Tariffs, ESG Compliance, and Supply Chain Resilience

EDITOR’S NOTE: Here is my reply to a new LinkedIn post by Everstreams’ David Shillingford. At the end of today’s Procurement Insights post, I will provide an advanced excerpt from my upcoming article in The Procurement Italia magazine.

Great post again, David Shillingford! Thank you for making us think or rethink what supply chain resilience really means:

I wrote an article for The Procurement Italia magazine, which will be published on May 5th (Micol Barba). The article is titled “What 1930 Can Teach Us About Tariffs And Supply Chains In 2025.”

In it, I refer to resilience 20 times as it relates to US and European supply chains and the impact of tariffs between 1930 and 2035. What my research tells me is that we must start seeing the concept of supplier resilience in an expanded scope that extends well beyond supply chain functionality.

When it comes to compliance and ESG strategies, John Elkington‘s book  Cannibals With Forks – The Triple Bottom Line of 21st Century Business should be required reading for all procurement and supply chain professionals. – https://bit.ly/3ToqhdQ

The Procurement Italia Magazine (Article Excerpt)

A Revealing Comparison

When it comes to domestic and global impact on supply chains you will note some concerning similarities of impact between the 1930 and 2025 Tariff Acts.

I will address these similarities by way of answering the following two questions.Compared to the 1930 Smoot- Hawley Tariff Act, what will the likely outcome of the 2024 U.S. Tariff plan have on supply chains in both the short term and longer term?

As previously stated, the projected outcomes reflects the proposed 10-20% tariff on all imports ($3.1 trillion in 2023), 25% on Canada/Mexico, 60% on China, with an anticipated start date being late 2025.

U.S. Supply Chains

• Short Term (2025-2027):
  • Disruption: Imports drop 10-15% ($310-$465 billion), per Peterson Institute (2024), hitting intermediates (e.g., $50 billion EU auto parts, $100 billion Chinese electronics). Exports to EU ($426 billion) fall $40-$60 billion with 10-15% retaliation, affecting aerospace and agriculture.
  • Resilience: High—diversified sourcing (40% Asia, 20% North America) and tools (e.g., AI forecasting, post-COVID buffers) limit production dips to 5-10% (McKinsey, 2024). Domestic capacity (e.g., steel up 5% since 2018) mitigates some losses, though bottlenecks (e.g., semiconductors) cause delays.
  • Outcome: Negative—higher costs (5-10% input price hikes) and delays disrupt operations, but manageable vs. 1930’s 70% collapse.
• Longer Term (2028-2035):
  • Disruption: Trade stabilizes 10-20% below 2023 levels ($2.5-$2.8 trillion imports) as firms adjust. Retaliation persists but softens with negotiations (e.g., WTO disputes).
  • Resilience: Strong adaptation—domestic production rises (e.g., 1-2% manufacturing output, $10-$20 billion, per Moody’s 2024). Supply chains diversify (e.g., Mexico up 5-10% as nearshoring grows), reducing EU/China reliance.
  • Outcome: Mixed-to-positive—initial disruption fades, with potential gains in domestic resilience (e.g., 100,000-200,000 jobs), unlike 1930’s prolonged shrinkage.

European Supply Chains

• Short Term (2025-2027):
  • Disruption: Exports to the U.S. ($576 billion) fall 15-25% ($86-$144 billion), hitting autos (Germany, $40 billion) and pharma ($20 billion). Integrated chains (e.g., $20 billion auto parts) face 10-15% cost hikes. U.S. imports drop $40-$60 billion.
  • Resilience: Robust—intra-EU trade (40%, $7 trillion) and Asia pivot (up 10% since 2018) absorb 20-30% of losses (EU Commission, 2024). Digital tools and €750 billion Recovery Fund limit production dips to 5-10%.
  • Outcome: Negative—cost increases and export losses strain chains, but far less severe than 1930’s 71% drop.
• Longer Term (2028-2035):
  • Disruption: Exports to U.S. stabilize 15-20% below 2023 ($460-$490 billion) as markets adjust. Retaliation ($50-$100 billion tariffs) persists but moderates.
  • Resilience: High—EU redirects trade (e.g., Germany to China, up 10-15%) and boosts self-reliance (e.g., green tech, 5% output rise). Supply chains diversify, reducing U.S. dependence (16% to 12-13% of exports).
  • Outcome: Negative-to-neutral—initial losses ease, with resilience preventing collapse, unlike 1930’s decade-long stagnation.

A FINAL TAKEAWAY: I will also share my interview with The Economist when it comes out.

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