As we move into 2025, global supply chains face significant uncertainties due to ongoing geopolitical shifts, disruptions in global supply chains, evolving trade policies, and sweeping tariff changes. How could the next administration influence global trade dynamics and what should businesses expect in the coming years?

Disruptions in Global Supply Chains

The year 2024 was marked by several unexpected disruptions in global supply chains, which have the potential to linger into 2025. Some of the key events included:

  • Port Union Strike—Labor disputes along the US West Coast (California rail and ports) East Coast hubs, and western Canada caused significant delays in container movements, exacerbating the already fragile logistics networks.
  • Challenges in the Red Sea and Panama Canal—Critical chokepoints for international shipping, these routes faced disruptions that strained the flow of goods, especially between Asia and the US.

“This past year, we saw weather and war related events that restricted container traffic through Panama and effectively closed the Suez Canal causing significant rate increases again. Taken together, the past five years have taught us the narrow trading window we had grown accustomed to has been replaced by a much more sophisticated and sensitive market. One that quickly adjusts capacity and freight rates to the benefit of the carriers’ bottom line. This calls for additional padding when trying to plan market levels a year or more in advance,” explains Rich Roche, Senior Vice President.

The ramifications of these events are still unfolding. From reduced service levels to higher transportation costs, businesses have already felt the financial strain. The forecast for 2025 is that these disruptions could persist, with knock-on effects across the global supply chain.

Evolving Trade Policies

The new administration will have a unified government with Republican majorities in the House and Senate. Congressional efforts are to be closely monitored as recent legislation has been introduced calling for higher duty rates and challenging the permanent normal trade relations or most favored nations status for China.

Sweeping Potential Tariff Increases

Tariff policy has long been a tool of economic strategy. A shift in industry policy and protectionism was prevalent in various campaign promises of the incoming President.

  • Universal Tariff on All Imports— a 10 to 20% tariff on all goods coming into the US.
  • Increased China Tariff—a 60% increase tariff on all imports from China.
  • Mexico— a 25% increase tariff on all imports from Mexico.

The President’s economic justification to promote domestic manufacturing and lessen reliance on foreign countries can be carried out via several mechanisms including Executive Orders and Acts of Congress. However, the effectiveness and duration of these measures may vary, as certain trade remedies can be temporary or contingent upon investigations, depending on the specific provisions of the trade acts invoked.

Presidential Powers

  • Trading with the Enemy Act—Grants the President authority to oversee or restrict any and all trade with its enemies in times of war.
  • International Emergency Economic Powers Act—Allows the President to impose embargoes or sanctions after declaring a national emergency in response to a threat to the US.
  • Section 122 of the Trade Act of 1974—Empowers the President to temporarily impose tariffs of up to 15% and/or quotas to address trade imbalances or national interests.

Investigational Requirements

  • Trade Act of 1974
    • Section 201: Authorizes the International Trade Commission (ITC) to take action following a determination of “serious injury” to domestic industries due to imports.
    • Section 301: Empowers the US Trade Representative (USTR) to take actions against foreign practices that are deemed unreasonable, discriminatory, or restrictive to US commerce, following an investigation.
  • Trade Expansion Act of 1962
    • Section 232: Grants the Department of Commerce (DOC) the authority to take action after investigating whether imports threaten to impair the US national security.

Exact details of how President Trump would implement the tariff increases—and how fast those could be implemented—remains to be determined. Any potential exclusions are still unknown.

The Role of FTZs, Drawback Programs, & Duty Avoidance

To mitigate the impact of tariffs, many companies are turning to strategies like Foreign-Trade Zones (FTZs) and duty drawback programs. These mechanisms allow companies to defer or avoid paying certain duties on imported goods under specific conditions.

  • Foreign-Trade Zones (FTZs)—FTZs allow companies to import goods without paying duties until they enter the U.S. market. This provides a buffer period for businesses to adjust to tariff changes.
  • Drawback Programs—These programs allow businesses to claim refunds on duties paid for goods that are later exported. This helps reduce the financial burden of tariffs, especially for companies that rely on international supply chains.

Both programs are likely to become more important as companies look for ways to minimize the financial impact of tariffs and trade restrictions.

“Whether it’s navigating tariff updates, leveraging duty mitigation strategies, or advocating on your behalf with government agencies, we deliver the expertise and stability importers need to thrive in uncertain times. Partnering with us means you don’t just adapt to change—you leverage it to strengthen your competitive edge,” says Anthony Pagnotto, Vice President of Global Sales and Marketing.

Preparing for Uncertainty: How to Navigate Potential Disruptions

As we look ahead to 2025, businesses must be proactive in managing the uncertainty surrounding tariffs, government interventions, and supply chain disruptions. Here are a few steps companies can take:

  1. Monitor Tariff Legislation—Stay informed about proposed tariff increases and trade restrictions. Engage with trade associations and government representatives to advocate for policies that support your business.
  2. Diversify Supply Chains—Companies should explore options to reduce reliance on any one country or region, especially given the volatility in US-China and US-Mexico relations.
  3. Adjust Shipping Strategies—Continue to monitor port conditions and shipping forecasts and consider advancing shipments ahead of anticipated tariff increases or logistical disruptions.
  4. Leverage Duty Avoidance Programs—Explore options like FTZs and drawback programs to mitigate the financial impact of increased tariffs and duties.
  5. Plan for Increased Costs—Prepare for potential price increases, both in terms of raw materials and consumer goods, and adjust your pricing and budgeting strategies accordingly.

The potential for significant changes to US trade policy presents both challenges and opportunities for businesses engaged in global supply chains. From tariff hikes to the continuation of disruptions in critical shipping lanes, the landscape is poised to remain volatile. “These changes can significantly impact supply chains, profitability, and operational efficiency. At Mohawk Global, we excel in helping businesses navigate these complexities with precision and foresight,” Anthony explains.

By staying informed, adjusting supply chain strategies, and leveraging government programs, companies can better navigate the uncertainties ahead and position themselves for success in a changing global trade environment.

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