Tariff Turmoil Puts Supplier Risk, Supply Chain Management Under Microscope

Without logistics, commerce stops.

As global, and domestic, trade undergoes seismic shifts driven by Donald Trump’s new tariffs, chief financial officers (CFOs) are being tasked with far more than managing financial performance. They must take a proactive, strategic approach to risk management to ensure long-term resilience and competitiveness.

Despite having navigated significant disruptions in recent years, including the COVID-19 pandemic, CFOs are faced now with a new challenge and must navigate a landscape filled with economic volatility, geopolitical tensions, and increased fraud risks that threaten to undermine corporate stability.

While Trump’s administration agreed to delay tariffs on Mexico and Canada, the 10% levies on China went live Tuesday (Feb. 4), with China striking back in turn with taxes on certain American goods as well as a new antitrust probe into Google. The Chinese tariffs will go into effect Feb. 10.

With these new tariffs poised to impact international trade, companies are reassessing supply chain strategies to minimize disruptions and optimize costs.

“Many companies are reshoring manufacturing, expanding U.S. manufacturing capabilities, and searching for reshoring and friendshoring opportunities with countries less likely to experience tariffs. At a minimum, proactive companies are moving a portion of their supply chains to address these risks,” Lisa Anderson, founder and president of LMA Consulting Group, told PYMNTS in an interview.

Read more: Trump’s Trade War Shocks Markets and Back Offices

Fraud Risks Escalate Amid Supply Chain Shifts

The market reaction to the burgeoning trade wars between America, China, Mexico and Canada has been relatively benign — with certain observers holding that Trump’s bluster is more negotiating tactic than bite.

Still, many businesses are shifting from a “just-in-time” to a “just-in-case” model, emphasizing supplier diversification to hedge against geopolitical risks and economic uncertainty. This shift, however, requires real-time, data-driven risk intelligence to ensure its effectiveness.

Jenna Wells, chief operating officer at Supply Wisdom, told PYMNTS in an interview that one of the biggest blind spots for many organizations is not just the suppliers themselves but the key locations in which those critical suppliers operate. By continuously monitoring risk conditions in these locations — including economic instability, regulatory shifts, climate risks, and geopolitical tensions — businesses can anticipate disruptions before they impact operations. This enables companies to take proactive steps such as securing alternative suppliers or adjusting logistics strategies, avoiding costly delays and revenue loss.

While reshoring manufacturing and expanding domestic capabilities may lessen supplier risk in some respects, it introduces new logistical, regulatory and financial hurdles. Companies that fail to balance supplier diversification with real-time risk management may end up exacerbating supply chain vulnerabilities rather than mitigating them.

As companies diversify their supplier base and adjust sourcing strategies, they open themselves up to new fraud risks. Fraudulent suppliers, counterfeit goods and payment fraud are growing threats in a rapidly evolving trade environment. CFOs must remain vigilant, ensuring robust due diligence in onboarding new suppliers and continuously monitoring transactions to detect anomalies.

LMA Consulting Group’s Anderson told PYMNTS that organizations proactively revamping supply chains will need to ensure they are working closely with trusted partners. Otherwise, they risk falling prey to fraudulent vendors who exploit the urgency of supply chain realignment.

“On one hand, supplier risk will be lessened as geopolitical and regulatory risks are addressed as part of the forward-thinking process. On the other hand, if these shifts are not closely managed, misalignment in demand and supply can increase overall supplier risk,” she said.

Read more: 5 Ways 2024 Kicked Off a New Era for CFOs and Treasury Pros

The Compliance Imperative

To combat fraud, CFOs should look to leverage technologies such as artificial intelligence (AI) and machine learning to enhance supplier vetting and financial transaction monitoring. AI-powered tools can detect inconsistencies in supplier behavior, flag high-risk transactions, and automate compliance checks to mitigate fraud risks before they materialize.

“Placing this responsibility in the CFO’s hands gives them the impetus to take another look at their supply chain and also open up and renegotiate existing agreements. Here, we touch on something all CFO’s love — finding a justifiable reason for all expenses,” Pimberly CEO and Co-founder Martin Balaam told PYMNTS.

“Perhaps the greatest tool companies can leverage to navigate this new terrain is AI. AI can efficiently identify alternative sourcing options, optimize inventory management, and provide advanced analytics to reduce costs and enhance resilience against economic and political uncertainties, including tariffs,” Balaam said.

After all, in an era where financial stability is increasingly becoming intertwined with supply chain agility, CFOs must themselves evolve into strategic risk managers. Those who embrace real-time intelligence, AI-driven fraud prevention and proactive compliance strategies could find themselves best positioned to navigate the complexities of global trade, as well as to ensure sustained growth relative to peers in an uncertain economic landscape.