The Trump administration's shifting tariffs are forcing US companies to rethink supplier strategies – but without ESG visibility, supply chain pivots may come with costly risks.
The global supply chain landscape is more volatile than ever. The Trump administration’s far-reaching tariffs on Canada, Mexico and China – plus new tariffs on certain EU goods – appear set to fuel lasting and contentious trade disputes that will force many US companies to reinvent their supply chains. More than 50% of companies surveyed in a recent study indicate that tariffs will require them to rethink supplier strategies. But shifting sourcing brings new challenges, from compliance issues to ESG blind spots posing reputational and financial risks. The key question procurement teams have to answer isn’t just "Where can we source from instead?" – it’s "How do we ensure new suppliers don’t pose risks that could offset the benefits of tariff avoidance?”
What’s the state of play?
|
The Real Cost of Tariffs
Much of the conversation around tariffs has focused on rising costs – and for good reason. A 2024 study by the Federal Reserve Bank of New York found that previous US-China tariffs significantly reduced corporate profits, sales and employment for global businesses. The latest wave of Trump tariffs could have an even greater impact, with price hikes on key inputs like automotive parts, electronic components and raw materials poised to squeeze margins. Nearly half of C-suite leaders expect these tariffs to drive double-digit increases in the cost of critical inputs.
But higher input costs aren’t the only consequence – tariffs create other financial and operational risks:
Supplier disruptions & ESG risks: Switching suppliers can create delays, capacity constraints and compliance challenges. Many alternative markets have weaker labor protections and environmental regulations, increasing ESG exposure. Without thorough due diligence, companies risk trading one problem for another and causing further disruption.
Regulatory complexity & compliance costs: Tariffs add another layer of complexity for US procurement teams already navigating evolving ESG regulations. Meeting obligations under frameworks like the EU’s CSDDD will become more challenging, with new supplier compliance checks driving up costs and due diligence demands.
Market volatility & long-term risk: Shifting sourcing to regions with less tariff exposure may introduce hidden risks, including geopolitical instability, currency fluctuations and sudden regulatory shifts. Companies must weigh short-term tariff relief against long-term resilience and supply chain continuity.
| Check out our ebook, 5 Key Accelerators of Leading Sustainable Procurement Programs, for insights on building a resilient supply chain. |
Shifting Supply Chains: New Risks, New Realities
US supply chains have undergone major restructuring in recent years, largely driven by the pandemic and rising trade tensions with China. Nearshoring has gained momentum, with Mexico and Canada emerging as the top destinations. However, new tariffs are forcing many US companies to pause or rethink these strategies.
While some strategic industries may see a significant uptick in reshoring, broad-based manufacturing relocation remains unlikely. Evidence shows the first Trump administration’s aggressive tariff policies failed to drive large-scale reshoring. The cost and complexity of restructuring global supply chains will push most US companies toward supplier diversification instead of full reshoring.
As the trade war escalates and tariffs expand to more countries, companies must stay agile – maintaining existing supplier relationships while building new ones in less exposed markets. Countries like Vietnam, Malaysia, Thailand, India and Brazil – which have mostly dodged new tariffs to this point – may be prime targets for US procurement teams looking to quickly diversify.
But companies must stay vigilant: environmental and social risks remain widespread across global supply chains and have intensified in many regions. Nearly 20 million people are still trapped in modern slavery, and worker rights have steadily eroded in many countries. Vietnam, a key hub for US supply chains outside North America, has been flagged as high risk for modern slavery, forced labor and other abuses. The other countries mentioned above also pose significant risks. Companies that diversify their supply chains without ESG visibility and due diligence tools risk serious exposure to these sustainability challenges.
Sustainability as a Value Driver
For procurement teams balancing rising costs and regulatory demands in this new landscape, supply chain sustainability isn’t just about risk mitigation – it’s a key driver of business value.
Gaining ESG intelligence across the supply chain and integrating it into sourcing and procurement decision-making is helping companies control costs, improve compliance readiness and build resilience:
Lower operational expenses: Sustainable suppliers enhance efficiency through strategies such as using clean or onsite renewable energy, optimizing logistics and reducing waste – ultimately driving long-term cost savings.
Improved regulatory compliance: Supplier visibility enables companies to collect the high-quality data needed to help companies stay ahead of evolving regulations, avoiding fines and reducing legal risks.
Enhanced resilience: Deeper supplier engagement helps improve supplier sustainability performance over time. This in turn reduces volatility and supply chain disruptions.
How EcoVadis Helps Companies Navigate Supply Chain Uncertainty
Navigating the volatile tariff landscape – and tapping into the opportunities created by the uncertainty – requires a new approach to supplier visibility and ESG risk management.
EcoVadis solutions provide companies with the insights and tools to:
1) Map supplier ESG risks quickly and comprehensively: IQ Plus uncovers ESG risks and opportunities across your entire supply chain – view in-depth supplier insights and aggregated at regional and industry levels. Easily vet prospective suppliers and view their sustainability risk profiles.
2) Accelerate compliance and due diligence efforts: Vitals, a feature of IQ Plus, is a quick and industry-tailored questionnaire that helps you gauge supplier readiness for a wide range of ESG regulations and identify potential due diligence needs.
3) Monitor supplier risks in real-time: Our Ulula solution delivers live ESG workplace data from across your supply chain, featuring an always-on worker voice platform. IQ Plus' AI-powered Live News Monitoring continuously scans analyst-validated sources for the latest supplier news.
4) Assess and benchmark supplier ESG performance: EcoVadis Ratings deliver in-depth supplier sustainability assessments, equipping your procurement team with the insights needed to make strategic decisions and prioritize supplier engagement.
5) Drive supplier improvement and build resilience: The EcoVadis platform provides tools to help you collaborate with suppliers to drive sustainability improvement. It also enables you to collect the supplier data you need for reporting and disclosure.
Ultimately, companies can’t afford to wait for clarity on the Trump administration’s tariff policies and long-term strategy. They must act now to navigate shifting global supply chain realities and prepare for a potentially prolonged trade war. As policies evolve rapidly, those that prioritize ESG transparency in both existing and new supplier networks will be better positioned to not only withstand the tariff storm but emerge stronger and more competitive.
Let’s talk about your supply chain ESG challenges and how you can take action on them. Schedule a call with us today to get started.
About the Author
Follow on Twitter Follow on Linkedin Visit Website More Content by EcoVadis EN
