Donald Trump’s return to the US presidency, and his subsequent decision to make good on the protectionist, pro-tariff trade policies from his first term and 2024 campaign, have intensified uncertainty surrounding global trade and economic growth. His trade policies not only affect the US economy but also have worldwide repercussions.
The rise in import tariffs has sparked growing international concern, impacting investment and destabilising global value chains. Europe was quick to respond to Trump’s “Liberation Day” tariffs, with the European Commission announcing a €26 billion retaliation package in April as a countermeasure against Washington’s tariffs.
This trade conflict will have a significant impact on global logistics and, even more critically, on international trade. But how will these effects materialise, and what can we expect in the coming months if the tariff war continues?
Rising Costs and Disruptions in Supply Chains
The increase in import costs will be inevitable. Businesses will have two choices: pass the added costs onto consumers—making goods more expensive—or absorb them, leading to financial losses and budget adjustments.
In this context, logistics will be directly affected. Additional fees at ports and customs will add to costs, some companies will relocate distribution centers to avoid tariffs, and regulatory compliance expenses will rise, further driving up supply chain costs.
Moreover, stricter customs inspections will cause shipping delays, disrupting deliveries and creating bottlenecks in distribution networks. As a result, many companies will face shortages of products or raw materials, limiting their production capacity and increasing the price of available goods. To counteract this, businesses will seek alternative suppliers—a process that comes with additional costs and complexities, further destabilizing supply chains.
Redefining Trade Routes and Sector Instability
As tariffs rise, many companies will reroute imports and exports through third-party countries to minimize costs. However, this strategy comes with major challenges: delivery times will increase due to more complex trade routes, administrative burdens will rise with new regulations, and congestion at alternative ports will further strain logistics efficiency. Consequently, global trade will slow down, leading to higher costs and more uncertainty across supply chains.
The higher cost of imported goods may also cause a drop in demand, further reducing global trade volumes. This will affect cargo transportation by sea, air, and land, disrupting operations at ports and logistics hubs. Additionally, uncertainty will discourage investment in infrastructure and logistics technology, limiting the industry’s ability to adapt to new challenges. As a result, the slowdown in global trade could trigger a ripple effect, impacting the broader economy.
In the UK, the automotive, machinery, and steel/aluminium industries and pharmaceuticals could experience reduced demand as US buyers face higher costs. While this week will likely see the US and UK announce a lower-tariff deal to spare the countries’ auto industries, top economists warn this will not be the kind of “free trade” deal that defined Anglo-American relations in the 1990s.
The global tariff war is only just beginning. Constant changes in trade policies and unexpected announcements not only heighten political and economic instability but also significantly impact global logistics. Are we truly prepared for a new era of logistical challenges?
- Risk & Resilience