Supply chains have long been treated like clockwork. A car assembled in Slovakia might carry batteries from South Korea, semiconductors from the Netherlands, and rare earth metals from China, all converging at the factory door. Likewise, a cotton shirt stitched in Portugal may owe its buttons to Italy, its fabric to Turkey, and its zips to China.

All of these interdependent pieces that make up an organisation’s product reflect a global business reality we’ve spent decades perfecting: build wherever it’s most efficient, source wherever it’s most competitive.

But the past few years have taught us something: efficiency is fragile. And one tariff, one renegotiated trade deal, or one political pivot is all it takes to turn “just-in-time” into “just-in-case.”

The question is no longer whether your business is global. It’s how well it understands its supply chains, partnerships, and cost models.

What are tariffs – and why do they exist?

At a glance, tariffs are border taxes charged on imports as they enter a country, most often as a percentage of a product’s value. But in practice, they’re something else entirely.

From Britain’s Corn Laws to America’s Smoot-Hawley Tariff, Tariffs have shaped global influence. In 1901, President McKinley, who oversaw the period of American Expansionism, asked, “If perchance some of our tariffs are no longer needed… why should they not be employed to extend and promote our markets abroad?” 

Tariffs have historically been used to shield domestic industries and push them to compete harder, offering both protection and provocation as part of a broader political playbook, “To me, the most beautiful word in the dictionary is tariff, and it’s my favorite word”, said Donald Trump in 2024.

As globalisation has driven integrated logistics, the consequences move quickly. According to the OECD, over 70% of world trade involves intermediate goods, components used in other products, which means tariffs often affect not just imports but also exports indirectly. 

They are signals. Strategic tools. And for business, a quiet rewiring of geography, value, and trust.

Are tariffs bad for business? 

For some businesses, tariffs present an opportunity. 

According to recent research, nearly half of small businesses view tariffs as a moment to pivot – encouraging a shift towards domestic suppliers and reducing dependence on complex international supply chains. For smaller firms, it’s as much about agility as it is about economics. As Terry Scuoler CBE puts it, “UK manufacturers may now be prepared to trade off an element of cost in order to guarantee… sustainability and security of supply.” 

Local doesn’t mean low-cost or low-risk

A move that makes sense operationally might fall flat with customers or create new gaps in service or compliance. And many ‘local’ supply chains still lean heavily on global inputs, the reality is messier than it looks. Tariffs might prompt a rethink, but not every reroute delivers.

Global organisations across automotive, consumer and manufacturing have spent years building supplier relationships that also deliver something less visible – data. Carbon reporting, labour practices, water use, human rights compliance – all of it depends on shared, trusted systems. “When those links are broken, it’s not just goods that stop moving,” notes Deloitte. “The flow of critical information is interrupted too.” With new suppliers come new terms and, as such, a new wave of ESG data agreements.

Targets don’t pause because trade routes change. 

Under frameworks like the Science Based Targets initiative (SBTi), companies are expected to account for, and reduce, supply chain emissions. Many do this by encouraging or requiring suppliers to set their own climate goals. But if those suppliers change, those agreements often reset. As CDP’s 2024 Global Supply Chain Report warns, “Over half of companies cite supplier engagement as the biggest obstacle to decarbonisation.” The reputational risk of missing targets, even for reasons beyond a company’s control, is real.

Compliance: simpler or riskier?

Tariffs that lead to onshoring or regionalising supply chains could simplify compliance, particularly around working conditions, labour laws and anti-corruption. When you source from markets with similar standards, you avoid complexity and reduce ethical risk. But it’s not guaranteed. Where critical materials or niche expertise are only available in less regulated markets, some firms may look the other way. 

Tariffs are not a solution. But they are a signal. For businesses willing to listen, they’re prompting questions that go beyond the bottom line, about transparency, trust and what sustainable growth really looks like.

As Mercedes-Benz CEO Ola Källenius puts it: “Global production and cross-border trade are increasingly circular.” The challenge now is building systems that can flex with that.

What do tariffs mean for business culture?

Tariffs are often discussed in terms of cost and consequence. But for globally-minded businesses, they also strike at an operating culture that has long assumed mobility and optionality. For companies built on decades of global integration, the reintroduction of trade barriers, symbolic or otherwise, forces a reappraisal of scale.

As Colin Browne, CEO of Cascale (formerly the Sustainable Apparel Coalition), puts it: “Consumer goods companies cannot afford to overlook sustainability amid short-term trade concerns. Trade policies may shift, but the need for decarbonisation and equitable labour practices is non-negotiable. True business resilience comes from long-term thinking and a commitment to sustainable operations.”

The difference between legacy and adaptability is becoming more visible:

• Nike built a sneaker empire on cost-efficient overseas labour, with over half its footwear now manufactured in Vietnam. When the US floated a 46% tariff on Vietnamese imports, the exposure was immediate. The brand’s share price fell to a seven-year low. Heavy reliance on Vietnam, once seen as a hedge against China, has instead revealed a fragile concentration of risk. Production cannot shift quickly, and consumers may soon face higher prices.
  
• On, meanwhile, took a different path. As Tortoise Media’s Sensemaker wrote to their audience in April “While Nike stumbled, new brands sprinted.” This Swiss performance brand has prioritised innovation, communities, and specialist products over mass-market efficiency. Its smaller, more deliberate supply network makes it less sensitive to trade shocks. While Nike was cutting costs and scaling marketing, On was developing spray-on shoes, investing in research and development.

What do tariffs mean for decision making? 

The cost of tariffs isn’t always in the tax itself. Often, the deeper loss lies in uncertainty.

With the wave of 2025’s tariffs thus far, “most business leaders are adopting a ‘wait and see’ approach to the tariffs,” notes Anna Leach, Chief Economist at the Institute of Directors. Across the mid-market, recent research shows that ambiguity around future tariff policy delays decisions on hiring, investment, and product development – affecting as much as 7% of potential revenue. Not because the outlook is negative but because the outlook is unclear. 

That lack of clarity can reshape and slow timelines, whether it’s expansion plans being revised, supplier relationships held at arm’s length or cross-border deals hedged or deferred altogether. Daniel Friedman, global leader of transactions and integrations at BCG, argues there are signs of resilience. Private equity firms remain well-capitalised among tariff changes and ready to deploy capital once policy and regulatory direction solidify, and “As we get more clarity, especially around political direction and regulatory signals, I’d expect companies and funds that have been sitting on the sidelines to move more decisively.” 

In moments like these, businesses are looking for signals strong enough to act on. Tariffs, especially when tied to broader political strategies, rarely offer that. Instead, they stretch the in-between period, long enough to matter, vague enough to complicate planning. 

Key Takeways

• Tariffs aren’t just taxes, they’re strategic signals.
  
• They can spark reshoring, but at a cost.
  
• Small firms see opportunity in agility.
  
• Efficiency isn’t resilience. Innovation is insulation.
  
• Uncertainty is as impactful as cost.
  

Further reading

• Managing uncertainty in the Trump age – Financial Times
• Opinion: Oren Cass argues tariffs are worth it – The New York Times 
• Did tariffs contribute to the great depression? – NPR