How Trade Uncertainty is Driving a Global Supply Chain Diversification Initiative

The announcement of sweeping tariffs on global trading partners by United States President Donald Trump has sent shockwaves through long-standing supply chains. It’s also inspired a widespread push among global firms to diversify their sourcing practices. 

Trump’s so-called ‘Liberation Day’ tariffs have been a major source of disruption for supply chains and have threatened to spark an inflationary acceleration of product prices as a result of higher import costs. 

Given that the reciprocal tariffs impacted 90 countries, the levies on trade also undermined China Plus One trade strategies, where businesses seek to diversify their manufacturing and supply chains by establishing production facilities in other countries while maintaining a presence in China. 

However, the long-term impact of trade tariffs and invitations by the United States to negotiate deals is likely to deliver a new age of supply chain diversification, with businesses looking globally for the best cost-effective efficiency. 

We’re already seeing evidence of this around the world. For instance, India’s auto component industry is adapting to trade uncertainty by recalibrating strategies to accommodate localization to anchor supply chains domestically and diversification to reduce exposure to market volatility. 

Indian firms like Kinetic Engineering and Samvardhana Motherson International Ltd. (SAMIL) have sought to form long-term partnerships to introduce a more technology-focused, risk-aware approach to global expansion. 

While Trump’s protectionist outlook appears set to encourage domestic supply chains, GEP has advised businesses reliant on suppliers impacted by tariffs to expand their sourcing networks to alternative markets in Southeast Asia, Eastern Europe, and Latin America. 

The consultancy also recommends negotiating long-term contracts with favorable pricing to better mitigate price increases. 

According to a recent Capgemini report into how business leaders are navigating supply chain disruptions, the reconfiguration of global supply chains and manufacturing capacity, including reshoring and nearshoring production and diversification, are being strategically prioritized over short-term profitability. 

As a result, almost 60% of executives have stated their desire to continue their efforts despite higher costs, while 65% have sought to lower reliance on Chinese imports by investing in ‘friendshoring’ over the next three years to re-risk their supply chains. 

Friendshoring is a practice that refers to sourcing or producing goods in nations that are political and economic allies. However, the far-reaching nature of Trump’s tariffs has made it more challenging to identify trading ‘friends.’

In the coming weeks and months, it’s likely that more businesses will begin to see which nations are best positioned for friendshoring as fresh deals are reached. 

Overcoming Supply Chain Disruption

One example of the uneven impact of Trump’s tariffs on supply chains can be seen in Vietnam. 

The Southeast Asian nation was forecasted by Oxford Economics to continue its impressive growth experienced in 2024 by growing 6.5% in 2025 and outperforming its regional peers, but tariff pressure has severely disrupted the nation’s trade outlook. 

While the Liberation Day tariffs on Vietnamese exports weren’t across the board, levies of up to 46% on categories like steel, electronics, and furniture have threatened to disrupt a key economic partner for the United States. 

Prior to the tariffs, Vietnam’s rate of growth was supported by its strong position for supply chain diversification away from China. 

During Trump’s first presidency, the nation became a leading player in the emerging China Plus One strategy of US firms finding a strong trading partner away from the tariff uncertainty of Asia’s largest economy. 

In recent weeks, Vietnam’s position as a key supplier for US goods was strengthened further as LEGO opened a new factory focused on enhanced supply chain agility and stronger environmental sustainability. 

The production hub, LEGO Manufacturing Vietnam, located in the Binh Duong province, is the firm’s second factory in Asia, with $1 billion committed over the next 15 years and a workforce that’s expected to reach 4,000. 

Although the timing of the 46% tariffs on Vietnamese exports to the United States may have been a pain point for LEGO, early indications suggest that the nation is actively seeking to retain its status as a leading China Plus One nation when it comes to supply chain efficiency. power,

The nation already benefits from trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU-Vietnam Free Trade Agreement (EVFTA), and the Regional Comprehensive Economic Partnership (RCEP), and tariff negotiations have already begun with the United States among officials in a bid to lower the levies on exports. 

Vietnam’s friendlier stance on US tariff negotiations is a sharp contrast to China, which prompted a trade war that saw import taxes reach 145% on imports from the superpower, and is likely a conscious effort by the nation to retain its status as a prosperous friend-shoring location for US businesses. 

The nation’s stability, strong labor force, and impressive range of worldwide trade agreements has led to Vietnam becoming a popular location for registering companies, and given that 400 local and foreign exhibitors recently participated in the emerging economy’s Global Sourcing Fair to a network of 10,000 buyers, it’s clear that Vietnam is intent on becoming a leading hub for diversified supply chains even in light of tariff pressure. 

The Future Could be Friendshoring

The full extent of the United States’ tariffs on its trading partners is far from being resolved. President Trump expects to deal with vast international negotiations to bring export costs down, while other nations like China have opted for a more retaliatory stance. 

It’s likely that supply chain diversification will be heavily impacted by friendshoring over the years ahead, with negotiating countries seeking stronger deals and trade war adversaries aiming to win favor with allies. 

For business leaders, this will call for a larger emphasis on supply chain agility moving forward. As Vietnam’s model shows, there’s plenty of mutual benefits associated with friendshoring, and it’s set to become the key for sustainable supply chains for the foreseeable future.