by Lloyd's List
23 January 2025 (Lloyd's List) - SHIPPERS are increasingly looking to diversify and expand supply chains to mitigate risk in a “new era” for global trade, according to a new industry report.
The fifth annual Trade in Transition study, published by Economist Impact in partnership with port and logistics giant DP World, found that as many three quarters of companies surveyed were working with more suppliers in the face of rising protectionism and shifting geopolitical alliances, which promise to usher in the most turbulent era for global trade since the 1930s.
The study polled more than 3,500 supply chain executives globally.
In the US, protectionism will likely intensify with the return of Donald Trump to the White House and the “America first” policies of the new administration, with tariffs on goods increasingly implemented, the report claimed.
However, research showed that Trump’s proposals for restricted trade measures are already reshaping supply chain strategies. This included 40% of companies looking to increase US sourcing to avoid higher import costs and around a third of respondents looking to cut internal costs to counter trade barriers.
The adoption of dual supply chains to hedge against regional risk is also high on the agenda, with 32% of global businesses polled as part of the study revealing such expansion.
The study said that Western companies continue to seek access to China’s lucrative market but are also looking for supply chain alternatives as geopolitical tensions rise. Similarly, Chinese companies are building parallel supply chains to overcome Western trade restrictions, while bolstering domestic operations, the report said.
Countries deemed as “supply chain safe havens”, such as Mexico, Vietnam and the United Arab Emirates, are also “fast emerging as vital intermediaries in mitigating trade risks, filling gaps created by global conflicts”, according to the report.
As many as 71% of supply chain executives agreed these countries can help manage risk by acting as politically insulated partners, while 69% said they can help fill supply gaps generated by trade conflicts between major geopolitical blocs.
There were concerns raised by 63% of respondents over the regulatory inconsistencies that could pose challenges to scaling up trade with “non-aligned countries”, which could undermine their reliability. That said, only 27% of companies favoured expansion into these more stable markets when faced with geopolitical tensions elsewhere.
The more favourable option for companies highlighted by the report was so-called “friendshoring” (relocating supply chains to politically aligned countries), with 34% of respondents adopting the practice to reduce geopolitical trade risks.
Meanwhile, economic headwinds remain for supply chain executives. Around a third highlighted prolonged inflation and high interest rates as chief concerns.
In light of the report’s research, the advice for supply chain executives to navigate this era of economic and geopolitical complexity is to leverage neutral hubs, diversify suppliers and adopt advanced technologies like AI to be better positioned.
“Firms that stay agile and cost-efficient will have the edge,” said John Ferguson, global lead, new globalisation, Economist Impact.
“Firms that also combine risk management with AI experimentation and openness will be best placed to win in this new chapter of globalisation.”
