Both businesses and consumers have been feeling their impact for over 18 months now.
Consumers have had to be more cautious with discretionary spending due to rising prices. Market estimates suggest that 40-50% of tariff costs had been passed on to consumers by late 2025.
For manufacturers, constant shifts in governments’ fiscal policies are causing operational uncertainty. Tariffs change frequently by country and sector, which can make it hard to fix on one ideal location to produce an item. In response, many organisations are diversifying their supplier base – spreading production across multiple regions to reduce over-reliance on a single country.
Expanding to new locations
While this seems like an obvious way to increase resilience and reduce exposure to risk, it isn’t without its own drawbacks. Building supplier capability in a new location takes time and factories do not reach maturity overnight. Not all suppliers carry the same risk profile either.
If an existing trusted supplier already operates in another region, manufacturers can replicate the systems, compliance frameworks and processes that they have established elsewhere. Management teams can be deployed from other sites to help set up these new facilities, which makes a transition smoother and reduces the immediate challenges of getting set up.
In these circumstances, companies will have years of audit history and a strong partnership that they can rely upon. However, manufacturers keen to diversify quickly will often need to onboard an entirely new supplier, which requires significantly more internal resource and greater scrutiny from a number of different teams within a business.
The hidden risks of new supplier relationships
It will take time to gain a full understanding of how this new supplier operates – and how people are looked after in the factory – but companies can’t afford to overlook proper due diligence to ensure standards are being upheld.
Procurement teams have a key role to play in building ethical expectations into any agreement with a supplier. They must also coordinate closely with other teams, including compliance, who need assurance that labour, environmental and safety standards are being met. They should be asking questions such as how dependent the factory is on overtime. Are grievance mechanisms in place? Are workers represented fairly?
Cultural misalignment also poses a significant risk. Different management styles, communication barriers and approaches to workforce engagement can slow down decision-making and make collaboration with the new supplier a greater challenge.
Whether a manufacturer is working with a brand new supplier or with a new branch of an existing one, it is key that they help that supplier to build their capabilities and become more efficient and effective at what they do.
If gaps in working conditions or sustainability performance are identified, the manufacturer should be going beyond audit and working collaboratively with their suppliers to help them set up clear, achievable improvement plans. Keeping lines of communication open and viewing suppliers as strategic partners is essential to forge a strong, long-term relationship.
Engaging the workforce
Strengthening supplier capabilities goes hand in hand with better understanding the workforce. Employees who feel well supported and safe in their roles will be less inclined to move on, resulting in lower turnover and higher productivity in the factory – which is critical when supply chains are under pressure.
One worker wellbeing initiative that makes a difference is an effective grievance mechanism. This allows staff to safely raise concerns such as harassment, or ask questions about their pay or working situation anonymously. The Worker Helpline we have established in factories in China and Vietnam, for example, handled over 1,000 cases in 2025 – while 20% of these cases related to general enquiries, over 800 required support on issues affecting the lives of workers.
Similarly family-friendly policies, such as flexible working patterns or on-site childcare facilities, can improve retention and morale among working parents. In just three years, our Family-Friendly Factory program in China – which supports working parents by creating policies and environments that improve quality of life for them, their children and their communities – has benefitted over 30,000 people.
Manufacturers and their supplier partners may struggle to set up these worker wellbeing initiatives on their own. But they can call on the expert help of an on-the-ground partner to strengthen these policies and systems – and help deal with issues effectively and impartially.
Businesses need to act quickly in the face of uncertainty – but they also need to do so responsibly. Rather than just lifting and shifting production to a different location, they need to invest in their suppliers and the workforce, whether these are long standing partnerships or newly formed ones. While tariffs and trade deals continue, strong supplier relationships will be the key to overcoming instability.