Tariff Crisis Could Trigger a Collapse in Global Supply Chains

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Global supply chains face renewed pressure as Trump’s reinstated tariffs have revived trade tensions that previously disrupted global commerce in 2018 and 2019. This time, the stakes are higher. The OECD lowered its global growth forecast to 2.9 percent for 2025 and 2026, attributing the decline to rising protectionism and a fragmented trade environment. The Bank of England’s governor stated that the rules-based global trade system has been seriously undermined.

Business sentiment is following suit. A survey conducted by Gallagher found that 90 percent of US business owners are worried about the impact of tariffs on supply chains. Logistics managers and procurement teams now face unstable costs, delayed shipments, and increasing regulatory hurdles.

Rare earth metals and the pinch on critical industries

One of the most immediate consequences has come from China’s move to restrict exports of rare earth metals. Controlling around 90 percent of global production, China has the power to disrupt industries that rely on materials such as neodymium and yttrium.

BMW has already suspended production of some EV models due to limited access to these components. Other automakers, including Volkswagen, are warning of longer lead times and workforce reductions. These materials are essential not only for EVs but also for electronics and defense systems.

How the automotive and semiconductor sectors are absorbing the blow

The automotive and semiconductor sectors are again under stress. After navigating chip shortages in recent years, automakers now face compounding issues. OEMs are delaying vehicle launches and cutting supplier orders.

Volkswagen has reported increased production costs, while several US manufacturers are struggling to import microcontrollers from Asia. Semiconductors, necessary for everything from powertrains to navigation systems, are in short supply due to trade restrictions and component bottlenecks.

Shipping delays and higher inspection rates are straining port operations. Many replacement suppliers lack the volume or qualifications needed for automotive standards. Retail prices are climbing, with analysts projecting up to a 10 percent increase in vehicle prices this year.

Artificial intelligence as a strategic tool for disruption forecasting

AI-based supply chain platforms have gained traction as companies search for ways to increase visibility. Systems developed by firms such as Everstream Analytics use data models to forecast disruption, flagging potential issues across global networks.

These tools rely on real-time data, risk assessments, and machine learning to provide actionable insights. While AI cannot predict geopolitical decisions, it can improve preparation by identifying patterns and highlighting exposure.

Companies using AI are adjusting more quickly, managing inventories more effectively, and implementing contingency plans with better timing. These advantages are limited but meaningful in a volatile market.

Sources:

• Forbes