Tariffs are Just the Latest Crisis: Building Supply Chain Resilience in a Perma-Crisis World
So, The Sky Is Falling, AGAIN? - Tariffs Take Center Stage
The news is loud, the headlines are dramatic, and the sentiment is familiar: tariffs are going to collapse global supply chains. AI chip bans, retaliation threats, plant relocations — the current surge in tariffs, particularly between the U.S. and China, is being treated like a bolt from the blue. For many, it feels like a first-time event, an unprecedented risk that threatens to undo years of growth.
But let us be clear: tariffs are just the latest chapter in a 30-year saga of supply chain disruption.
Disruption Is not New: A Look at the Last 30 Years
If we look at the globalization era which was ushered in by the Bretton Woods constructs at the end of WW II, we have seen an increasing interconnectivity of global economies over the past 80 years. The result was a large increase in economic advancement and one can measure this by the amazing decrease in the percentage of people living in severe poverty – from 60-70% in the late 1940s to a historic low of under 10% today (which means over 1 billion people now have the means to obtain next week’s meals).
Sure, we had shocks to the systems, but most were regionally based and due to local wars/conflicts. The exception here may be the oil embargos of the 1970s which had global ramifications. However, over the more recent 30-year period, there has been a significant increase in the number of Supply Chain disruptions, actually over 50% more! Let us take a closer look at these.
Over the past three decades, global supply chains have been rocked by seismic shocks that rival or exceed the disruption from tariffs. Consider the seven most significant events:
2008 Global Financial Crisis: A demand shock that wiped out suppliers, tightened credit, and tested the solvency of entire industries.
Fukushima Earthquake and Tsunami (2011): Exposed how concentrated Japan-based supply chains were for critical components, especially in automotive and semiconductors. (Side note - the author spent one sleepless night in Narita Airport on 11-Mar-2011!!!)
U.S.-China Tariff War (2018–Present): Policy-driven disruption that reconfigured tech and industrial sourcing and forced massive supplier relocations.
COVID-19 Pandemic (2020–2022): A once-in-a-century global health crisis shut down factories, ports, and borders, paralyzing everything from electronics to pharmaceuticals.
Suez Canal Blockage (2021): A single ship halted $9 billion per day of global trade, reminding companies of infrastructure fragility.
Russia-Ukraine War (2022–Present): Disrupted energy, metals, and agriculture in ways felt from Berlin to Beijing.
Red Sea Disruptions from Israeli-Hamas Conflict (2023–Present): Armed conflict and Houthi attacks on shipping have disrupted the Suez-Red Sea shipping corridor, forcing global rerouting through the Cape of Good Hope. This has led to longer lead times, increased freight rates and insurance premiums, particularly for Europe-Asia routes.
Comparative Magnitude: While tariffs impact pricing and trade flows, COVID-19 and Fukushima caused complete stoppages. The Suez incident revealed route risk. The financial crisis showed us what happens when the system's liquidity evaporates. Tariffs are disruptive, but they are not uniquely so. They are another form of pressure in an already unstable system.
And all too often, after six months of “things are getting back to normal,” we forget to look at contingencies, redundancies, and risk mitigation in our supply chains! And then boom, the next event hits and supply chain resiliency is once again top-of-mind.
Why Is This Happening More Often?
To understand the frequency and complexity of today’s disruptions, we need to examine what has changed since the end of World War II:
Globalization and Interdependence: Post-WWII growth relied on globally distributed manufacturing. A part made in Vietnam may be assembled in China, shipped to Germany, and sold in the U.S. Here are some facts showing changes from the 1960s to the 2020s (for those of us who can’t remember that far back):
Global Trade as a % of World GDP has increased from ~24% to ~ 60%, or 2.5 times increase
Number of Multinational Corporations from ~7,000 to > 100,000, or 15 times increase
Containerized Cargo volume from ~150,000 TEUs (Twenty-foot Equivalent Unit – which has been used since 1956 when containerization was first standardized) to ~400,000,000 TEUs, or 4000 times increase
Daily Value of Global Trade from ~$2B to >$25B or > than 12 times increase
% of Manufacturing Value Chain which is Cross-Border from <20% to > 50% or 2.5 times increase
Truly some amazing figures
Geopolitical Fragmentation: The world is no longer unipolar. Rising protectionism, rival economic blocs, and national security policies are reshaping trade. There is much more stability when one or two powers set all the rules.
Just-In-Time (JIT) Models: Originally lauded for efficiency, JIT eliminated buffers and made entire networks fragile. Minimal inventory meant minimal tolerance for disruption.
Climate and Catastrophes: Natural disasters (e.g., hurricanes, floods, pandemics) are more frequent, more extreme, and less predictable.
Digital Complexity: While technology enables visibility, it also adds vulnerability through cyber risk and digital dependencies. Recent ransomware and systems outages have occurred in the past 12 months.
In short, supply chains are not just more global. They are more complex, more interdependent, and more exposed than ever before.
A Structured Playbook for Building Resilience
Reacting to the latest crisis is no longer enough. Companies must proactively build supply chains that are resilient by design. Here is a five-part framework to follow:
1. Diversify Sourcing and Geography
Avoid over-reliance on a single supplier or region.
Adopt "China+1" or "China+many" strategies.
Develop alternate suppliers and qualify them before you need them.
2. Invest in End-to-End Visibility
Deploy control towers or real-time tracking systems.
Extend visibility beyond Tier 1 suppliers to Tier 2/3.
Use predictive analytics to monitor risks across transportation, geopolitics, and raw materials.
3. Adopt Scenario Planning and Simulation
Run simulations for tariff hikes, export bans, and regional conflicts.
Test how quickly your supply chain can recover (Time to Recovery metrics).
Create playbooks for different disruption types.
4. Balance Efficiency with Redundancy
Move away from pure JIT toward "Just-In-Case" for critical inputs.
Invest in strategic buffers and dual sourcing where it matters.
Recognize that a little waste may prevent a lot of loss.
5. Digitize and Automate for Agility
Use AI and machine learning for demand sensing and dynamic planning.
Automate procurement, inventory, and logistics decisions to respond in real time.
Build integrated planning processes across finance, operations, and supply chain.
Companies like Cisco, Nestlé, Volkswagen, and PepsiCo have all implemented variations of this playbook to reduce exposure and recover faster than competitors.
Do not Wait for the Next Crisis
Tariffs are not an anomaly. They are part of a broader, accelerating trend of supply chain dislocation. The companies that will thrive are not those that dodge the current bullet but those that build immunity against the next.
The question is not whether you will face another disruption. It is when, and how prepared you will be when it comes.
If your organization is still using spreadsheets to manage suppliers, is single threaded on one vendor or geography for your most crucial components, or relying on the same logistics partner you used five years ago, it is time to act. Not out of fear, but out of strategic necessity.
Resilience is no longer a nice-to-have. It is a competitive advantage.
By Duane Kotsen, Partner
** Please join me on May 8th at 12:00EDT to discuss the impacts of Tariffs on global supply chains and how companies can apply the latest AI technology to help navigate through these challenging times. Supply Chain expert Scott Saunders will join the event, which will be moderated by Deepak Mittal, CEO of NextGen Invent. You can register for the event here:
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