Bhuvan— Revenge of the supply chains
One thing I still don’t have a clear understanding of is how Trump’s reckless tariffs will affect today’s highly complex global supply chains. For the past 30-odd years, companies have invested heavily in diversifying their supply chains across the world to take advantage of cost efficiencies. Now, all of that is under threat.
Take the case of a car. A typical vehicle contains around 30,000 individual parts — from large components like engines and transmissions down to nuts, bolts, and microchips. Even if the car is assembled in the U.S. or Germany, its parts are sourced from across the globe. BMW, for instance, works with about 12,000 suppliers spread across 70 countries. Volkswagen’s supply chain is even more sprawling, encompassing over 59,000 supplier sites in more than 90 countries.
Now, Trump’s tariffs have thrown sand into gears that were otherwise spinning smoothly.
Look at this chart. It’s one of my favorites — a clear visual of just how intricate today’s global supply chains are. The first-order effect of tariffs is straightforward: U.S. imports become more expensive. You can easily imagine the immediate demand and supply responses. But beyond that, I struggle to visualize the knock-on effects.
Here are a few questions I’ve been thinking about:
There will likely be a reallocation of supply chains — through onshoring, reshoring, or “China +1” strategies.
But what are the second- and third-order effects of that shift? How will it ripple through tier-2 and tier-3 suppliers in other countries?
What impact will tariffs have on long-term investment decisions? Will companies pause expansion or shift capital to more politically “safe” regions?
Could tariffs drive smaller suppliers out of business, especially those that rely on cost-sensitive contracts?
If there’s retaliation from other countries, how will that affect these fragile but incredibly efficient supply chains?
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