees imposed on China starting in October will also have some exemptions.<\/p>\n\n\n\n<p>Negotiations with several countries are ongoing, with some level of de-escalation expected.<\/p>\n\n\n\n<p>Beyond the direct impact on prices, there are multiple effects anticipated on the supply chain, much like those experienced during the COVID-19 pandemic.&nbsp;<\/p>\n\n\n\n<p>Many of the key impacts we are watching for are already underway:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Purchase orders and import volume drop:\u00a0<\/strong>Sharp declines in booking volumes and increased cancellations across U.S. inbound trade lanes from late March to early April signal a coming drop in import volumes. While some retailers have pulled forward orders\u2014reflected in elevated Q1 volumes across U.S. ports\u2014and some are capitalizing on the temporary tariff pause, uncertainty remains high. The U.S. de minimis exemption, which allowed duty-free entry for low-value packages (under $800) from China and Hong Kong, was removed effective May 2, 2025, is expected to further decrease air cargo volumes.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/files.passle.net\/Passle\/5e1358328313d50770039d23\/MediaLibrary\/Images\/2025-05-15-17-27-03-422-682623e7e520855b61ecae54.png\" alt=\"\"\/><\/figure>\n\n\n\n<p><em><strong>Week over week changes in ocean bookings % change (Week of April 25, 2025)<\/strong><\/em><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/files.passle.net\/Passle\/5e1358328313d50770039d23\/MediaLibrary\/Images\/2025-05-15-17-25-07-504-682623732a6920dfc66888ff.png\" alt=\"\"\/><\/figure>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Inventory is increased in anticipation of higher costs down the line:\u00a0<\/strong>Many companies increased their inventory positions in anticipation of the U.S. tariffs. This is evident in the March 2025 U.S. inventory numbers,\u00a0<a href=\"https:\/\/www.census.gov\/econ\/indicators\/current\/index.html\">up 0.5% to $908 billion<\/a>\u2014their strongest gain in months, as businesses sought to lock in lower costs before the tariffs. As businesses hold off on orders to avoid tariffs on China, we expect to see an unwind of this gain in inventory with the risk of on-shelf shortages and tighter replenishment windows in the months ahead.<\/li>\n\n\n\n<li><strong>Lower bookings send ocean traffic to busier shipping lanes<\/strong>:Lower booking volumes (standard container bookings from China to the U.S.\u00a0<a href=\"https:\/\/www.vizionapi.com\/blog\/tariff-tracker\">down 45%<\/a>\u00a0by mid-April) and rising cancellations are already prompting carriers to redeploy vessels to busier trade lanes\u2014a trend that will only intensify the longer tariff uncertainty persists.\u00a0<br>If policy suddenly reverses, a scramble to rebook cargo could trigger a classic bullwhip effect, driving freight rates sharply upward. At the same time, subdued import flows risk creating container imbalances\u2014more boxes stacked at ports than loaded on ships, threatening port congestion and further straining logistics networks.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Near-term and long-term tariff scenarios, and possible ways to mitigate their effects&nbsp;<\/h4>\n\n\n\n<p>The global supply chain landscape is likely to undergo significant changes depending on how trade negotiations unfold, particularly with China and other key partners such as Vietnam, India, Thailand and the European Union.\u00a0<\/p>\n\n\n\n<p>Below are three potential tariff scenarios, along with their anticipated impacts:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/files.passle.net\/Passle\/5e1358328313d50770039d23\/MediaLibrary\/Images\/2025-05-15-17-27-31-502-682624032a6920dfc6688a81.png\" alt=\"\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/files.passle.net\/Passle\/5e1358328313d50770039d23\/MediaLibrary\/Images\/2025-05-15-17-27-57-298-6826241d2a6920dfc6688ac0.png\" alt=\"\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">What you can do today<\/h3>\n\n\n\n<p>Given ongoing volatility and possible future scenarios, companies need to drive actions to achieve short-term success as well as set the foundation for long-term supply-chain resilience. It is critical to remain nimble and have the agility to pivot based on how the tariff situation pans out.<\/p>\n\n\n\n<p>To manage immediate disruption while maintaining customer trust and financial stability, companies must act now. We have worked with clients to establish a war room to continuously assess risks, adapt strategies and drive decisive actions that protect performance and unlock opportunities in the face of disruption. We\u2019re also embedded in client teams designing and implementing future-ready supply chain strategies, from network redesign to sourcing diversification and Total Cost of Ownership assessments.<\/p>\n\n\n\n<p>Longer term, building supply chain resilience into your business is no longer optional\u2014it\u2019s a strategic imperative. Retailers should begin with a forward-looking question: What should our supply chain look like in the next 12-18 months?&nbsp;<\/p>\n\n\n\n<p>Here are some steps to take today:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Assess the current network for vulnerabilities and structural risk<\/li>\n\n\n\n<li>Apply a Total Cost of Ownership lens to sourcing and manufacturing decisions<\/li>\n\n\n\n<li>Diversify supplier base and geographies, reducing over-dependence on China<\/li>\n\n\n\n<li>Design for flexibility, agility, and long-term value creation<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p>No one wants a repeat of 2020-21 upsets. Executives must evaluate the liquidity trade-offs of frontloading inventory versus the cost of inaction to safeguard revenue, manage cash flow, and preserve customer trust.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Beyond the direct impact on prices, there are multiple effects anticipated on the supply chain, much like those experienced during the COVID-19 pandemic.\u00a0Here&#8217;s what to do. <\/p>\n","protected":false},"author":23169,"featured_media":368831,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[57724],"tags":[],"class_list":["post-368830","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ap-tariffs"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The 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