Recent volatility in global trade policy has created considerable uncertainty for many UK businesses, as they seek to navigate the wide-ranging (and constantly evolving) US tariff regime and reciprocal measures imposed by other countries that are impacting supply chains.
The situation has been exacerbated by the unpredictability of President Trump's decision-making, with major policy changes announced with little or no notice before sometimes being rescinded within days. Just this week US officials said that tariffs will begin on 1 August, having previously set a 9 July deadline.
Trump's tariffs are subject to an ongoing US court battle, but they do symbolise a wider global trend and there has been debate around whether globalisation as we know it is over. Last year, before Trump had even won the US election, let alone entered office, the director general of the World Trade Organisation, Dr Ngozi Okonjo-Iweala, admitted that "global trade is not having the best of times at the moment".
This sentiment has been echoed by leading economists, academics, think tanks and others who have pointed to increased levels of protectionism in recent years.
For businesses whose cross-border supply chains have grown almost unchecked during an era of ever-expanding globalisation, this poses a challenge around how to best plan for the future.
If it hasn't been done already, now would be the right time for businesses to take a deep dive into their global supply chains to identify points of weakness and sources of uncertainty. This will allow, where possible, for a proactive approach to identifying alternative, more robust sources for products and materials.
Nearshoring the supply chain may come with greater costs, but some businesses might find that the rewards of certainty outweigh the greater risk posed by lengthy supply chains. It may also bring benefits in terms of sustainability and alignment with environmental goals.
One benefit of shorter supply chains that should not be underestimated is the value of close relationships during times of financial distress. With lengthy supply chains comes an inherent remoteness from those you are dealing with. Lines of communication may be less open, and distant suppliers may be less sympathetic to your financial issues. Building strong relationships in short supply chains that are closer to home could help facilitate conversations that allow breathing space in times of difficulty for both customers and suppliers.
As ever, the right approach will depend on the individual requirements of the business. Local supply chains won't be possible in all cases, such as where materials are found in limited geographical locations e.g. rare earth minerals required for batteries where China is a key supplier. There is also the danger of 'too many eggs in one basket' where everything is kept local, with risks around regional or national policymaking and localised economic downturns.
There is no one-size-fits-all approach. However, reviewing your options is rarely time spent badly. Investigating alternatives, exploring contingencies, and maximising connections and building relationships in those supply chains will benefit every business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
