Prioritize Resilience Over Costs to Weather Trade Uncertainty

Trade uncertainty is back—just as memories of pandemic-induced supply chain shocks had begun to fade. Now, the Trump administration’s tariffs and threats of tariffs are again upending the global trading landscape.

Geopolitical tensions, variable tariff policies, and natural disasters continue to threaten fragile trade routes, driving up shipping costs and consumer prices. This isn’t a new phenomenon—it’s a long-term trend. A McKinsey study noted the frequency and severity of supply chain disruptions has been increasing for decades.

The public and political consensus on global trade also has shifted dramatically. The pandemic exposed vulnerabilities in lean, globalized supply chains that prioritized efficiency over resilience. Beyond the strain on consumers, dependencies on foreign suppliers revealed national and economic security risks in critical sectors, from semiconductors and pharmaceuticals to batteries and defense-related materials.

China’s dominance in key markets, such as critical minerals essential for everything from cell phones to defense applications, demonstrates how trade dependencies can be leveraged in geopolitical disputes. Tariffs are no longer just a trade tool; they are now a core component of US foreign policy.

The era of ever-expanding free trade appears to be over. Businesses must adapt accordingly.

Know Your Risks

Many companies have enhanced their supply chain visibility to identify risky suppliers and customers. This critical first step not only reveals chokepoints but also enables more efficient decision-making and operational efficiencies. However, some industries are reverting to pre-pandemic historical sourcing and inventory patterns, prioritizing cost over resilience. This is short-sighted.

Balancing cost-efficiency with risk management is always a challenge, but the Trump administration’s tariff policies serve as a stark reminder that business models based on static trade assumptions can be upended overnight. For example, the administration has moved to end the US’ de minimis exemption that allows small packages valued under $800 to enter from China duty-free.

Many consumer product companies, from e-commerce giants to small businesses, have built models around this de minimis exemption, shipping directly from overseas factories to US consumers without import taxes. If the exemption ends as planned, affected businesses will face a dramatically different cost structure and administrative burden.

Invest in Resilience

Crisis-proofing supply chains has never been more critical. This requires going beyond traditional retrospective metrics such as supplier reliability and transportation delays. Robust stress testing and scenario planning can help businesses prepare for simultaneous shocks across different parts of the system.

Businesses can look to tools that quantify the financial and operational impact of supply chain disruptions to proactively identify vulnerabilities and hidden dependencies before they result in widespread disruptions.

Toyota Motor Corp., for example, overhauled its supply chain after the 2011 Tōhoku earthquake severely disrupted production. The company mapped its entire supply network, identified vulnerabilities, and built redundancies into key supplier relationships. These measures helped Toyota weather subsequent crises more effectively than many competitors, including the pandemic-induced global semiconductor shortage.

When done well, stress testing reveals weak points in the system and allows companies to strengthen their resilience through supplier diversification, redundancy, inventory management, or more agile manufacturing methods. Companies that invest in these strategies can adapt more quickly to unforeseen disruptions, ensuring greater long-term stability.

Tell Your Story

Governments don’t run supply chains; companies do. Before Covid-19, the US government—outside of the military—had limited understanding of supply chains, let alone the ability to craft policies to strengthen them. Progress has been made since 2020, but supply chains remain highly complex, and policymakers can’t anticipate the full effects of their decisions across all industries.

As trade policies shift, businesses must engage with policymakers and communicate the effect of these changes. Data-driven insights about how trade rules affect market share, workforce stability, and operational costs are invaluable to decision-makers.

Communication can be formal or informal, directly or through industry associations, or even stated publicly to investors. In the case of the highly integrated North American automotive supply chain, for example, Ford Motor Co. CEO Jim Farley told investors that 25% tariffs on Mexico and Canada would “blow a hole in the US industry that we’ve never seen.”

While it remains unclear whether, and how, the Trump administration will consult businesses on tariff policies, companies must ensure their perspectives are heard.

New Trade Reality

Trade volatility is no longer an exception—it’s the rule. Companies that prepare for this reality will be better positioned to navigate today’s uncertainty.

By prioritizing supply chain visibility, investing in stress testing, and actively engaging with policymakers, businesses can build resilience and maintain a competitive edge in an unpredictable trade environment.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Monica Gorman is a former senior White House official and a managing director at Crowell Global Advisors, where she advises clients on global trade, supply chain resilience, and industrial policy.

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