In 2025, we are in unchartered territory. The new US administration under President Donald Trump has taken an aggressive stance on tariffs, which have been implemented against every nation. It's an tariff policy which is certain to shake up global trade.
A memorandum titled 'Reciprocal Trade and Tariffs' released by the new administration confirmed the US administration would be fighting what they perceive to be unfair trading practices from other nations. A minimum 10% baseline tariff has been applied, with many nations subject to much higher rates.
You can see the latest information on US import tariffs, including specific tariff rates applied to individual countries, on our regularly updated news page here.
Trade wars create instability in international trade, leading to unpredictable costs and disruptions. They tend only to escalate. Businesses trading internationally need to understand the full range of consequences and develop strategies to mitigate.
"To me, the most beautiful word in the dictionary is ‘tariffs’, it's my favourite word... We’re going to bring the companies back. We’re going to lower taxes for companies that are going to make their products in the USA. And we’re going to protect those companies with strong tariffs."
US President Donald Trump during the election campaign
This article outlines the key impacts of a trade war on supply chains, offering practical approaches to minimise disruption and even outlining the opportunities they can create.
Impact of a trade war on supply chains
Increased costs directly from the tariffs
The first and most direct impact of a trade war is an increase the cost of imported goods. Companies dependent on raw materials or components from tariff-targeted countries will see a rise in operational costs.
This can squeeze margins or the higher costs may be passed on to consumers, potentially reducing demand and impacting revenue. Over time, repeated cost increases can erode competitiveness, especially for businesses in highly competitive markets, where cost is a key purchase driver.
Disruption to established logistical routes
Shifting tariffs can force importing companies to rethink logistics and shipping routes. In scenarios where tariffs become unmanageable. Traditional supply lines may no longer be viable, forcing businesses to establish new, less efficient or less well-served routes.
The additional time and costs associated with route changes can disrupt supply chains in the short term. They have to be managed very carefully to avoid inventory shortages or delays in fulfilling customer orders. Ports and logistics hubs may also face congestion, as many businesses look for new transit points. Space can be hard to find as shipping schedules take time to adjust.
Uncertainty and volatility
Uncertainty is the only certainty in the current trading environment. It's a time when long-term planning is extremely difficult. Businesses with long-term contracts may face sudden changes in costs, making forecasting and financial planning almost impossible.
Additionally, uncertainty can impact investment decisions, as businesses become more cautious about capital expenditure and expansion plans.
Pressure on supplier relationships
Established supplier relationships may be strained as businesses are forced to pivot to avoid tariffs. This disruption does threaten to cause quality issues if new suppliers don't initially meet quality standards. It's often very difficult to shift suppliers, so this can be a real problem. But it's also completely unviable for a company to use a supplier if it's making them uncompetitive on price.
In some cases, businesses may need to invest in supplier development to maintain quality, which only adds further costs. Below, Nikki Gee the Account Director at Rocket Branding describes the challenges she faces when changing supplier for her merchandise company.
“Because we’re a member of ISO, everything has to be audited. Every factory must be checked. If we want to sell product, we have to audit our factories, we have to make sure the material is compliant and certified.”
Nikki Gee, Account Director, Rocket Branding
Exchange rate volatility
Trade wars can destabilise currencies making international transactions more complicated and potentially more expensive. Businesses may need to assess their currency risk alongside the potential impact of tariffs directly.
Exchange rate fluctuations can obviously erode profit margins and complicate pricing strategy. Particularly for businesses trading in multiple currencies.
This is true in freight transactions also, which are always priced in dollars. However, recent moves from the US administration has caused volatility in that currency.
Considerations for mitigating the disruption caused by a trade war
Diversify your export markets
The best way to build defence against a trade war and tariff disruption, is to diversify your export markets. Finding new places to sell your goods not only means you're trading with nations who aren't impacted by tariffs, but also generally increases your resilience against economic shocks. A highly diversified portfolio leaves you less exposed to a breakdown in one particular trading relationship.
The fact is, tariffs disrupt existing trading relationships, meaning there is opportunity. Businesses around the world will be looking for new suppliers where goods are tariff-free. It's a time where there's lots of businesses looking for new trading partners. In those environments there is undoubtedly scope to grow.
"Whilst the threat of a wider trade war between the US and partner nations looks likely, it presents the ideal opportunity for UK exporters to look to other markets. European, Australian and Canadian businesses could be looking for new suppliers away from the US whilst the administration implements these aggressive tariff rates."
Liam Launders, Head of Sales, WTA
For example, in 2024 the US exported $144bn worth of goods to China. Now that China has introduced retaliatory tariffs of 34% on US goods, those imports just got much more expensive for Chinese companies. Therefore, it's likely thousands of businesses in China, previously supplied by the US, will be looking for new suppliers.
In this instable world, countries where a stable political relationship exists such as between the UK, EU, Canada and Australia could be prime opportunity for exporting expansion.
Diversify your suppliers
Diversifying your own supply lines can further protect from tariff disruption from a single nation. By sourcing products from different countries, you are more protected from tariffs introduced against one individual state. Furthermore, building a multi-supplier network will add flexibility and resilience to your logistics against other types of disruption.
Basically, the approach here is if there is disruption impacting one particular trade lane, it's less threatening to overall operations, as any one trade lane makes up a smaller overall percentage of operations. We have written a more detailed article on the benefits of supplier consolidation vs diversification here.
Conducting supplier audits and building long-term relationships with new partners will help maintain quality and reliability.
Revaluate your customs processes and commodity codes
Changes to tariff policy present the perfect opportunity to revaluate your commodity codes and customs process. What we mean here, is by looking for efficiency savings you can cut overall costs, consequently you are less impacted by tariffs.
"In the case of these US tariffs, there are some mitigations for products which have been assembled using goods sourced from the US. So if that applies to your goods, it's worth investigating.
Alternatively, there are usually plenty of customs optimisations that can be found. Whether that's with better use of automation, using bonded warehousing or inefficient document processing."
Jamie Craig, WTA Customs Consultant
There are endless opportunities to be found in revaluating customs processes. By optimising documentation practices, using automation, and ensuring compliance, businesses can avoid penalties and speed up clearance times.
Additionally, making use of customs special procedures like inward processing or customs warehousing can defer or even eliminate tariff payments when goods are processed or stored temporarily.
Efficient customs management not only saves time and money but also improves supply chain resilience in the face of tariffs.
Front-loading or stockpiling essential goods
For goods where alternative sourcing is not possible, consider increasing inventory levels. This strategy can buffer against short-term disruptions while longer-term solutions are explored. Conducting a cost-benefit analysis to weigh the costs of increased inventory against potential revenue loss from shortages is critical.
Lobbying and advocacy
Campaign to industry bodies to lobby against harmful tariff policies. Collective industry action can sometimes influence governmental decisions or lead to exemptions. Staying informed about policy changes and participating in consultations can also give businesses a voice in the decision-making process.
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Whether you are the victim of direct tariffs or not, global supply chains are interconnected. The fallout from a widespread trade war will not spare many businesses. Proactive planning, export diversification and risk management are essential to navigating these turbulent times.
As usual, long-term success will depend on building resilient supply networks and maintaining the necessary flexibility to adapt to changing trade policy. In doing so, you can protect your operations from unpredictability.
