Author: Andrea Little Limbago, PhD, SVP, Applied AI
Not with a Whimper, but with a Bang
The rules-based system and international collaboration that has guided the global economy for decades – and quite possibly produced the greatest reduction in worldwide poverty in history – may have come to an end.
With the strike of a pen, the United States is implementing 25% tariffs on allies Mexico and Canada (10% on Canadian energy), coupled with a 10% tariff increase on China.
The delay and uncertainty around the timing and implementation of the tariffs adds an additional level of disruption, that if comes to fruition, would likely mark the end of a global economic system that already was feeling the weight of trade wars, geopolitics, and import controls.
However, this is not simply continuity of the shifts underway since the beginning of the U.S.-China trade war almost a decade ago. The tariffs are an escalation of trade barriers aimed at the U.S.’ top three trade partners, but also two of its closest allies. In fact, President Trump has identified other U.S. allies – the European Union and United Kingdom – as potential upcoming targets of tariffs as well. This is a dramatic shift from the ongoing re-globalization of the global economy and supply chains along geopolitical fault lines and is a much more aggressive adoption of the economic nationalism and the mercantile policies that undermined globalization almost a century ago.
Supply Chain Disruptions, Again
Geopolitics has driven the global restructuring of supply chains, leading to the expansive and unprecedented implementation of industrial policy. However, ally or friend-shoring remained at the heart of this restructuring, with both the U.S. and China building out their economic spheres of influence along with like-minded countries.
These tariffs – if fully implemented – would be a huge blow to post-World War II alliance structures.
Moreover, the tariffs come at a time when China is shaking up the AI and technology landscape and is strengthening collaboration with many of the U.S. geopolitical adversaries.
Given the hyperspecialized, complex, and geographically dispersed nature of supply chains, one country alone cannot simply provide all parts and components for emerging technologies, let alone less strategic industries.
At a time of heightened strategic competition and technological shifts, the tariffs would introduce yet another major disruption to supply chain risk. As the next section details, given the size of the trade flows, very few companies will be immune from the impact of these tariffs.
Products and Industries at the Greatest Risk
The 25% tariff impacts goods flowing into the U.S., serving as a tax on the price of these goods domestically. Based on trade data from Canada and Mexico combined since January 2024, and leveraging interos.ai’s product and industry categorization that are based on self-attestations of a company’s industry and products, the following tables highlight the key products and industries at risk across the 10.5 million number of import shipments into the US.
The major industries impacted range from software and IT to retail and banking and financial services, while products generally include underlying components such as plastic, rubber and iron and steel, indicative of the economy-wide impact of the tariffs.
Both Mexico and Canada have vowed retaliation, and highlight similar dependencies across industries and products, demonstrating the hyperspecializing and interdependency of the three economies.
In contrast, the major industries and products impacted by the additional 10% tariffs on Chinese imports highlight a consumer-facing impact as well, with consumer goods and retail among the top industries impacted, although industrial equipment and construction clearly demonstrate the diverse range of industries that will be affected.
The top 10 products imported by US companies from Canada and Mexico make up over 40% of all 10.5 million shipments in total.
Preparing Supply Chains in a Volatile Setting
As of this writing, the tariffs on Mexican and Canadian imports are delayed one month, in return for additional troops along the border. There is no word yet on a similar delay to those imposed on China. The shifting nature adds to global uncertainty, which only fuels greater risk and market fluctuations.
The only certainty here is on-going change and disruption, as these tariffs upend decades of rules-based order that has driven globalization and supply chains.
Across the globe, markets fell in response to the weekend’s tariffs news and impending trade war expansion.
For supply chains, decisions made now often take years, not minutes, to implement.
Whether or not to shift operations, for example, has a long-term impact and therefore this growing uncertainty is forcing many to reassess their global footprint amid such potential shifts.
Overhauling supply chains, yet again in some cases, is expensive and time intensive. The unpredictability presented by the tariffs only adds to supply chain risks, especially in geographies until very recently deemed stable and less risky.
From higher prices to operational disruptions to economic shocks, interos.ai is closely monitoring the situation and how it is impacting supply chains and the global economy.
For more on our take on how geopolitics, tariffs, trade, cyber and poised to wreak havoc on supply chains in 2025, read our latest report.
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