Blue Yonder: Why Businesses Need a Tech-Driven Tariffs Plan

European businesses are scrambling to assess the potential impact of US tariffs on their supply chains, with some sectors facing particularly difficult choices about their future operations and market strategies.

The pharmaceutical industry appears to be one of the most vulnerable sectors, potentially facing what Blue Yonder's Simon Bowes describes as a "catch-22 dilemma". 

Simon, CVP Manufacturing Industry Strategy for the EMEA region at Blue Yonder, says pharmaceutical companies may need to "bear the cost of relocation or absorb the tariffs and face increased costs for manufacturers and consumers".

Automotive industry under pressure

The European automotive sector stands to be particularly hard hit by any new tariffs, coming at a time when the industry is already grappling with multiple challenges.

"The industry is already struggling due to competition from China, the withdrawal of electric vehicles (EVs) subsidies in key markets and the ongoing transition to European sustainability regulation," explains Simon. 

"As the US is a critical market for European car makers, tariff threats are sending the industry to boiling point - and if placed on internal combustion engine vehicles (ICEVs), it would put a tin lid on everything that's going bad for the industry."

As businesses face these uncertainties, the role of technology in supply chain management becomes increasingly important. Modern tools, particularly those powered by AI, are proving essential for scenario planning and strategy development.

"Supply chain management tools enable companies to evaluate and model different scenarios to calculate the impact of tariffs on business profitability," Simon notes. "While it feels impossible to predict if tariffs will be imposed on Europe, businesses should have a plan ready to go with every scenario."

Global trade at risk

The implementation of US tariffs could have far-reaching consequences beyond immediate trade relationships.

Simon warns that such moves could trigger a domino effect of protectionist measures worldwide, potentially disrupting established patterns of global specialisation.

"If US tariffs are imposed, it could set off a chain reaction across the globe," he continues. "This could limit the ability of companies to leverage the global specialisation and expertise that currently drives international trade.

"For instance, the world's reliance on Taiwan for semiconductors or Germany's expertise in automotive engineering would become more complicated if countries erected barriers against each other."

While some industries face significant challenges, others may be better positioned to weather the storm. The luxury goods sector, for instance, appears to have more flexibility in absorbing additional costs, according to industry experts.

However, the broader implications of increased tariffs could be substantial, as Simon points out, "The rise of tariffs would likely stifle competition and innovation. While some industries could benefit from protectionism, others would undoubtedly face higher costs and reduced market access."

Planning for the future

In response to these challenges, businesses are increasingly turning to advanced technological solutions. AI-powered systems are proving particularly valuable in helping companies navigate the complexity of modern supply chain management.

"AI can evaluate vast amounts of real-time data," Simon highlights. "Working like a GPS system, it simulates 'what-if' scenarios tailored to different variables, meaning businesses can strategically decide the best course of action, whether that is using new suppliers, using a co-manufacturer or absorbing tariff costs."

As European businesses continue to monitor developments in US trade policy, the importance of flexible, responsive supply chain strategies has never been more apparent.

While the ultimate impact of potential tariffs remains uncertain, companies across sectors must working to ensure they have robust contingency plans in place.

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