Tariff and Sanction Actions

Trend Definition 

What is the essence of this trend? What is its impact? 

• Essence: Tariffs and sanctions are introduced to prevent the respective entity (company or country) from entering business in the own country or to importing goods there 
• Impact: Tariffs and sanctions require companies to change their supply chain activities and change the competitive landscape by creating vacuums that need to be filled by the remaining or new players

Trend Drivers 

Why is this trend emerging now? What’s changing? 

• National Security Concerns: The protection of domestic industries and IP is gaining prominence, even accelerated by escalating geopolitical tensions and the resulting need for self-reliance in critical sectors 
• Surge in Populism and Nationalism: The upswing in political movements advocating protectionist measures is accompanied by a commitment to safeguard domestic jobs and industries 
• Unfair Trade Practices: Growing perceptions of uneven trade balances and competitive disadvantages based on political interventions in markets are driving tariffs 

Use Cases 

How to apply this trend? 

• Business Disruptions: Lack of alternative suppliers 
  Example: German mobile network providers highlighted that the planned ban of Huawei equipment on the market would lead to severe troubles since there are not sufficient alternative suppliers, moreover, they cannot ensure sufficient procurement and construction capacities 
• Strategic Shifts: Shift countries supplying inputs 
  Example: Following the US’ tariffs imposed on the import of Chinese goods, Walmart massively increased its imports from India which is not affected by any tariffs and reduced the imports from China, requiring Procurement to find new suppliers 

Procurement Relevance & Response Strategies 

How should Procurement adapt its Processes, Organisation, and Strategy?

• Supplier Base Diversification: Prioritise the diversification of suppliers to minimise the vulnerability to tariff-affected regions as well as to enhance overall resilience  
• Cut-off Costly Suppliers: Analyse current suppliers and the effect of tariffs on them might lead to the decision to end the relationship, as importing their goods is no longer economically viable