In light of the evolving trade policies and tariff considerations during President Trump's second term in office, industries should prepare for possible disruptions in their supply chains. Consistent focus on trade deficits and reciprocal tariffs and the resultant speed at which countries can address these varies significantly. It also means that countries with large trade deficits are exposed. What will the impact be for U.S. industries with supply chains that are dependent on these large trading partners? Reacting quickly to changes in policy or imposition of tariffs is extremely difficult, so scenario planning and building a flexible supply chain that can react to policy changes is imperative.
Which Sectors Have the Most Exposure?
The level of exposure to any source nation varies significantly. For example, apparel, machine parts and kitchen appliance industries are highly exposed to APAC countries. Despite some diversification, on average 84% of these shipments are sourced out of Asia followed by 10% from Europe. This concentration highlights vulnerability and exposure to risks of changing trade policies that can greatly alter supply chain economics and underscores the urgent need for creating alternatives to provide supply chain diversification.
How Concentrated is Your Supply Chain – Are You At Risk?
Building a supply chain that minimizes the impacts of unpredictable trade policy requires thoughtful diversification. Historically, concentrating on key strategic suppliers has had benefits – but it comes with significant risk today. Quick pivots in response to tariffs could save millions of dollars and valuable margin points while creating competitive advantage. Recent surveys show that only 26% of companies list reconfiguring supply chains as a top priority – the time to act is now. The average company has 3,000 suppliers per $1Bn of spend, in which 80% of that spend dedicated to ~170 suppliers... how exposed is your supply chain?
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