This week’s supply chain risk news
A quiet week for tariffs? No such thing
The U.S. Supreme Court could decide the legal fate of some of President Donald Trump’s tariffs. That’s after another court ruled those tariffs were unlawful and had to be walked back, prompting an appeal from the administration.
At issue are Trump’s global reciprocal tariffs, as well as others targeting Canada, Mexico, and China over illegal drug trade allegations. Notably, the lower court’s ruling does not affect tariffs on specific products like semiconductors and pharmaceuticals. It’s not yet clear when or to what extent the Supreme Court might weigh in.
Meanwhile, more than 47 postal companies globally have indefinitely halted shipments to the U.S. amid the end of its de minimis tariff exemption. This previously let parcels valued under $800 through without additional tariffs. In its place, a new rule requires foreign postal services to assess individual duties on each package and pay that amount to the U.S.
Among those halting shipments are providers from Japan, Canada, India, Mexico, Korea, Germany, France, Taiwan, and the U.K.
We detail further upheavals in trade and tariffs in our latest Risk Center post.
Is home wherever the tariffs aren’t?
For companies trying to grow operations in places where they won’t face steep U.S. tariffs, little is certain. One small example is Bizerba, a German manufacturer of scales and slicers for customers like the U.S. sandwich chain Subway. In recent years, Bizerba moved some production from China to Serbia to avoid tariffs—only to now face more tariffs.
“We are now almost at the point where it makes sense to produce certain products directly in the U.S., instead of trying to find new workarounds,” the fifth-generation head of the family-owned company told the New York Times.
One problem, though, is that it takes time to build factories, and in the meantime, trade arrangements could change again. Another concern for Bizerba is their need for aluminum and steel, which they’d have to source from U.S. suppliers to avoid 50 percent import taxes.
It’s an emblematic slice of what the head of the World Trade Organization calls an unprecedented disruption to global trade rules. Data shows global trade on WTO terms is down from 80 percent to 72, and the slide could continue into next year.
A potential cascade for U.S. pharmaceutical supplies
The U.S. is on track to impose a tariff up to 15 percent on pharmaceutical imports from Europe. Additionally, steep rates potentially also in store for pharmaceuticals from key countries like Korea and Japan. In turn, one expert warns in Forbes, that could lead to empty shelves:
“Some wholesalers would undoubtedly try to stockpile drugs before tariffs take effect. In fact, some pharmacists are already stocking up on extra doses of common medications. Ironically, these buying surges could exacerbate supply chain chaos and leave other buyers without enough stock. In other words, the tariffs could do considerable damage before they even take effect.”
This potential “man-made disaster” comes after a year that ended with 277 active U.S. drug shortages. And while an executive order last month aims to stockpile key ingredients—which are cheaper and have a longer shelf life—other federal moves risk running in the opposite direction. A better remedy, the American College of Physicians contends, would be to diversify supply chains and improve transparency.
Efficiency is great, but have you ever tried reliability?
Imagine a car that’s quite fast and costs very little to run, but with wheels that might fall off if it hits a gum wrapper. It’s an extreme example of the perils of prioritizing efficiency at the expense of resilience.
Indeed, although supply chain operations must find ways to save time and money, efficiency isn’t everything. Importantly, it can add new risks when potential disruptions arise. That’s why we make the case for building agility and durability by prioritizing logistical resilience in our blog.
While a resilience-based approach might add to shipping times and costs, over time this proves worthwhile. It allows companies to better withstand some disruptions and more readily adapt to face others. Evaluating this landscape thoroughly means taking into account a huge range of shifting factors, from weather and shipping routes to trade restrictions, cybersecurity, and labor issues.
It’s not realistic to monitor all of these concerns in real time. That’s where advanced analytics, data science, and AI with nuanced human oversight are key to seeing the bigger picture and making smart moves. This is crucial because those pesky gum wrappers are, unfortunately, all over the place.
A bevy of beverage woes
Potential disruptions to coffee and matcha supplies are continuing to brew.
In the case of matcha, part of the problem is simply that a lot more people have started enjoying it. Prices are up 170 percent as demand has rapidly outstripped what Japanese farmers are producing—a problem exacerbated by high temperatures. While new fields are now being planted, it will take some five years before they’re ready to harvest.
Meanwhile, among the latest complications for coffee is a European Union rule meant to curb deforestation. Starting next year, EU coffee sellers must prove their products are from land that wasn’t cleared of forest after 2020. That could be a challenge for smaller growers who can’t provide the right paperwork and exact coordinates of their plots to buyers. That, in turn, could be a boon to larger coffee growers.
For the EU, the upshot will likely be more sustainable coffee at a higher price. Elsewhere, coffee from traceable lots might cost more, “while unverified beans are discounted or simply avoided by brands that choose to follow EU standards,” the Conversation reports.
Just don’t talk to us about it until we’ve had our coffee.
