On April 2, 2025, President Trump issued Executive Order 14257, altering the U.S. trade policy by introducing ‘reciprocal tariffs’ across a broad spectrum of U.S. trade partners. He leveraged the International Emergency Economic Powers Act of 1977 (IEEPA) to justify the move, and with these tariffs, elevated U.S. import duties to levels unseen for more than 100 years.
This action has sparked immediate controversy, triggering legal challenges to the president’s use of IEEPA and drawing scrutiny from Congress. The global market and policy spheres have reacted with considerable alarm, with long-term concerns surfacing regarding inflation and the stability of international trade. The duration of these tariffs remains, for now, uncertain.
While some tariffs took effect on April 5 and others on April 9, the EO grants the president broad discretion to adjust these duties based on perceived economic and national security requirements. This flexibility, paired with potential judicial interventions or legislative responses, has created a fluid, unstable situation and global ripple effect.
One area of uncertainty? The global supply chain.
Pre-existing diversification efforts disrupted
The strategic shift away from China as a primary manufacturing base, which has been underway since the initial Trump administration, aimed to mitigate the financial strain of U.S.-imposed tariffs. However, the recent implementation of ‘reciprocal’ tariffs, extending beyond China to encompass a wider array of trading partners, has disrupted these plans.
The expansion of tariff applications has plunged many businesses into operational uncertainty. Companies must confront the daunting task of reassessing their global production strategies and grapple with the fundamental questions about where and how they will manufacture their goods.
The previously charted course of diversification is now complicated by the need to account for newly imposed tariffs across a larger geographic scope, compelling companies to adapt rapidly and potentially restructure their supply chains. This situation has generated a scramble for alternative manufacturing locations and strategic adjustments.
Trade disputes with China during the first Trump presidency led to the “China Plus One” strategy. Manufacturers diversified their production by relocating part of their operations to other Asian countries to lower labor costs and alleviate the risk of more substantial U.S. tariffs.
The recent announcement of a significantly expanded tariff structure, including a minimum 10% tariff on all countries and substantially higher rates for certain Asian economies, has thrown the “China Plus One” strategy into disarray.
“The ‘China Plus One’ strategy has been severely undercut by Trump’s tariffs that have by now encompassed every U.S. trading partner,” said Eswar Prasad, professor of international trade and economics at Cornell University. “The viability of rerouting output and restructuring supply chains through countries like Vietnam and India, with whom the U.S. had more constructive trading relationships, has been shattered by the latest round of tariffs.”
According to Prasad, despite the widespread tariff application, elevated tariffs on Chinese imports still create a relative advantage for supply chains routed through countries with relatively lower rates.
“However, the entire logic underpinning global supply chains as a means to cut costs and improve efficiency has been decimated by tariffs,” he said. He also emphasized that tariffs will significantly increase the expenses associated with maintaining “lean and mean supply chains” that frequently intersect with multiple national borders.
Medical supply chains feeling the pinch
A coalition of 26 House Democrats, led by representatives Doris Matsui (CA) and Brad Schneider (IL), sent a letter to the U.S. trade representative Jamieson Greer and commerce secretary Howard Lutnick voicing concerns that “reckless tariffs” pose a significant threat to the already vulnerable medical supply chain.
Despite Trump’s initial exemption of pharmaceuticals from the broad tariff measures announced earlier, analysts have cautioned that increased costs throughout the supply chain could still lead to price hikes, especially for generic medications.
“The supply disruptions of critical medical products will unavoidably hurt U.S. patients, force providers to make impossible rationing decisions, and potentially even result in death as treatments are delayed, or more effective medicines and products are swapped for less effective alternatives,” said the letter.
The representatives also warned that imposing tariffs on pharmaceuticals could have unintended consequences, potentially driving manufacturers to “cheaper foreign markets, undermining efforts to strengthen domestic and allied-country production.”
To minimize the potential impact on patients, lawmakers urged Greer and Lutnick to carefully assess the potential ramifications of tariffs on medications and medical supplies. They proposed considering exemptions or product waivers for active pharmaceutical ingredients, generic drugs, essential medicines, and critical medical supplies.
The group also called upon the trade officials to collaborate with the Food and Drug Administration (FDA) to expedite the approval of secure, alternative sources and to collaborate with Congress to bolster the resilience of the medical supply chain.
Potential positive effects for 3PL and merchants
Is there a silver lining to these tariff implementations? Perhaps. While the tariffs pose challenges, including increased transportation expenses and extended delivery schedules, they may spur innovation within third-party logistics (3PL) operations. Specifically, the tariffs incentivize the development of more streamlined routing and supply chain methodologies. 3PL providers can leverage these changes to create competitive advantages through:
- Enhanced warehousing solutions. Shifting from just-in-time (JIT) to just-in-case (JIC) inventory management, driven by the need to buffer against tariff increases, creates a demand for adaptable and scalable storage solutions. 3PLs can capitalize on this demand by offering customized warehousing options accommodating fluctuating inventory needs.
- Technology-driven visibility. Implementing advanced tech, like real-time tracking systems, enables 3PLs to manage longer transit durations and address potential customs delays, providing clients greater transparency and control over their shipments.
- Strategic logistics optimization. 3PLs can analyze trade routes and proactively adjust logistics strategies to help clients maintain operational continuity amidst the evolving tariff environment.
Tariffs will lead to higher import spending but also give merchants opportunities to refine their pricing models, strengthen compliance protocols, and enhance product differentiation, with key strategies like:
- Dynamic pricing adjustments. Tariffs have already inflated product acquisition costs, and merchants can use this timing to reassess their pricing structures. Transparent communication about pricing modifications is critical for preserving customer trust. Some companies, for example, have added a line item on invoices detailing the additional cost of tariffs.
- Supply chain diversification and negotiation. As with construction materials and medications, tariff pressures may motivate merchants to diversify their supplier networks, explore new market opportunities, and renegotiate with existing suppliers to build a more robust, adaptable framework.
Now what?
For the near term, businesses should prioritize staying informed and remaining agile. Knowing what’s happening as the tariff policies evolve is crucial. The best sources of information include the World Trade Organization and the U.S. International Trade Commission.
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