This month, the details of Trump’s self proclaimed ‘Liberation Day’ finally came to light, with the US President announcing a comprehensive tariff policy, including a baseline 10% tariff on all imports into the US, with 20% imposed on EU imports and significantly higher rates reserved for certain countries accused of unfair trade practices.
While the situation is changing daily, and companies on both sides of the Atlantic are scrambling to assess the impact, it’s a stark reminder of how political decisions can completely upend global trade in an instant.
So far, the fallout has been both swift and widespread; much of the world’s markets have slumped, economists have warned a trade war is looming, and both European and American manufacturers that rely on transatlantic steel and aluminum imports are facing huge uncertainty.
Impact on the CPO
These tariffs however are not just a manufacturing issue, but an issue that’s already rippling through industries, raising costs and shifting trade patterns. For the world’s Chief Procurement Officers (CPOs) and supply chain leaders, we’re already starting to see a number of challenges emerge, including:
- Budgets issues: triggered by increased costs for imported materials.
- Increased operational complexity: It can be expected that leaders will have to re-evaluate supply chains and make substitutions, reconsider logistics, in addition to adjustments to commercial terms. This will be fraught with difficulties, and required activities should not be underestimated in terms of the time, skill, and resource demand – particularly in the industrial sectors.
- Planning difficulties: It’s hard to plan in a state of flux, certainly one like this. Planning is a critical part of the supply chain, and will certainly be under strain. Clear forecasting and planning are essential to managing the supply chain, and this is going to be very difficult.
- Increased internal pressures: Unfortunately, there is likely to be a keen eye on procurement teams from finance teams and operations teams, and possibly increased scrutiny due to unease around any misaligned sourcing strategies. It’s a very challenging time to navigate.
Countermeasures see trade war heat up
Another key factor at play here is the world’s response to Trump’s decisions. Again, while this is a very fluid situation, we’ve already seen the EU, China and Canada warn the US of countermeasures.
We’re also seeing efforts to bolster local manufacturing through initiatives like the ‘Made in Europe’ campaign, reflecting a growing shift towards protectionism. Efforts to reduce reliance on external markets and counter tariffs may be a valid response, but any tit-for-tat measures can be very unhelpful and just increase trade tensions. It can also lead to retaliatory cycles that have the potential to spiral out of control, causing problems such as:
- Fragmented compliance: Diverging rules across borders that are shifting in a very dynamic way, as countries decide how to respond to the shifts in their own way, will likely further complicate global procurement strategies.
- Reduced optionality: Shrinking supplier pools will be highly probable as trade walls go up. Tariffs can raise prices, soften demand, or spark consumer backlash in B2C sectors. Supply and demand may well materially change in certain sectors.
- Loss of pace: Red tape and uncertainty means cross-border transactions will simply take longer. That’s a lot of pressure on procurement teams who may really struggle to meet business timescales – delaying fulfilment and possibly hurting the customer experience.
The importance of strengthening trade relationships
While many believe that tariff changes and their resulting challenges are largely beyond the control of CPOs and supply chain leaders, there is a great deal that can be eased by investing in stronger trade relationships; offering continuity through the chaos.
This is because, in times of crisis, transactional suppliers tend to protect themselves first. The problem with relationships that are purely transactional is there’s little incentive for suppliers to go the extra mile, and contractual rigidity leaves no room for improvisation. This can lead to delivery failures, financial penalties, and stranded assets. Worse still, failing to deliver amid disruption doesn’t just impact operations; it erodes brand credibility, particularly in tightly regulated or just-in-time industries.
Trust-based relationships, on the other hand, enable flexibility. Strong, strategic partners are not only more likely to renegotiate terms instead of pushing material disputes and perhaps even litigating, but they can also open the door to early intel. Knowledge sharing is a really important part of planning, becoming even more so through tougher times. So fostering an open and transparent relationship that shares early signals of disruption will be key. There’s also the pro of shared problem-solving; whether it’s co-creating alternative sourcing, joint ventures, or localised production to bypass tariffs, this period will be all about working together closely, and collaboratively.
The bottom line is that well-managed partnerships mean reduced conflict, fewer disputes, faster resolution, and reputational insulation; again, a key point, considering there will likely be many frequent and unexpected issues on the horizon. The alternative – a breakdown in relationships – can lead to disputes and in some instances expensive, drawn out, brand-damaging court battles. While businesses are much more adverse to court processes these days, we still see prolonged disputes that are just as expensive and culminate in large out-of-court settlements.
Four conflict resolution strategies for CPOs and supply chain leaders
With the above in mind, any strategies that work to strengthen trade relationships will become increasingly important.
To help manage risk, enhance supply chain resilience, protect corporate reputation, and ensure financial stability through these challenging times, consider the following:
- Invest in conflict resolution technology: Given that teams are already stretched for resources and businesses are increasingly focused on cost reduction strategies, hiring additional staff to handle conflict is not a viable option for many. Instead, look to invest in effective conflict resolution technology that can handle the heavy lifting. There are advanced tools available that can automate and streamline dispute management, alleviating pressure on the teams, reducing operational costs, and ensuring smoother collaboration between buyers and suppliers.
- Introduce pre-contractual clarity: Any ambiguity whatsoever in contracts can lead to disputes and inefficiencies. So, instead of relying on the standard model traditional clauses, ensure contracts include comprehensive dispute resolution clauses and escalation pathways. Clearly defining this upfront helps prevent conflicts from escalating and provides all parties with a structured framework for addressing challenges before they become costly disruptions.
- Consider third-party solutions for neutral facilitation: When conflicts do happen, emotional stand-offs can stall negotiations and worsen tensions. Neutral, third-party facilitation can help here by cutting through the issues efficiently and objectively.
- Adopt scenario-based renegotiation: When under unpredictable conditions like shifting tariffs or supply chain disruptions, rigid, static contracts can fail. As such, data-driven ‘what-if’ modelling is recommended, to reprice contracts collaboratively under different tariff scenarios.
Weathering the immediate storm and beyond
While Trump’s ‘Liberation Day’ tariffs may highlight the importance of strong trade relationships, for CPOs, the challenge isn’t just about navigating immediate disruptions – it’s about building long-term resilience.
As such, it’s important to remember that conflict resolution strategies aren’t just a reactive measure. You should adopt them as a proactive tool for ensuring supply chain continuity, financial stability, and for safeguarding brand reputation.
Faster paths to resolution means fewer stalled projects, while cost containment strategies help avoid expensive legal battles and material financial settlements, supporting successful commercial outcomes. Embedding these capabilities also supports deeper collaboration, and the building of a shared language of accountability across suppliers, finance, legal, and operations.
With uncertainty set to persist, organisations that prioritise robust trade relationships and proactive conflict resolution won’t just weather today’s storm – they’ll also secure a long-term future in what’s currently looking like an increasingly volatile global market.
