On Tariffs and Procurement Strategy

Global trade saw a structural shift towards liberalization post-1945, with successive rounds of tariff and non-tariff trade barriers being dismantled. The key premise that drove these changes was the assumption that the new, globalized, relatively stable geopolitical conditions were to last indefinitely, a belief that became so entrenched that corporate governance, management theory, capital allocation, and procurement practice widely adopted it.

However, this assumption is now under sustained stress. A multitude of factors are now widely believed among scholars and corporates to be driving a change in the globalized free-trade regime, including but not limited to (i) escalating bilateral tariff conflicts between great powers, namely the United States and China; (ii) growing use of national security concerns as a justification for trade restrictions, in particular through export controls on technologies such as semiconductors; and (iii) domestic political and economic concerns in the United States— the principal geopolitical guarantor of the postwar globalized order— forcing a more transactional approach to international security commitments and overseas engagement. Enterprises must now confront these changes, in part through reorganizing supply chains and creating redundancy in the face of heightened geopolitical volatility.

Enterprises that rearchitect their procurement functions into a technologically sophisticated, pre-emptive, strategic center embedded within cross-functional governance will be meaningfully better positioned to navigate the forthcoming shifts. In essence, the procurement function would benefit from an elevated position in enterprise governance, as the presumed constants of the globalized era are projected to be in considerable flux.

Evidence draws attention principally to three key priorities: (i) a more balanced evaluation of supplier considerations, integrating supply continuity, geopolitical exposure, and supplier recovery time— all of which are C-level considerations, further reinforcing the necessity for the elevation of procurement into a strategic center; (ii) the establishment or bolstering of a dedicated geopolitical risk monitoring capability, particularly one that leverages machine learning and data visualization to enhance visibility and enable proactive action; and (iii) in the cases of strategically or geopolitically sensitive supplier relationships, a move towards co-development partnerships to create supplier investment in outcomes rather than transactional fulfillment of contracts— redesigning performance metrics to create incentives for both parties to be accountable to long-term outcomes, efficiency, and reliability, rather than price and volume alone.