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Home » Trump’s Tariffs Will Put Retail Supply Chains To The Test

Trump’s Tariffs Will Put Retail Supply Chains To The Test

adminBy adminApril 21, 2025 Market No Comments7 Mins Read
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Retail analysts expect inbound cargo levels will drop sharply in May and the months following, despite retailers picking up imports in advance of Trump’s reciprocal tariffs.

The National Retail Federation said imports during the second half of the year will drop “dramatically” through the end of the year, leading to a total net volume decline of 15% or more through the rest of the year.

“Retailers have been bringing merchandise into the country for months in attempts to mitigate against rising tariffs,” Jonathan Gold, NRF vice president for supply chain and customer policy, said in a statement. “At this point, retailers are expected to pull back and rely on built-up inventories, at least long enough to see what happens next.”

ForbesLVMH Sees Revenues Drop As Tariff Anxiety Touches Luxury ConsumersBy Pamela N. Danziger

Inventory Vulnerability

Retailers had their supply chains tested during the pandemic and they are headed for another resiliency test this time too. “If you go back pre-pandemic, a lot of retailers had fine-tuned a just-in-time supply chain, where goods were getting here a week before they needed to land on shelves. Covid changed all of that,” said Ashley Hetrick, sourcing and supply chain leader at BDO.

After the pandemic, retailers started to build up inventory excess as a buffer. But now their inventory buffers are starting to backfire.

“The challenge is retailers find themselves carrying too much of the wrong kind of inventory because they’ve become so risk averse,” she continued. In other words, retailers have too little of what sells and too much of the stuff that doesn’t.

A BDO survey conducted in November after the election among 100 retail CFOs at companies generating over $350 million to more than $3 billion in revenues found that only 22% said their company’s inventory position was healthy. A majority reported extreme (16%) or moderate (42%) inventory shortages, presumably in higher-demand products.

“Because of the uncertainty, retailers are feeling a lot more pressure to make tough decisions about whether to bring things in on previous timelines or to hold things at the production site and wait to see what changes,” she continued, adding that some retailers find their most recent inbound shipments tied up at the border awaiting processing.

With the expected slowdown in import shipments ahead, inbound products will likely move more quickly to where they need to go, but retailers have to hope they accurately forecast demand so they have the right products on the shelves in late summer into fall.

ForbesHow Consumers Are Preparing For Tariffs Amid Economic UncertaintyBy Pamela N. Danziger

Shuffling The Deck

Adding another layer of complexity to potential inventory shortfall, retailers are trying to shift sourcing relationships from high-tariff to lower-tariff countries. While many retailers have already been rejiggering their manufacturing networks out of China into Vietnam, India, Thailand and other places, they still face extreme vulnerability when it comes to China.

“The idea of being able to uproot Chinese manufacturing at this point – to move it to another place in time to respond to some of these near-term changes – is unlikely,” Hetrick said.

The nation’s largest retailers have more room to maneuver given their size and scope, though Amazon has reportedly canceled orders from China for summer-centric products, e.g. beach chairs, air conditioners and scooters, and Walmart got a dressing down from Chinese officials after it tried to get suppliers to absorb some tariff impact on prices.

However, smaller retailers are left holding the bag. A Pymnts Intelligence survey among 60 CFOs at mid-market firms with revenues between $100 million and $1 billion conducted in February reported that 80% of those in the product goods sector expect shortages and delays getting certain products in and some 65% anticipate higher costs due to reconfiguring their supply chain. In addition, 80% are looking down the barrel at increased costs for raw materials.

Yet, product suppliers don’t expect to raise prices immediately with some 65% planning to negotiate with existing suppliers for better prices to offset tariffs, though 45% expect to eventually have to pass along higher prices to customers.

At the same time, some 35% are looking to diversify their international suppliers and the same percentage are considering redesigning products to use alternative materials and sources. Some 30% plan to expand into higher-margin products, but only 10% will discontinue products affected by tariffs.

While the survey suggests mid-market CFOs have plans in place to confront the tariff uncertainties, an analysis of the survey results led Pymnts to conclude the opposite: “Most middle-market firms did not make concrete plans for dealing with the tariff onslaught.”

It noted that only 20% of CFOs said their companies had implemented contingency plans for supply-chain disruptions, where BDO’s Hetrick sees particular vulnerability for retailers as import levels decline in the coming months.

Retailers Try To Take Action

Boston Consulting Group’s senior partner and global retail sector leader Nate Shenck says retailers don’t have a minute to lose to shore up their supply chains to manage the uncertainty.

“Take action now!” he stressed. Retailers must take advantage of the 90-day reprieve before the worst of the tariffs go into place in early July.

He is advising clients to establish a cross-functional command center, including financial, supply-chain operations, marketing and merchandising teams, to develop a rapid response plan that accounts for numerous contingencies, both on the demand side – “We have to assume the consumers to change the way they behave” – and the upstream supply side.

Upstream it means assessing a retailers’ exposure category by category, even down to the item-by-item level. “This is new muscle for retailers that haven’t had to do this before because the sources and economic supply has been fairly stable,” he said.

“The good news is that by investing in these tools and capabilities now, it will help not just in the near term for tariff response, but in the long run once things get back to ‘business as usual.’”

However, Shenck warns balancing projections on the demand side to satisfy needs on the supply side will take take longer than during the abrupt disruptions experienced during the pandemic.

“We’re talking about a much longer period for these changes to ripple through the supply side to the demand side, so retailers who are closest to the customer are going to have to figure it out pretty quickly to soften the blow so they remain competitive,” he continued.

Opportunity In Disruption

Building the data sets, tools and intelligence mechanisms to bring demand forecasting together with supply-side planning is an immediate priority and one that will payoff down the road.

“This is a multi-year effort, and very likely, retailers will come out stronger on the other side,” Shenck shared, adding that marketplace disruption ultimately creates opportunities for companies and brands that lean into it.

“Disruption creates opportunities, but no one has a crystal ball to see what’s going to happen over the next couple months. What we can say is that scenario-based plans will help retailers be better prepared to take action once they know what elements of the tariffs are going to remain and what might be pulled back.

“But the main message is act now. Take moves that make sense on both the cost side and the demand side. This doesn’t change the basic needs of being a strong retailer. You’re here to serve the consumer, understand what they need and ultimately position yourself to best serve them.”

Shenck reminds us, “Retailers succeed by doing two things: understand consumer demand and meet that demand in a cost-effective manner,” and that formula doesn’t change no matter how many variables the pending tariffs throw into the equation.



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