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Global supply chains in flux as trade enters new era

Approximately 40% of firms are increasing their sourcing from US-based suppliers

Published: Tue 21 Jan 2025, 10:38 PM

By
Issac John

Containers are stacked at the port of Jebel Ali, in Dubai. — AFP file

In a significant shift reflecting the complexities of the modern geopolitical landscape, nearly three-quarters of businesses worldwide are revamping their supply chains to engage with a larger number of suppliers.

This strategic pivot comes as companies seek to mitigate risks associated with an increasingly fragmented global trade environment, highlighted in a recent report by Economist Impact and DP World presented at the World Economic Forum.

The fifth annual Trade in Transition study, which surveyed over 3,500 supply chain executives globally, sheds light on how geopolitical uncertainty — exacerbated by the ‘America First’ policies of the new US administration — is compelling firms to adapt rapidly. The findings reveal a widespread acknowledgment of the need for diversification in supply chain strategies to combat rising protectionism and shifting geopolitical alliances.

Countries perceived as non-aligned, including Vietnam, Mexico, India, the UAE, and Brazil, are emerging as vital trade intermediaries. The study indicates that 71 per cent of executives believe these nations play a crucial role in mitigating trade risks, while 69 per cent recognize them as essential in addressing gaps created by global conflicts.

The data also highlights a notable trend toward reshoring and dual supply chains. Approximately 40 per cent of firms are increasing their sourcing from US-based suppliers, while 32 per cent are adopting dual supply chains as a safeguard against geopolitical instability. Additionally, the concept of “friendshoring,” which involves relocating supply chains to politically aligned countries, is being pursued by about 34 per cent of businesses aiming to navigate the tensions between global powers.

Despite these strategic shifts, economic challenges continue to loom large. Inflation and high interest rates are top concerns for 33% of executives, underscoring the need for businesses to remain resilient in the face of economic headwinds. By leveraging neutral trade hubs, diversifying supplier networks, and integrating advanced technologies like artificial intelligence, companies are better positioned to navigate the complexities of this new era.

DP World Group Chairman and CEO Sultan Ahmed bin Sulayem addressed the report’s findings during the launch event at the World Economic Forum, stating, “Global trade today is more complex than ever, demanding agility, resilience, and innovation. At DP World, we empower businesses with the global infrastructure, local expertise, and advanced technology needed to thrive in fragmented markets. This research from Economist Impact provides invaluable insights into the future of trade, and we aim to foster dialogue, innovation, and resilience within the global supply chain ecosystem.

“In 2025 and beyond, global trade will be shaped by three pivotal forces: shifting geopolitics, climate change, and a new wave of AI and automation,” said John Ferguson, global lead for New Globalisation at Economist Impact. “However, businesses are not shying away from international trade; rather, they are rising to the challenge. Firms that remain agile and cost-efficient will gain a competitive edge. Those that integrate risk management with AI experimentation will be best positioned to excel in this new chapter of globalization,” he noted.

As companies adapt to these evolving dynamics, the emphasis on actionable insights and detailed strategies becomes increasingly critical. The landscape of global supply chains is undergoing a transformative shift, necessitating that businesses not only adapt but also innovate to remain competitive in an era characterized by uncertainty and rapid change, said the study.