How trade wars impact Supply Chains
The trade war has created a wartime-like environment for global supply chains, demanding rapid and radical adaptation from companies and institutions alike. This adaptation spans processes, systems, technologies, talent, and crucially, infrastructure investments - fueling the closed-loop cycle of supply chain transformation viciously and driven by protectionism and inefficiency.
Supply chains have mass, movement, and inertia - relying on infrastructure - and, despite connections between systems occurring at the speed of light, their flows have long cycle times.
Although the economy is based on statistical phenomenology, supply chain efficiency requires forecast errors to be contained in order to reduce redundancies and dependencies.
When we go through a period of war, assumptions and conditions are made under the presumption that the theater of war does not unfold on a weekly or daily basis. When there is a war in Europe, the theater and its conditions are assumed and its specific parameters become immediate operational constraints. Markets are partially disrupted, supply chains are restructured based on new origins, sometimes incorporating new materials, services, and energy sources.
When economic frameworks allow the continued circulation of goods, materials, and access to territories, but price and availability forecasts vary by more than 50% over undefined periods, supply chains are compelled to adapt to the edge of operational feasibility. This comes at the cost of spurious investment, including rapid relocation of capacities, new suppliers, new technologies, and new processes.
The greatest challenge in this new landscape lies in fostering cooperation, collaboration, and strategic partnerships among economic players and institutions across supply and value chains.
In times of peace, business relationships are typically shaped by efficient products and transactions, aligned with marketing strategies and capital. In times of conflict, however, strategic alliances and operational priorities come to the forefront.
The current tariff war is forcing companies and institutions outside the U.S. to forge new partnerships and make investments that would have been unlikely—or even unthinkable—under normal market conditions. Inside the U.S., it’s leading to spurious investments, such as expanded warehousing capacity, aimed at supporting speculative policies rooted in the “poker economics” of the current administration.
This also marks a shift away from the global paradigm of “designed in California and made in China” toward “designed in Shenzhen/world and made in the U.S.”, financed by tariffs rather than following market logic. However, the expected benefits may never materialize—unless, of course, economic performance was never the true objective.
Brazil provides a compelling case in point.