How 2025 Trade Hit 35 Trillion While Supply Chains Struggled With Tariffs, Talent, And Tech

Prices keep rising, lead times keep slipping, and yet global trade is still on track to break records. We dig into that paradox and make sense of a year where supply chains fought on multiple fronts: tariffs compounding at every border, inventories ballooning, and returns threatening to swallow margins. I walk through the latest data showing trade flows surpassing 35 trillion dollars in 2025 and why the Q4 slowdown signals a tougher landscape in 2026.

From the shop floor to the boardroom, the real story is how operational reality collides with policy. Tariffs emerge as the biggest drag, especially when a component shuttles across borders for staged processing and fees snowball past the item’s original value. I break down a Canada–US case that turns a 20 dollar part into 60 dollars through repeated crossings, then move into the practical toolbox: duty relief programs, temporary importation under bond, bonded warehouses, inward and outward processing relief, and lawful tariff engineering that reclassifies assemblies to reduce exposure. If you need to cut tariff impact without cutting corners, this is your map.

We also zoom out to the 2026 risk horizon. Geopolitical tension and protectionism, debt and credit volatility, energy transition pressures from AI-hungry data centers, and civil unrest shift the calculus for sourcing and routing. On the supply chain side, cybersecurity and supplier solvency rise to board-level priorities, while climate shocks and ESG mandates force better infrastructure and digital twins for scenario planning. The strategy that holds through the noise: dual-source critical inputs, regionalize where it truly pays, digitize multi-tier visibility, and hedge currency and credit risk with discipline.

If you lead trade, procurement, logistics, or operations, you’ll leave with a clear, actionable brief: reduce border touches, use lawful duty relief, strengthen compliance, and build resilience that survives policy swings. Enjoy the conversation and, if it helps your team, share it with a colleague, subscribe for more grounded insights, and leave a review with the biggest risk you’re tackling next.

Chapters

• 0:00 A Year Of Disruption
• 1:44 Record Trade And Slowing Momentum
• 3:02 Themes: AI, Twins, Visibility
• 4:39 Leadership Shifts And Food Antitrust
• 6:46 Inventory Swells And Returns Strain
• 8:20 Risks Setting The 2026 Stage
• 9:46 Top Global Trade Risks For 2026
• 12:40 Supply Chain Risk Playbook
• 15:20 Cyber Shocks And Climate Costs
• 17:04 Tariffs: The Elephant In The Room
• 18:12 How Tariffs Compound Across Borders
• 19:09 Case Study: Canada–US Component Loops

Transcript

Tony Hines: 0:12

Hubble bubble, toil and trouble, fire burn and cauldron bubble. Well it feels like that, doesn't it, over the past year, with all those disruptions to trade because of self-inflicted harms, the Trump tariffs, and all the wars going on in various places around the globe. Not a very harmonious year, not a good year for supply chains generally. So what's been happening over the past year in supply chains? Well let's have a look. Global trade in 2025, thirty five trillion dollars of trade flows, and the supply chain, inventories and returns have surged. Growth drivers, goods and service demand, and in supply chains, artificial intelligence, digital twins and visibility, themes of the year. The risks, debt, cost, geopolitics, and in supply chains, in particular, volatility, talent shortages, and sustainability. So plenty going on to keep us occupied. Let's take a look in a little bit more detail about what's been happening. This week the biggest globe trade and supply chain headlines. Global trade is set to surpass the 35 trillion in 2025, and it marks a record high, while supply chains are grappling with resilience, digital transformation, and leadership changes as companies prepare for 2026. We've had record-breaking flows. Global trade in goods and services will exceed 35 trillion in 2025, and that's up about 7% year on year. It represents an increase of $2.2 trillion compared to 2024, according to UNCTED and three other sources. Goods and services, goods trade contributed roughly 1.5 trillion of the rise, while services grew by $750 billion, nearly 9%. The momentum is slowing. Growth in quarter four is expected to moderate, with about 0.5% growth in goods and 2% in services. And that reflects uneven demand and higher costs. For 2026, analysts warn of weaker growth next year due to rising debt, trade cost, and geopolitical uncertainty. During the year, resilience and digital transformation have been some of the major themes in supply chains. December's industry review, spotlight, artificial intelligence adoption, digital twins, and visibility tools as key strategies for navigating volatility. There's been leadership shakeups. Stanley, Black and Decker, appoints a new chief global supply chain officer from Schneider Electric to drive a future ready supply chain. You might remember Schneider Electric is the Gartner top supply chain company and has been for a number of years. So potentially a good appointment for Stanley Blackendecker. Food supply chains probe in the United States, President Trump ordered a Justice Department investigation into meatpacker practices, raising antitrust concerns across the food supply chain. Inventories and returns have surged during this year. Logistic operators report swelling inventories and anticipate holiday returns pressure, testing reverse logistics capacity as companies planned for 2026. The top trends of 2025, AI-driven freight matching, sustainable operations, and tighter C-suite alignment were among the years defining supply chain themes. The risks and challenges, trade risks, rising debt burdens and geopolitical tensions could slow trade momentum in 2026. Supply chain risks, reverse logistics strain from holiday returns plus talent shortages and sustainability pressures will test resilience and policy uncertainties. Antitrust investigations in food supply chains could reshape industry practices, but they're not the only policies, are they, that causing all the problems? The big one, the elephants in the room, the tariffs. Let's turn our attention to the top global trade risks of 2026. Let's look ahead. Geopolitical tensions and protectionism with rising tariffs, counter tariffs, and industrial policies could fragment trade flows further. Mitigation, diversify markets, build regional trade partnerships, and strengthen compliance teams. two, debt burden and financial volatility. High sovereign and corporate debt levels may trigger recessions, especially in the United States. Mitigation, hedge currency exposure, maintain liquidity buffers, and monitor credit risk. three, energy transition pressures, AI driven data center demand and green hydrogen competition are straining global energy grids. Mitigation, invest in renewable sourcing, flexible contracts, and on-site storage solutions. four tariff and tax complexity. Shifting tariff structures, for example, semiconductors taxed by country of design versus origin, complicate compliance, making it more difficult for firms to understand exactly what's going on in the tariff and tax space. That uncertainty raises risk. Mitigation, deploy advanced trade management software, and strengthen customs expertise. five, civil unrest and regional instability. Risks in South Asia, Eurasia, the Ukraine war, and Latin America could disrupt trade routes. Mitigation, scenario planning, insurance coverage, and alternative routing strategies. Get those in place now, so as you're not caught short when disruptions happen. What about the top supply chain risks of twenty twenty six? Well geopolitical disruptions again. Export restrictions on rare earths and critical minerals threaten manufacturing. Mitigation, secure dual sourcing, regionalize supply bases, and invest in recycling. two, cybersecurity vulnerabilities, hidden dependencies in digital supply chains, expose firms to ransomware and supplier side breaches. Mitigation Conduct tier visibility audits. Know where you're getting your stuff from. That's the basic. Enforce supplier cyber standards and adopt zero trust frameworks. Just make sure that you've got visibility over those supply chains. Climate shocks and sustainability mandates. Carbon costs, extreme weather, and stricter ESG regulations drive volatility. Mitigation, build climate resilience, better infrastructure, adopt digital twins and integrate sustainability into procurement. four tariff and sourcing restrictions. Countertariffs and government investigations are reshaping sourcing strategies. Mitigation, develop flexible sourcing models and maintain strong government relations. And number five, supplier financial instability. Smaller suppliers face liquidity and compliance challenges, creating cascading risks. There could be quite a trickle down if liquidity dries up. Mitigation, monitor supplier health, offer financial support, especially if it's short term to get over a hump so you can still maintain your supply from that source, and diversify supplier portfolios to spread the risk. So strategic takeaways, trade watches, prepare for fragmented trade flows and rising compliance costs. Supply chain leaders, cybersecurity and climate resilience are now board-level priorities, and cross-cutting strategy, dual sourcing, digital visibility, and financial hedging are essential for resilience. When you think about it, big cyber attacks in the year, the Jaguar Land Rover case in the United Kingdom disrupted the automobile industry and particularly the JLR supply chain for weeks. And that still isn't over, it's still ongoing. So you have to do what you can while you can to prevent such damage to your supply chain. You probably heard episodes on chain reaction prior to Trump coming to office, where I talked about the danger of tariffs and the problem with tariffs, and how tariffs can be quite damaging to trade. Well, we ain't seen nothing yet, have we? Because when I was talking about that, I was making the case for hypothetical situations, but the reality that Trump introduced is a lot worse. As we approach the year end, reflections for the past year would appear to focus on meddling. And there's been a lot of meddling in the global trade system this year. And y you will know that President Trump came out in April and presented his piece in the Rose Garden with his tariff boards showering tariffs on the world. Made everything very expensive. But of course it was a very amateur approach and very destructive. And nobody seems to have pushed on this. But it's uh caused a lot of friction in supply chains. And businesses are still struggling to get their heads round exactly what these tariffs mean for their business, and especially where they've got trade crossing borders several times. And I've mentioned this a number of times in the podcast. Once goods cross a border, perhaps it's a raw material, then there's some work done on it, crosses back to another manufacturer to do some further work, crosses back to the original equipment manufacturer, worked on again, and so on. So once it's crossed the border, say three, four, five times, it's picked up a tariff on every crossing. And so when we talk about a twenty-five percent tariff crossing a border, if you do that four or five times, you're up to a hundred percent or even a hundred and twenty five percent paid in tariffs at different values on the crossing. And that's a nightmare for business. And rather than encourage trade or growth, it's actually destroying trade and it's destroying growth and it's destroying business profits. And it's about time that someone got a grip and said, Mr. President, you're doing so much damage to the economy, isn't it about time you reversed a lot of those tariffs? It's not very clever. It's really rather stupid. Let's take a hypothetical situation. I'm a manufacturer and I'm in Canada. And I've got an item which contains steel and aluminum, and I send it to the US for some processing, I incur twenty-five percent US tariff as it goes into the plant in Michigan, say. So the twenty dollar item now becomes a value of twenty-five dollars, because five dollars is added in tariff. On its return trip to Canada, it incurs another five dollars at twenty-five percent of the value of twenty dollars. And supposing I have to repeat that four times. So it has to go four times between the two plants, the one in Canada and the one in the United States, before it's ready to go into production. Well each round trip costs me ten dollars in tariffs, so on the second trip it'll be twenty dollars, on the third trip thirty, and on the fourth trip forty dollars. So in the end I've paid forty dollars of tariffs for the four trips, the four round trips, and the effective cost of the twenty dollar item, instead of it being twenty dollars, which it would have been if it was tariff free, it's now sixty dollars, so it's added all that cost, and tariffs compound quickly. By the third or fourth crossing, the tariffs exceed the original value of the item. There are no exemptions for temporary export. The current rules don't waive tariffs just because the item is being processed and returned, and CU SMA doesn't help here. Kuzma CUSMA stands for Canada US Mexico Agreement. That's the replacement for NAFTA. The North American Free Trade Agreement. Kuzma replaced it, you might recall. Steel, aluminum are excluded for tariff relief under Cuzma. Administrative cost, there are brokerage fees, paperwork and delays and further expenses beyond the tariffs. So it adds all the friction as well. So the bottom line for this is that every round trip adds fifty percent of the item's value in tariffs. So a twenty dollar steel aluminum component, repeating the process twice is twenty dollars in tariffs, raising the effective cost to forty dollars. So you double the cost, even on two round trips. If you expect multiple crossings, it may be worth exploring tariff mitigation strategies. For example, bonded warehouse programs. Putting stuff into a bonded warehouse means that you don't pay any tariff until it comes out of the bonded warehouse. Whereas if you don't have a bonded warehouse, you can't stop the tariff from being applied. And the other thing that people have been doing is looking at changing the classification of the item and testing whether tariffs will be applied if you call the item something else so as it gets listed under a a different tariff regime. Different rules apply to different categories of uh product. But whichever way it goes, you can see how bad it is and what a problem it is for manufacturers on the border who've had these networks set up in their supply chains for years and years. Not just a few weeks. They've had established links across border from Canada to the US and US to Canada to share technology and manufacture goods over many, many years. Until, of course, President Trump comes along, puts the tariffs on, destroys the relationship, and adds lots of cost. So when we do these things, it's quite difficult, isn't it, really, to see how you can maintain profitability and how it won't affect prices, because of course it will affect prices. It will put prices up significantly, and it will cause lots of pain for business and consumers. So there are temporary import programs for situations just like this. Canada's duty relief program allows goods to be imported duty free if they will later be exported. US temporary importation under bond lets you bring goods into the United States without paying tariffs if they're not consumed there and will be re-exported. These programs are designed exactly for scenarios like send for processing, then return. Then if we look at bonded warehouses, goods can be stored or processed in bonded warehouses without tariffs until they officially enter the domestic market. If your component is processed in a bonded facility and then re-exported, tariffs could be avoided. That isn't always possible of course, unless you can do the processing in the bonded facility. There's inward and outward processing relief. EU style programs exist in Canada and the US under different names. They allow companies to temporarily export goods for processing and then reimport them with reduced or waived tariffs. Canada's exported goods for repair program is one example. Then there's tariff engineering, adjusting the composition or classification of your component to fall outside steel, aluminum, tariff categories. For example, if steel is a minor part of a larger assembly, classify under the broader assembly code rather than the raw steel, and that will reduce the tariff. And then there's consolidation of processing. Instead of multiple cross-border trips, batch all required processing in one country before final import. This reduces the number of tariffs from several to just one. The certificates of origin, the CUSMA we referred to, is important. While steel and aluminum are excluded from tariff relief, mixed components may qualify under other Kuzma rules. So if your components primary classification isn't steel, stroke aluminum, you might avoid the surtax. And you can use duty relief if you can. Without relief, three round trips $30 in tariffs on a $20 item, effective cost $50. With duty relief, tariffs are waived, so there's $1 in tariffs. Item remains at $20 plus the admin fees. There are still admin fees, of course. The bottom line here is programs like Canada's Duty Relief Program and the US Temporary Importation Under Bond are the most effective ways to avoid repeated tariff hits. Bonded warehouses and tariff engineering can also help, but they do require careful planning and compliance, and you've got to know the rules, and you've got to, in some cases, dare I say it, bend those rules. To fit the case if you want to avoid the tariffs. Now that's avoidance, not evasion. Well there we are. If you ever wanted to know why tariffs are not good, and in the particular case of Trump's tariffs in the United States, why they're a real problem and an issue for many countries, global trade and businesses and consumers will all be paying the price for this calamitous tariff regime. Well, thanks for joining me for this special edition of Chain Reaction where we're discussing the impact and the damage done by the US tariffs and let's hope that twenty twenty six some common sense will come to prevail when it comes to global trade. And we can begin to keep the money in our pockets or for investment or to make profit. If Trump's a businessman, he should be interested in profit, and he should be interested in improving the performance of businesses in the United States. And tariffs isn't the way to go. It just increases cost and actually damage to relationships is important too. It damages country relationships, it damages the status of the United States in the global trade system. And let's hope things change for the better. I'm Tony Hines, I'm signing off, and I'll see you next time in the Chain Reaction Podcast. Until then, take care. Bye for now.