The global trade environment has undergone a seismic shift with President Trump’s declaration of a national emergency, the imposition of sweeping tariffs on imported goods and affected nations retaliatory tariffs on U.S. goods. These policies, driven by geopolitical tensions, present a dual-edged sword: increased costs and supply chain disruptions on one side, with opportunities for innovation and growth on the other.
There are undoubtedly risks and opportunities tied to tariffs, but companies can prepare for future growth by strengthening their supply chain strategies today. Thriving in this new trade landscape means taking actionable steps to enhance supply chain design, bolster compliance and resilience, and secure the supply base.
Understanding the Current Tariff Environment
The 2025 tariff regime imposes a 10 percent baseline tariff on all imported goods, with “reciprocal” tariffs targeting trade surplus nations/trading blocs like China and the European Union. Specific sectors face steeper levies, such as tariffs on foreign-made automobiles, steel and aluminum. The administration’s America First policy aims to protect domestic industries, shrink the trade deficit, and generate revenue for tax relief, while increasing U.S. manufacturing capabilities and reducing reliance on countries like China. Recent additions to DOD’s 1260H list, targeting military-civil fusion, also reflect this approach. In addition, China’s subsidies in telecom, semiconductors and electric vehicles have also prompted the U.S. to bolster domestic capacity in critical industries.
Strategic Responses for Businesses
To navigate this landscape, companies must blend reactive (near-term) and proactive (mid-to-long-term) strategies. Reactively addressing immediate challenges, organizations should prioritize critical items and implement contingency plans such as stockpiling materials and diversifying suppliers to manage rising costs and ensuring operational stability. Concurrently, leaders should consider redesigning supply chains, investing in flexible technologies or partnerships, and exploring nearshoring or vertical integration to adapt. Geopolitical and tariff changes may have made divested or overlooked value chain components valuable again. Revisiting these options could drive growth and enhance resilience and innovation.
The Chertoff Group’s three-phase Supply Chain Tariff Mitigation Approach offers a roadmap for companies to address these critical issues:
1. Identify and Assess: Map supply chains to pinpoint vulnerabilities—such as reliance on high-tariff regions or industries—and assess risks using tools like Illumination to uncover gaps and opportunities.
2. Evaluate and Prioritize: Conduct scenario analyses to address high-risk areas (e.g., retaliatory tariffs, material shortages or logistics delays), delivering a tailored mitigation strategy.
3. Implement and Monitor: Execute solutions, train stakeholders and continuously track tariff changes. Integrate risk assessments into vendor assessments and broader frameworks like Third-Party Risk Management (TPRM).
These phases provide a structured foundation for businesses to adapt and thrive. Let’s review three key areas where companies can strengthen their position.
Enhance Supply Chain Design
Tariffs expose vulnerabilities in global supply chains, particularly for companies dependent on imports from heavily taxed regions like China or the EU. To mitigate these risks and prepare for growth, businesses should consider the following:
- Diversify Suppliers: Reduce reliance on single countries or regions by expanding the supplier network.
- Explore Alternatives: Nearshore or shift to domestic production to avoid tariffs.
- Reevaluate Make vs. Buy: Assess whether tariffs make in-house production or vertical integration viable, such as reengineering products to bypass constrained materials.
For example, the 25 percent auto tariff could spur U.S. manufacturing investments, turning short-term costs into long-term gains.
Strengthen Compliance and Resilience
To adapt to a shifting tariff landscape, proactively manage foreign exposure and sub-tier supplier restrictions with these steps:
- Stay Informed: Track tariff, restrictions, and trade policy changes affecting foreign and sub-tier suppliers. Use audits to ensure compliance and minimize risks.
- Adjust Pricing Models: Include sub-tier supplier tariff costs in pricing, balancing absorption and competitiveness to safeguard margins.
- Enhance Visibility and Agility: Leverage technology for real-time sub-tier supplier insights, enabling rapid risk assessment and disruption response.
By nearshoring production or developing domestic manufacturing, technology firms facing the 34 percent tariff on Chinese imports can mitigate costs while building resilience against future trade shocks.
Secure Supply Base
A robust supply base is the backbone of an adaptable supply chain. To strengthen it, companies should:
- Foster Supplier Relationships: Collaborate with suppliers to develop cost-effective solutions that offset tariff impacts.
- Encourage Continuous Improvement: Invest in supplier development and performance monitoring to ensure reliability.
- Leverage Technology: Enhance visibility and agility with tools that track supply chain dynamics in real time.
A secure supply base can not only mitigate disruptions but also positions companies to seize new opportunities as trade conditions and geopolitical risks evolve.
Opportunities Amid Challenges
While tariffs pose undeniable risks such as higher costs, inflation and potential retaliation by affected countries, they also open doors for innovation. The potential for trillions in projected revenue could reduce the deficit or fund tax relief, easing financial pressures on businesses and consumers alike. By incentivizing domestic production, tariffs may spark job creation and reduce reliance on foreign goods, fostering long-term economic growth.
Companies that take decisive action to innovate and adapt will thrive in this new trade era. Whether it’s a Fortune 500 enterprise rethinking global sourcing or a mid-sized firm optimizing local operations, the ability to respond effectively to changing conditions will be key to success. By embracing these opportunities, businesses of all sizes can position themselves to flourish in an evolving trade landscape.
The 2025 tariff landscape is complex, but it’s one the private sector can solve with the right strategies. By enhancing supply chain design, strengthening compliance and resilience, and securing and diversifying their supply base, companies can mitigate risks and unlock opportunities for growth. The Chertoff Group stands ready to guide organizations through this journey, leveraging our expertise in geopolitical and regulatory risk to deliver tailored, actionable solutions.
Geoffrey Kintzer is a senior director in The Chertoff Group’s Geopolitical & Regulatory Risk business. He leads strategy, transformation, enterprise risk and operations engagements with a focus on measurable and sustainable improvements to performance and cost.
