Boardroom conversations have changed markedly over the past decade. Trade and supply chains, once niche concerns, are now often on corporate agendas, as businesses worldwide are grappling with disruptions to their procurement, production and logistics operations. The culprits are many: trade wars, geopolitical tensions, climate events and a global pandemic. In 2024 alone, bridges collapsed, earthquakes struck, the wars in Ukraine and the Middle East raged, US-China tensions rose, EU-China relations soured and Donald Trump was re-elected as the president of America. Looking ahead to 2025, many of the challenges to trade will persist and new ones will undoubtedly emerge. However, businesses are not retreating from international trade, they are stepping up.
There are reasons for optimism. Companies are finding ways to navigate political fragmentation, while technologies such as artificial intelligence are improving efficiency and opening up new opportunities for growth. Those that adapt quickly to these shifting dynamics will set themselves apart from their competitors. In this fifth edition of Trade in Transition, we continue exploring how businesses perceive and respond to the new era of globalisation.
Key finding one:
Firms brace for deeper protectionism as global trade may face its most turbulent era since the 1930s
Donald Trump’s return to the White House suggests an intensification of American protectionism is imminent, with tariffs wielded to pursue other policy goals. The world of trade is no longer one of international rules, but of mercantilist confrontation. Mr Trump has proposed a 10% tariff on all imports, levies of up to 25% on goods from Mexico and Canada, and even steeper duties on Chinese products. Although such measures are unlikely to be implemented in full overnight, their mere suggestion is already reshaping business strategies. Almost 40% of firms globally are increasing US-based sourcing to avoid disruptions, while others are focusing on cutting costs or lobbying governments to mitigate risks. However, the impact might be harder to contain, as the countries Mr Trump will target are better prepared to retaliate. Their responses might include trade incentives to woo US allies, and export restrictions on vital resources (which China has already imposed plenty of). This tit-for-tat retaliation threatens a new era of global trade fragmentation, comparable to the trade wars of the 1930s.
Key finding two:
Dual supply chains are now also a two-way street
Establishing dual supply chains—one tied to China and another entirely independent—has become increasingly common among Western firms, but they are not the only ones adapting. About 32% of businesses are pursuing this approach to hedge against region-specific risks. Western companies like General Motors and TSMC use dual supply chains to keep tapping China’s profitable market while protecting themselves from the associated geopolitical risk. Meanwhile, Chinese firms, especially in the auto industry, are doing the reverse: setting up parallel supply chains to navigate growing trade restrictions in the West while strengthening operations at home. Western firms are focusing on profitability and resilience, whereas Chinese firms are prioritising market access. The strategies may look similar, but the different motivations highlight the increasingly fragmented world of trade.
Key finding three:
Non-aligned countries emerge as important trade partners, but not without concerns
In a divided global trade system, non-aligned countries like Vietnam, the United Arab Emirates (UAE) and Mexico are increasingly seen as supply-chain safeheavens. According to 71% of the executives we interviewed, these countries can help firms manage risks by acting as politically insulated trade partners. However, scaling up trade with non-aligned countries poses challenges: 63% of businesses worry about regulatory inconsistencies, which could undermine the ability of non-aligned countries to serve as reliable intermediaries. Consequently, only 27% of firms see expanding into more stable markets as the best way to deal with geopolitical tensions.
Key finding four:
Friendshoring is more political than it is practical
Relocating supply chains to politically aligned countries, or “friendshoring”, is the most popular strategy to reduce geopolitical risks, with 34% of firms adopting this approach. Western governments, particularly in the US, are nudging businesses toward friendlier markets through policies like export controls and tariffs on Chinese goods. However, businesses will struggle to bet on long-term “friends”. As Mr Trump’s tariffs-based approach to international relations takes hold, determining which nations qualify as allies (and how long they will remain so) will become an increasingly complex calculation for supply-chain planners. Furthermore, whether friendshoring will work in practice remains unclear. Although American firms are shifting production to Vietnam or Mexico to reduce dependence on China, many of these countries still rely heavily on Chinese inputs.
Key finding five:
Finding the sweet spot: balancing diversification and localisation
Businesses are split between spreading supply-chain risk across regions and staying close to home. Almost 46% are diversifying geographically to enter new markets and hedge against disruptions, while 42% are localising supply chains to cut transport costs and improve oversight. A calculated mix between the two approaches might be the right answer. Each approach has its limits: diversification can be complex and expensive, whereas localisation risks cutting off global opportunities. However, enjoying the best of both approaches can work, by sourcing materials from multiple regions to reduce reliance on any one geography while shifting production closer to key markets for greater control and agility. In the fractured world of trade, firms that combine global reach with local responsiveness are most likely to thrive.
Key finding six:
Diversification trumps inventories: less hoarding, more hedging
The days of stockpiling goods in sprawling warehouses are fading. Only 20% of executives see building inventories as the best strategy for resilience, compared with 42% who favour diversification across suppliers and regions. However, it isn’t about picking only one solution. The majority of firms are trimming their inventory buffers—down from 10.2 weeks in 2022 to 8.6 weeks in 2024—while casting a wider net for suppliers to ensure flexibility when shocks occur. About 37% of executives feel that inventories and diversification are equally effective. The solution seems to be balance: leaner inventories free up some cash, while diversified suppliers reduce reliance on any single source and offer room for growth. In a trade landscape where adaptability is fundamental, hoarding is out and strategy is in.
Key finding seven:
More suppliers, more flexibility; fewer suppliers, more control
Firms favour working with a greater number of suppliers for intermediate goods, raw materials and services. Three-quarters of businesses are diversifying their supplier base, spreading risk and increasing resilience by working with more partners. However, not everyone is casting a wider net. About 25% of firms prefer to work with fewer providers as a deliberate strategy. For these firms, the benefits of working with fewer suppliers include higher quality and consistency (38%), stronger, trust-based relationships (35%) and lower administrative costs (28%). Although diversification reduces the chance of disruption, consolidation offers reliability and simplifies oversight. Choosing suppliers is yet another balancing act facing supply-chain strategists.
