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Invoked to impose tariffs since early 2025, IEEPA grants U.S. presidents broad authority to regulate trade during national emergencies. While designed for genuine security threats, its extension to tariff policy, often bypassing the congressional process, has prompted lawsuits questioning its legality and scope, and increased market volatility. Businesses face rising costs and increased operational risks as the legal and regulatory landscape evolves.
By utilizing IEEPA to implement tariffs, the White House is acting with rare latitude without congressional approval and other formal processes (e.g., public consultation. The legal challenge to IEEPA is creating further uncertainty as the fate of the IEEPA tariffs (i.e., those against Canada, Mexico, the EU and many other countries) remains indefinite, leaving businesses unsure of whether they should make long-term adjustments to supply chains. In the short term, firms must adapt rapidly to new compliance demands, from reconfiguring sourcing routes to reviewing customs bonds. Accurate classification, country-of-origin verification, and thorough documentation is critical to avoid penalties and delays. Overlapping Section 301 and 232 tariffs compound complexity. Since new tariffs can exceed 25%, importers must ensure bond capacity is adequate to cover higher duty outlays.
Between rising geopolitical tensions and shifting trade policies, global trade is more complex and unpredictable than ever. Importers and exporters are feeling the pinch, and businesses that haven’t built flexibility and redundancies into their supply chains are at risk of being left behind. One way importers and exporters can mitigate the risks inherent in a volatile market is to diversify their supply chains.
Relying on a single region, supplier, or market exposes operations to increased risk and potential disruption. Diversification – intentionally spreading sourcing, production, and distribution across multiple partners and geographic regions, is an essential strategy in 2026. Beyond risk mitigation, a diverse supply chain presents opportunities to lower costs and expand reach, and to build flexible and resilient processes that help your business respond quickly to ongoing change. As trade conditions shift and global uncertainties persist, diversification presents a competitive advantage that can help businesses thrive in today’s landscape.
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February Field Marketing Program: Supply Chain Diversification
Recent trade data shows a clear shift toward diversification. North American companies are reaching into new markets, taking advantage of new trade deals, and decreasing their reliance on traditional partners. According to the United Nations Conference on Trade and Development (UNCTAD)’s December 2025 report, global trade exceeded $35 trillion in 2025, a 7%, or $2.2 trillion, increase from 2024. But that number doesn’t represent a simple linear growth in goods traded.
Although goods still accounted for about $1.5 trillion of the increase, the services trade represents a growing portion of that growth, increasing 9% from 2024. Plus, rising prices in the first half of 2025 drove the value of goods higher, not volumes (though volumes and prices decreased by the end of the year). Finally, many businesses spent the first half of the year stockpiling goods to offset new tariffs threatened or imposed by the United States.
In other words, trade is shifting. Canadian trade data reinforces this trend as well: The percentage of Canadian exports to the U.S fell to 67% in 2025, down from 73% in 2024, while Canadian exports to the EU and China both grew about 18%. Other regional shifts stand out as well. East Asia and Africa saw strong export growth in 2025, compared to the slower growth of North American exports.
Value of global trade in 2025
YoY increase in value of global trade
Value of services trade in 2025
Product categories are also shifting. The UNCTAD report noted a 4% decline in global automotive trade over the past year, with combustion-engine vehicles falling 13% and hybrid vehicles rising 18%.
YoY growth in exports from East Asia
YoY growth in exports from Africa
growth in exports from North America
The shifts apparent in the latest trade data aren’t happening by accident. Companies are adjusting their supply chains in response to global tensions, tariff volatility, rising costs, and evolving trade agreements.
Geopolitical and Economic Pressures
U.S.-China trade relationship
Tariff uncertainty
Rising costs
The ongoing trade friction between the U.S. and China has been a primary catalyst. Tariffs and the threat of further duties have made sourcing from China more expensive and unpredictable. This has led many companies to adopt a "China plus one" strategy, where they maintain some operations in China while developing a second supply base in another country. As tariffs on Chinese goods escalated, U.S. importers aggressively shifted volume to alternative markets to mitigate costs, such as Thailand (37% growth in U.S. exports in 2025) and Vietnam (52% growth in 2025, continuing a surge that began in 2019, when the United States first increased tariffs on China).
Throughout 2025, a wave of new and threatened tariffs forced supply chain leaders to rapidly rethink their sourcing strategies. And it’s not just China in the crosshairs: The U.S. has implemented significant tariff hikes on multiple countries, including close trading partners like Canada, forcing those partners to respond. In response to new U.S. tariffs on Canadian aluminum, steel, and agricultural products, for example, Canada enacted reciprocal tariffs targeting key U.S. exports, from dairy and processed foods to household goods. This escalating tariff environment disrupted existing trade flows and made cost forecasting more difficult for businesses.
Production and labor costs have climbed sharply in traditional manufacturing hubs. In 2025, hourly compensation in the U.S. manufacturing sector rose by 4.8%, while global input costs increased by an average of 5.4%. These rises reflect persistent inflation, higher costs for materials and energy, and continued uncertainty around tariffs and trade policy. Diversifying allows businesses to find more cost-effective partners in emerging markets.
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Another outcome of recent trade volatility has been the introduction of several new trade agreements around the globe. Countries are forging new alliances, creating a more multifaceted global trade system where businesses no longer need to rely on one or two partners – nor should they. Although many of these agreements are limited in scope, smaller pacts can still provide benefits for specific industries, provided businesses have flexible enough supply chains to take advantage of them. Some recent trade agreements include:
EU-India Free Trade Agreement
U.S.-India Trade Framework
Canada-China Limited Trade Agreement
U.S.-EU Framework Agreement
U.S.-Vietnam and U.S.-Thailand Frameworks
U.S.-Cambodia and U.S.-Malaysia Agreements
Current Status: Announced in late 2025, signed January 2026 Key Objectives: Eliminate or reduce tariffs on over 95% of shipments, enhance market access for European cars, and strengthen trade in textiles and chemicals.
Current Status: Finalized and announced in February 2026 Key Objectives: Reduce U.S. tariffs on Indian goods from 50% to 18%; boost Indian exports including textiles, chemicals, and auto components; expand U.S. exports to India in energy and technology; and strengthen bilateral trade relations.
Current Status: Signed January 2026 Key Objectives: Reduce tariffs on electric vehicles and canola oil, aiming to rectify trade imbalances and improve bilateral relations.
Current Status: Announced July 2025, implemented August 2025 Key Objectives: Eliminate tariffs on industrial goods, provide preferential market access for U.S. seafood and agricultural products.
Current Status: Signed October 2025 Key Objectives: Establish reciprocal trade frameworks, reduce tariffs on select goods. bilateral trade relations.
Current Status: Announced October 2025 Key Objectives: Develop frameworks for reciprocal trade agreements, enhance market access for U.S. goods.
The current global trade landscape makes a compelling case for supply chain diversification. Economic and geopolitical uncertainty represent risk that can be offset by diversification, while new trade agreements open doors to new markets and potential cost savings, and make reducing dependence on singular regions even more attractive. By adapting to these changes proactively, importers and exporters can ensure resilience, capitalize on new technologies, and position their organizations for sustainable growth in an increasingly interconnected marketplace.
Benefits of a Flexible Supply Chain
Risk mitigation
By spreading sourcing and production across multiple regions and suppliers, you can reduce your exposure to natural disasters, political instability, or regulatory changes in one area.
Cost optimization
Market access
Improved resilience
Diversification isn’t always the best strategy for every business. For companies in highly specialized industries with unique intellectual property or complex manufacturing processes, a single, highly integrated supply chain may be more efficient. The cost and complexity of qualifying new suppliers in sectors like aerospace or pharmaceuticals can be prohibitive. In these cases, strengthening relationships with existing partners and building up strategic inventory may be a better approach.
Is Diversification the Right Move?
Diversification lets you tap into markets with more competitive labor or production costs, helping manage expenses. Sourcing from more than one country can also ease the impact of currency fluctuations or sudden increases in raw material prices.
Establishing a presence closer to your end customers allows for faster delivery, reduced shipping costs, and improved responsiveness to changing demand. This localized approach can also help you navigate market-specific regulations and preferences more effectively.
Flexible networks empower your business to adapt quickly during periods of global volatility. You can reroute shipments, shift production, or scale output as needed, strengthening your ability to maintain service levels when demand or supply conditions change.
You don’t have to overhaul your entire supply chain overnight. Begin by shifting a small percentage of your production to a new supplier or region. This allows you to test the waters and work out any issues before making a larger commitment.
Start small and scale
Assess your vulnerabilities
Leverage technology
Identify new suppliers
Build strong relationships
Conduct a thorough audit of your current supply chain. Identify and score areas of risk exposure, including single points of failure, including suppliers, transportation routes, and geographic regions.
Enhanced visibility is critical for making informed decisions and managing a more complex network. Modern technology platforms, including AI-driven solutions, can provide real-time data on inventory levels, shipment tracking, and supplier performance.
Research potential alternative sourcing regions. Look for countries with stable political environments, favorable trade agreements, and a capable workforce. Thoroughly vet potential suppliers for quality, reliability, and compliance with ethical standards.
A diversified supply chain relies on strong partnerships. Invest time in building relationships with your new suppliers, logistics providers, and trade consultants. Clear communication and mutual trust are essential for navigating challenges together.
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Livingston’s global trade experts can provide the guidance and technology to assist you in building a more flexible supply chain. From navigating and understanding new trade agreements and duty optimization strategies to vetting suppliers and implementing new technology, we can help.
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Our experts monitor changes to trade policies to keep you informed and provide you with critical perspectives on managing customs and supply chain challenges during times of volatility. Follow us on LinkedIn and visit our website for up-to-date information and expert insights.
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