Keep Your Eye on the Tariffs Ball: What Supply Chain Leaders Need to Know

Author- George Coe- Partner & Co-founder, PRISM & Johan Gott- Co-founder, PRISM

Mexico, NAFTA, the EU, and BRICS: Negotiation Threat vs. Real Impact

Tariff threats against Mexico, Canada, the European Union and other blocs like BRICS are the most high profile actions so far. But the word in Washington is increasingly leaning toward that these parts are political posturing and negotiation strategy. President Trump has already backed down from some of his most aggressive tariff threats, settling for largely symbolic wins rather than substantial policy changes (true for fights with Colombia and Mexico already).

The EU and BRICS are wildcards, with certain industries (e.g., autos, technology) facing potentially serious risks. However, even here, much of the pressure is tied to domestic political narratives rather than deep-seated trade disputes. It is likely we will see tariffs and retaliation with all of these countries - but the political durability of these fights is low, on both sides, creating a likely costly trade spat, but not long-term restructuring of supply chains.

China Tariffs: The Big and Durable Risk

Unlike disputes with Canada, Mexico, or Europe, the tensions with China are both bipartisan and escalating. Many have noted the US has placed a lower tariff on China (10%) than on its allies (25% on Canada and Mexico). But unlike Canada and Mexico, Trump insiders don’t see these tariffs and trade restrictions as just short-term negotiation tactics—they are long-term policy shifts.

And they are likely to get worse from here. On the campaign trail, Trump signaled 60% (or higher) tariffs. His Treasury Secretary Scott Bessent has publicly called for tariffs to rise incrementally to avoid shocks. All of this points to the 10% rising over time, perhaps dramatically. On top of this, there are discussions in the GOP Congress over potential revocation of China’s Most Favored Nation (MFN) status, a move that would impose dramatically higher tariffs on Chinese imports and upend the trading order in ways not seen since China’s accession in 2001. This is not an idle threat. The idea is already circulating in Congress, with both Republican and Democratic lawmakers showing support. Supply chains that rely on Chinese suppliers could face massive cost increases and forced restructuring.

While there is always a small chance of a “grand bargain” to de-escalate tensions, the likelihood is slim. The current trajectory points toward worsening relations, higher tariffs, and broader restrictions. Companies should be preparing contingency plans now, whether through supplier diversification, nearshoring, or reshaping sourcing strategies.

Don’t Get Distracted: The Real Takeaways for Supply Chain Leaders

Amid the flood of tariff headlines, one of the biggest distractions for supply chain leaders has been the focus on Canada, where the rhetoric has been loud, but the duration of the risk is likely low.

To remain focused, it is key to remember:

• The China trade conflict is not going away and could become significantly worse. Prepare for higher tariffs, potential MFN revocation, and increased supply chain constraints.
• A universal 10% tariff is costly. But market forces and currency adjustments will offset much of the effect and it is unlikely to have a structural long-term impact.
• Negotiations with Mexico and Canada will continue, but many of the threats are more political than economic.
• The EU is a new front in the trade war. There are more substantive conflict vectors in this relationship than with Canada and Mexico, and thus the risks are higher. This is especially true in industries where influential stakeholders are pushing for policy changes.

In short, supply chain leaders need to keep their focus on where the biggest, most durable risks are developing. While the political noise will continue, the structural challenges posed by China tariffs are the ones that demand serious planning and response. Companies that stay ahead of these risks will be in a much stronger position to weather the turbulence ahead.