Navigating the Tariff Turbulence—and Beyond: Key Insights from the State of Supply Chain Report 2025

Geopolitical shifts and sudden tariff hikes are no longer just background noise in global trade—they’re reshaping the very core of how brands source, produce, and deliver goods. In our newly released State of Supply Chain Report 2025, we explore how tariff uncertainty, forced labor regulations, and consumer-driven sustainability are colliding to redefine supply chain strategies.

If tariffs and political tensions are top of mind for your business, you’re not alone. According to our research, over 40% of surveyed executives cite tariffs as a primary disruptor, triggering rapid pivots from China to Vietnam, Cambodia, and nearshoring destinations. Yet these quick fixes come with fresh hurdles—elevated logistics costs, complex compliance requirements, and an ever-present risk that new tariffs could emerge elsewhere.

Tariffs: The Unpredictable Storm

Brands that once relied heavily on a single country are finding themselves forced to diversify in record time. The logic is clear: mitigate risk by spreading production across multiple regions. But as one sourcing executive told us, “If tariffs on Vietnam happen tomorrow, we’re right back where we started.” The takeaway? Agility and real-time intelligence have become essential. Companies now model “what-if” scenarios, watch political flashpoints, and brace for regulatory surprises.

For many, diversifying isn’t just about dodging tariffs; it’s also about confronting emerging ESG and labor standards. Some factories simply relocate from China to Vietnam, bringing unresolved forced labor or compliance issues along with them. That’s why full transparency—not just lower tariff exposure—is key.

Forced Labor & Compliance: No Room for Error

Beyond tariffs, rising forced labor regulations—like the Uyghur Forced Labor Prevention Act (UFLPA)—can halt shipments at the border. In our survey, 75% of organizations increased compliance budgets to handle these tightened mandates. Yet 20% worry they’re pouring too many resources into “regulatory overhead” instead of addressing real factory-level improvements.

Penalties for non-compliance are severe: seized goods, reputational harm, and lost customer trust. Leading companies are embracing traceability tools—digital passports, AI-based audits, and worker-voice platforms—to spot red flags before they escalate. A single forced labor claim can undermine years of brand-building, so forward-thinking leaders consider compliance officers strategic partners, not mere box-checkers.

Sustainability: From “Nice-to-Have” to Non-Negotiable

Our research also reveals that over 75% of executives say sustainability strongly influences consumer purchasing decisions, though shoppers remain price-sensitive. Businesses face a dilemma: they must incorporate recycled materials, reduce carbon footprints, and invest in greener processes, yet struggle to pass higher costs on to customers.

In this “hourglass” market, high-end and low-cost segments flourish, while mid-tier players get squeezed. Many retailers push sustainability-related costs back onto suppliers. However, savvy leaders see sustainability as more than a compliance checkbox—they view it as an innovation catalyst. Waste reduction, circular design, and energy-efficient processes can yield long-term operational savings while meeting rising environmental standards.

Digital Transformation: The Differentiator

Amid these shocks, fewer than 10% of surveyed companies have reached near-full automation in their supply chain. Yet early adopters of AI-driven risk modeling, dynamic forecasting, and real-time compliance checks are seeing tangible benefits—faster lead times, streamlined audits, and nimble responses to sudden disruptions.

Historically, siloed data and cultural resistance have held back digital transformation. But as complexity intensifies, manual processes simply can’t keep pace with tariff changes, forced labor scrutiny, or evolving sustainability laws. The future belongs to those who build robust digital ecosystems—with standardized data inputs, advanced analytics, and AI-driven insights—so they can pivot quickly, whether a new tariff comes down or an environmental regulation tightens.

The Path Forward

1. 1. Embed Tariffs & Compliance Into Core Strategy
      Stop viewing tariff policy as a short-term hurdle. Make it a central pillar of your sourcing strategy, backed by continuous scenario modeling and high-visibility monitoring.
   2. Treat Forced Labor Scrutiny as Existential
      One violation can lead to seized shipments and a PR crisis. Proactively invest in third-party verifications, digital worker-voice platforms, and credible audits that transcend “checklist” approaches.
   3. Sustainability at Cost Parity
      Consumers demand eco-friendly products but refuse to pay extra, intensifying margin pressures. Look for cost-neutral innovations—like recycled polyester and more efficient manufacturing processes—that tie environmental goals to operational efficiency.
   4. Accelerate Digital Adoption
      AI, real-time dashboards, and automated compliance checks reduce guesswork. Successful pilots—like automated container forecasting—should scale enterprise-wide, creating a unified data framework that supports procurement, compliance, and ESG efforts.
   5. Collaborate to Thrive
      “Audit fatigue” hurts both factories and brands. Shared standards, pooled audits, and co-investment in greener processes not only lower costs but also foster trust and continuous improvement across the supply chain.

Download the Full Report Here to discover:

• • How other businesses are navigating tariff uncertainty and geopolitical tensions.
  • Best practices for forced labor compliance, from DNA testing to digital product passports.
  • Real-world examples of AI solutions that cut lead times and reduce overhead.
  • Why sustainability is now a baseline expectation—and how to make it work without eroding margins.

Don’t wait for the next tariff wave or regulatory crackdown to catch you off guard. Arm yourself with the insights and strategies to stay agile, ethical, and competitive in a world where change is the only constant.