The Trade Policy Tightrope: Balancing Supply Chain Realities

Editor’s Note: Tariffs are an evolving topic. This article was written on March 11, 2025 and may not reflect the most recent developments.

One of the goals of the Trump administration’s aggressive tariff strategy—targeting all goods from Canada and Mexico to China, all imports of steel and aluminum, and a reciprocal tariff policy for countries across the board—is to reinvigorate American manufacturing and bring production back home. But there’s a catch: while tariffs can be signed into law at the speed of a pen, overhauling supply chains takes years, even decades, and demands massive financial investments in infrastructure and skilled labor development. Caught between this lag, businesses face eroded profits, consumers with higher prices, and the U.S. economy with diminished growth.   

For decades, U.S. manufacturers outsourced production in pursuit of lower labor costs and supply chain efficiencies. Over time, countries like China developed advanced production capabilities at an unparalleled scale, becoming the manufacturing center for many of the world’s most sophisticated products. Now, with tariffs disrupting this ecosystem, the question isn’t just whether American companies should reshore — it’s whether they can and how long it will take. 

The U.S. manufacturing sector isn’t equipped to handle an abrupt return without significant investment. For example, industries like semiconductor and EV battery production require cutting-edge factories and highly specialized workforces. 

Policy plays an important role in incentivizing near-shoring investment. The Inflation Reduction Act and CHIPS and Science Act led companies to announce more than $50 billion of investment in new semiconductor, battery, and battery storage production. While a step in the right direction, it will take years before for these factories come online. In the meantime, tariffs apply immediate pressure without a means to relieve it with alternative domestic production. Proposals to undo these policies risk making matters worse.  

And it’s not just about China. Trump’s additional 10% tariffs on Chinese goods, on top of those imposed in February 2025, are compounding pressure on businesses already grappling with supply chain uncertainty. Meanwhile, the 25% tariffs on imports from Mexico and Canada—exempting only energy products like crude oil and natural gas, which are subject to a 10% tariff—could throw a wrench into industries that rely on seamless North American supply chains. 

Take automotive manufacturing: many U.S. automakers depend on Mexican and Canadian factories for key components like engines and transmissions, which routinely cross borders multiple times before the final assembly. The 25% levy on each border crossing has a compounding effect which, in addition to tariffs on underlying commodities such as steel and aluminum, have the potential to significantly increase car prices, with estimates reaching up to $12,000 per vehicle. 

For dealers like David Kelleher, who owns a Dodge and Jeep dealership in Glenn Mills, Pennsylvania, the fallout is already tangible. A customer who previously ordered a Ram truck backed out when the price jumped from $80,000 to $100,000 due to tariff-related cost increases. “Nobody’s gonna buy the truck because it just had a $20,000 price increase,” Kelleher told Fox Business, calling the shifting tariffs “pretty radical.”

The White House’s decision to grant a temporary one-month reprieve to 25% tariffs on goods from Canada offers some relief, but uncertainty remains. Canada has already announced retaliatory tariffs, escalating trade tensions that could slash American exports and erode the global competitiveness of U.S. goods. Furthermore, as I’m writing this, 25% tariffs on all steel and aluminum imports are scheduled to go into effect two days from now. These would further raise costs for construction, consumer electronics, and countless other sectors, squeezing domestic industries at a time when inflationary pressures are already high.

Beyond tariffs, global trade volatility is a growing minefield. Companies find themselves forced to navigate an unprecedentedly fluid landscape riddled with shifting policies, geopolitical unrest, climate disruption, and economic aftermath following the COVID-19 pandemic. To stay ahead, businesses started down the path of diversifying supply chains, hedging risks with alternative sourcing strategies, and adopting digital tools for greater visibility to risks of all kinds, including regulatory changes. Routine disruptions to global material flows have reinforced that a new level of resiliency and adaptability is no longer optional—it’s becoming essential for survival. 

But there’s a second catch: with all the on-again off-again tariff policy, it’s hard for CEOs to know what actions to take. The way things are changing, a good decision today could literally be a bad decision tomorrow. Long-term investments in U.S. manufacturing hinge on stability, but the current climate is anything but predictable. Companies don’t make billion-dollar multi-year decisions on a whim — they need certainty. Even high-profile domestic investments, like Apple’s $500B data center expansion, aren’t necessarily a strategic shift—they were in the works long before trade tensions escalated. The reality is that most large capital investments are on the sidelines, waiting it out. It will stay this way until the maelstrom of back-and-forth tariff uncertainty settles into something resembling predictability.  

Meanwhile, markets, consumers, and the economy at large are caught in the crosshairs. Uncertainty around tariffs, counter-tariff retaliation, and fears of recession sparked another day of market selloff. Last week the Nasdaq crossed into correction territory, dropping more than 10% from the previous high, and the S&P 500 is hot on its heels following its biggest daily drop since December. Uncertainty is reflected in the Consumer Confidence Expectations index, down 9% in February, signaling a recession ahead. Remember, in America, the consumer is the economy, so this is an important bellwether. Looking at the data, this lack of certainty has already bled through to the economy, with the Atlanta Federal Reserve downgrading US GDP estimates for the January-March quarter from an annualized growth of 4.0% a month ago to a remarkable contraction of 2.8%. If that didn’t get your attention, probably nothing will.  

As CEOs wait for the tariff roller coaster to end and a return to certainty, one important thing to do is to identify the parts of their global supply chains most at risk of escalating tariffs, keep your finger on the pulse by closely monitoring changes to the regulatory landscape, and establish means to connect tariffs and retaliatory actions to production and service commitments so as not to be blindsided if things quickly spiral into a full-fledged trade war.