Supply chains are struggling with a “sea change” of swiftly changing tariffs today, and stock markets were swamped on Thursday with a 1,500-point plunge in value as U.S. investors scrambled to find ways to offset the cost of the new import taxes.
The “reciprocal” tariffs covered such a long list of nations that entrenched supply chains will find it difficult to find new distributors or manufacturers in alternate countries, analysts said. “President Trump’s reciprocal tariffs are unprecedented in both their scale and their scope,” Chris Rogers, Head of Supply Chain Research for S&P Global Market Intelligence, said in a statement. “Corporate supply chain managers are likely to incorporate the new duties into their pricing and cost negotiation strategies in the near-term, with options to reshore sourcing limited due to the sheer breadth of coverage of the duties.”
The latest tariffs also cover a wide range of goods, but they could bite hardest on consumer goods, where importers, retailers, and shoppers will likely see rising prices as U.S. companies pass along the new added costs to American consumers in the checkout aisle. “The exclusion of sectors including metals, chemicals and autos – which will have their own tariffs – means the supply chains most affected will be finished consumer goods including clothing, toys and smartphones which face additional duties in the order of 27 to 30 percentage points on a weighted average basis,” Rogers said.
Overall, the U.S. administration’s new reciprocal tariffs will add 10 percentage points to import duties from all countries except Canada and Mexico with immediate effect. And further country-specific rates will be applied with a trade weighted-average of 16.8 percentage points, according to S&P Global Market Intelligence. The 10-percentage-point and additional rates will add around 20.5 percentage points to the average U.S. import duty and $458 billion to U.S. importers’ costs in a full year based on 2024 imports.
Another aspect that makes the new April tariffs difficult for supply chains to digest is that they are “much more extreme” than most were expecting, according to Tony Pelli, director of supply chain security & resilience at BSI consulting. “Companies anticipated higher tariffs on China and a few others, but not to this extent on where they are trying to diversify away from China, like India, Vietnam, or Cambodia. The only regions left relatively unscathed are Latin America and Africa,” Pelli said.
There is high market uncertainty whether the new tariffs are a temporary bargaining chip or if they will stick. Some analysts suggest the April tariffs are just a feint by the White House to gain negotiating leverage on other issues such as border security over immigration and illegal drugs, pointing to Trump’s quickly postponed February tariff threat on Canada and Mexico. “In the longer term, if these tariffs hold, it could mean major changes for global supply chains, but that’s a big “if”. For now, companies will likely rush to assess where they are most affected, and we may start seeing price increases within a few weeks as current inventory runs out,” Pelli said.
But even if the latest tariffs are soon cancelled, they have already upset global supply chains that are tuned to optimize speed and price, not flexibility and adaptability. For example, Georgia’s Port of Savannah today reported its busiest March ever, pointing to Trump’s tariff threats as a major cause. “The rate of growth was due in large part to two factors: Cargo coming back from the U.S. West Coast after the completion of labor contract negotiations, and second, customers front-loading orders to avoid new tariffs,” GPA President and CEO Griff Lynch said in a release.
By the numbers, the Port of Savannah’s container trade increased by 22.5% or 98,000 TEUs compared to the same month last year. And in intermodal cargo, the Port of Savannah set an all-time record of 52,645 containers moved by rail, an increase of 17% over the same month last year.
