The first few weeks of President Trump’s second term in office have been eventful – with 25% tariffs on Canada and Mexico introduced then suspended, and an additional 10% tariff imposed on imports from China (at the time of writing).
However, Trump 2.0 is just the latest in a sequence of disruptive events businesses have had to navigate – including the financial crisis, Trump 1.0 and Covid-19. And the constant to and from of turbulence will continue into the foreseeable future. Therefore, by redefining supply chains as part of a level-headed, long-term strategy, it’s possible to thrive instead of just survive in the next four years and beyond.
Supply chain disruption in 2025
Trump’s trade wars are forcing businesses to seriously rethink their sourcing strategies. This process will lead to short-term cost increases by driving the underlying need to control your own destiny, and long-term impacts which will undoubtedly reshape global trade and logistics.
How tariffs affect manufacturing costs
The main target of Trump’s tariffs is China (to the tune of $360 billion). And this has rocked supply chains – especially for verticals heavily reliant on Chinese manufacturing, such as electronics, automotive and consumer goods.
Suddenly, companies depending on just-in-time inventory models and highly integrated supply chains have faced price increases and delays in a deeply uncertain environment.
And organisations that previously relied on seamless cross-border trade with Canada and Mexico now face increased costs and logistical complexities. For example, the US automotive sector, which relies on components often crossing borders multiple times during production.
Supply chain resilience strategies
Untangling cross-border trade during Trump 2.0 can certainly feel complex. However, finding a lasting solution to supply chain resilience now will arm forward-thinking companies with a powerful competitive advantage in future.
China + 1 strategy
Trump 1.0 already caused a sea change in global supply chains, exposing their fragility and catalysing a shift to diversification. One positive adaptation many companies have since maintained is China + 1 – put simply, reducing their dependence on China. And this solid long-term resilience strategy can continue to reduce supply chain risks and vulnerability as Trump 2.0’s trade wars unfold.
Companies yet to adopt China +1 may be nervous doing so, given the trade behemoth’s sophisticated logistics networks, low costs and entire value chains. But nevertheless, a steady and sensible retreat should prove sagacious in the long term.
Supply chain contingency strategies: redefine, don’t redesign
The conversation around supply chains has evolved from efficiency-driven models to resilience-focused strategies. Consequently, the prevailing notion of transitioning from ‘Just-in-Time’ to ‘Just-in-Case’, the fragmenting of supply sources, onshoring manufacturing back to the US and nearshoring to neighbouring countries are all strategies businesses are using to safeguard against disruptions, while accepting the attendant increase in costs.
However, this shift has not been without its pitfalls. Many companies have overemphasised buffering against potential crises, meaning inflated costs and inefficiencies which were initially justified must now be reassessed.
Redefining supply chains (and reducing risk through diversification)
Despite the challenges, with judicious planning, onshoring and nearshoring can bring stability and sustainability benefits. Investing in state-of-the-art equipment with high levels of automation – and reduced labour requirements – may look like a high capital cost. Nevertheless, compared to the risk of wage inflation and labour availability, it could still be beneficial for some of your supply chains. And compared to offshoring, the only differentials are now land and energy, which are often a much lower percentage of the profit and loss.
However, to sustain success it’s essential to take a holistic view – integrating logistics, manufacturing, procurement and other components. Rather than viewing these elements in isolation, they must work together harmoniously for optimal results, carefully counterbalancing necessary trade-offs.
Diversifying your supply or manufacturing base should also be based on product segmentation. This means you won’t necessarily shift all of your categories to near or onshore, because you have to carefully calculate which products or categories the strategy best fits. For instance, it’s easy to move sewing machines elsewhere for apparel manufacturing, but not so simple moving to another country when you have mold injected manufacturing machinery and sophisticated techniques.
And taking a step back, it’s also wise to carefully review your product development process and bill of materials, to work out where you could source alternative raw materials or inputs at each stage. Provided alternatives don’t compromise quality, this allows you to maintain your product integrity and value proposition while reducing cost of goods sold.
Last but by no means least, tax has long played a significant role in logistics network design and analyses of the best routes to market. But now it is a central element, requiring studies to be conducted jointly between businesses’ supply chain teams and their tax and legal departments. There are certainly optimization opportunities, but they require agility in execution. This is illustrated by the fact we are currently working with clients considering switching back to direct supplier flows, using warehouses located in other countries, or switching their warehouses to Free Trade Zones.
Self-healing supply chains: move with the times
There’s no easy answer to future-proofing your supply chain. But perhaps one concept will stand the test of time: the idea of a self-healing system.
As supply chains evolve, leveraging new technologies like AI and advanced analytics can enhance visibility and responsiveness, thus turning adaptable, self-healing supply chains into a competitive advantage for early mover businesses.
The self-healing supply chain adjusts and optimises by rebalancing, prioritising or resequencing events for better outcomes. And while human oversight may be necessary for approvals, it predominantly operates on data driven automation.
For maximum effectiveness, the supply chain must be well-integrated across suppliers and customers, functioning cohesively like a single organism. A self-healing system requires a nuanced approach to supply chain management, where physical elements such as the length of chains, flow paths and critical stock points are constantly evaluated and balanced.
In this way, the muscle memory of future-proof supply chain management is built up – augmenting specialist team capabilities with powerful systems, generative AI and machine learning. Adapting dynamically, it prioritises needs and optimises responses to satisfy customers and enhance operational efficiency.
Next steps
Businesses need to take a holistic view to solve the complex challenge of navigating global supply chain pressures. Therefore:
- Consider the unique needs of your operations, suppliers and customers
- Ensure data connectivity and understanding across all points
- Take informed decisions, adjust needs and rebalance resources, enabling the entire supply chain to adapt and self-heal
This approach requires collaboration – with the entire value chain, from raw materials to end customers, interacting and responding effectively. It’s no easy task. But remember: the post-pandemic era already demands a radical rethinking of supply chain strategies, so the speed of change in Trump 2.0 has merely accelerated the need for more responsive and cost-effective models. Indeed, the self-healing supply chains you engineer today will soon be battle-tested by geopolitical events that transcend Trump. Drawing on human expertise combined with intelligent automation, they’ll cope with:
- Ongoing tensions in the Middle East and Red Sea
- The Ukraine War (and the trade implications of its settlement)
- The looming threat over Taiwan
Not to mention recurring ocean freight bottlenecks, global port congestion problems, strategic sourcing conundrums, and environmental and sustainability pressures.
There are always challenges on the horizon. But resilient, self-healing supply chains won’t collapse under pressure. Instead, they’ll roll with the punches, intelligently anticipating each blow and counterattacking with confidence.
This is how future-focused businesses will flourish – through Trump 2.0 and beyond.
For expert guidance on navigating tomorrow’s world, contact Argon & Co today.
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