U.S. Tariff Shock: Trade Fragmentation and Uncertainty
Published on Monday, March 31, 2025
At the end of March, Washington announced new 25% tariffs on certain auto parts (effective early April), part of a broader trade strategy. For global businesses, the immediate effect is not just higher import costs but heightened legal and logistical uncertainty, with contract renegotiations, customs rerouting, and rapid sourcing adjustments. The most exposed sectors include automotive, electronics, machinery, and electrical transformers (with knock-on effects for energy and data centers).
Risk management requires: (1) scenario planning for escalation and retaliation; (2) tariff-adjustment clauses and re-sourcing triggers; (3) recalculating landed costs and working capital buffers; (4) weighing nearshoring/friend-shoring against cost increases.
Financial institutions and credit insurers foresee a deterioration of the business climate if tensions widen, making margin stress tests and covenant reviews necessary. Tax teams must also revise transfer pricing and customs structuring (rules of origin, substantial transformation tests). More broadly, the rise of “reciprocity” and tariff weaponization creates investment volatility: companies must integrate risk bands into their business cases and diversify market access strategies.
Depending on its business sector and the nature of its activities, your organization may be impacted, directly or indirectly, by this global risk over the coming years.
Whether you are a director, an executive or a manager, you may be wondering if your company is exposed to this global risk or other potential events. And if so, are you and your organization ready to face these challenges?
Should you need advice on the appropriate risk governance and enterprise risk management approach for your organization, please contact us.
Baldwin Global is an independent advisory group offering professional services, education and training in risk governance and enterprise risk management. We help our clients’ boards of directors and management teams attain their objectives by embedding sound risk oversight and management practices into their decision-making process to have a significant positive impact on their business.