Global supply chains have been upended in the wake of President Trump’s election victory, with companies frontloading shipments and seeking out new suppliers in anticipation of higher tariffs. The weaponization of supply chains is becoming entangled in the new normal of global trade relations.
President Trump has imposed or threatened tariffs against the United States’ three largest trading partners — Canada, Mexico and China. Those against Canada and Mexico were delayed for one month following negotiations. Meanwhile, the unexpected inclusion of a retaliatory clause threatening steeper tariffs for any countries that retaliate has sparked further concerns of a global trade war. Despite this clause, all three nations initially fought back, vowing to swiftly impose tariffs of their own on U.S. imports.
Now, the geopolitical tensions stemming from the threat of tariffs are poised to cause even greater disruptions to the global economy than tariff policies themselves.
The Weaponization of Tariffs
At the World Economic Forum, President Trump urged global business leaders to manufacture their goods in the U.S. or risk paying tariffs. It is abundantly clear that we are navigating a trade war as tariffs, as they are increasingly being imposed along geopolitical fault lines. China is the latest example of the weaponization of supply chains based on high demand for its raw materials, especially rare metals that are essential to many high-tech products.
We’re seeing an avalanche of geopolitical concerns, closely correlated with the threat of tariffs. In addition to the pause on levies against Mexico and Canada, Colombia narrowly avoided steep tariffs by agreeing to the unrestricted acceptance of migrants being deported from the U.S. But for countries that don’t stand down against the U.S., where does that leave them?
Tariffs on China were expected to follow a predictable trajectory, with the economic showdown being a heavyweight match between two global superpowers with relatively equal punching power. While a strategic currency devaluation seemed a likely countermeasure, China has fought back with retaliatory tariffs that have already gone into effect. In contrast, tariffs on Canada and Mexico are proving to be more of a wild card. The instant retaliation received from these two nations has seemingly caught the Trump administration off guard.
The Trade Fallout
As nations vocalize their disapproval of Trump’s tariff policies and international relations escalate further, the global supply chain could crack under increased pressure points. Today, 481 companies of the S&P 500 have direct suppliers located in high-risk regions. Our data determined that if just 10% of combined annual revenue is impacted by supply chain ripple effects in high-risk regions, it could equal over $1 trillion impact felt in 2025 from this single risk factor.
We’ve already observed how this intersection of issues has historically impacted trade passing through regional conflict zones such as the South China Sea, Red Sea, and Eastern Europe.
These conflicts are pushing the barriers of how far disruptions will reverberate, beyond just surging prices of imported goods. Commodity price increases of raw materials and energy could skyrocket. The entire food chain is vulnerable, as agricultural markets could be sent into a tailspin, due to a combination of tariffs and the threat of mass deportations. The technology divide is rapidly widening, as critical technologies from semiconductor chips to artificial intelligence are put onto export control lists based on geopolitical alliances. We’ve already seen the exploitation of the supply chain in hardware devices. Now we’ll see the weaponization of supply routes, minerals and natural resources.
For decades, American trade has been hardwired around this trilogy of trade partners — China, Canada and Mexico. Veering from that established path will prove to be extremely difficult. Yet we’re already seeing a hasty scramble for alternative suppliers around the world.
One thing remains clear: the tariff squeeze will tighten further as the Trump administration amps up action against trade partners, sparking regulatory backlash worldwide. With geopolitical tensions rising, supply chains may undergo a major overhaul, particularly in the U.S., as corporations seek stability amid the threat of an impending global trade war.
Ted Krantz is chief executive officer of interos.ai.