Baylor Expert: Top 3 Effects of Tariffs on the Global Supply Chain

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Tariffs – broadly defined as government-imposed taxes placed on imported and export goods – are a central force in shaping supply chains, especially in today’s interconnected global economy. The broader implications of tariffs on the global supply chain have become more evident recently as major changes are being made in U.S. trade.

Supply chain expert Adé Oyedijo, Ph.D., in Baylor University’s Hankamer School of Business, is an agenda contributor at The World Economic Forum (WEF), where he helps shape global conversations on supply chain management and transportation.

“While tariffs can occasionally shield vulnerable domestic industries, their broader implications for global supply chains have become increasingly evident,” Oyedijo said.

As an agenda contributor of the WEF, Oyedijo works to create a bridge between his research and real-world applications in ethically responsible global supply chain approaches. Currently, he is watching three primary ways tariffs are affecting the global supply chain: increased supply chain costs, restructuring of global sourcing and production strategies, and increased supply chain uncertainty and risk. 

1. Increased costs

Tariffs have a direct effect on the costs of goods sold, resulting in higher prices for materials, adjustments to cost structures and final products. This increases transaction costs between buyers and suppliers, as well as the need to manage more complex procedures. 

“These costs include not only the tariffs themselves but also administrative burdens, compliance procedures and the costs of adjusting pricing strategies. For businesses operating on tight margins or lean inventory models, this can create significant financial strain and operational inefficiencies throughout the supply chain,” Oyedijo said. 

2. Restructuring global sourcing 

To minimize impacts, tariffs are prompting businesses to rethink their sourcing strategies, leaning into a more flexible supply chain model. This includes exploring onshore, nearshore or diversifying suppliers geographically, often resulting in a more regionally integrated approach.  

“This realignment impacts everything from procurement and logistics planning to supplier relationships and contract terms,” Oyedijo said. 

While this readjustment can mitigate the effects of tariffs and maintain cost efficiency for companies, a significant financial investment is still required to restructure those logistical networks. As a result, supply chain partners often make strategic moves in sourcing to protect their interests, increasing long-term unpredictability.  

3. Increased supply chain uncertainty 

The uncertainty of the geopolitical trade environment under tariffs makes it difficult for companies to plan long-term, creating a more volatile supply chain system.  

“Frequent shifts in trade policy or tariff rates can disrupt long-term contracts, delay investment in infrastructure and erode supplier trust,” Oyedijo explained. “As a result, many firms are now placing greater emphasis on risk mitigation, including building redundancies, enhancing visibility and investing in scenario planning to adapt quickly to policy changes.” 

In addition, some firms make decisions based on short-term political shifts over long-term supply chain resilience, affecting investments in innovation and collaboration.  

Can tariffs be used as a tool to promote ethical supply chains? 

Recently, the term tariff has created confusion and a negative connotation being associated with trade wars and economic disruption. But Oyedijo said that it is important to understand that tariffs can “serve as a powerful tool for advancing ethical trade values” when thoughtfully designed in collaboration with industry stakeholders, academics and policy experts.

Tariffs require companies to face the challenges between operational efficiency and ethical responsibility. But while shifting production to a lower-cost, loosely regulated region may seem financially prudent, such decisions, he said, can open the door to serious ethical risks. 

"Tariffs act as more than just economic tools; they become a strategic lens through which companies must re-evaluate their sourcing choices.”  
- Adé Oyedijo, Ph.D.

“Without proper due diligence, such moves can expose the company to greater ethical risks, including labor exploitation, environmental harm or poor working conditions,” Oyedijo said. “In this way, tariffs act as more than just economic tools, they become a strategic lens through which companies must re-evaluate their sourcing choices.” 

The decisions go beyond choosing the most cost-effective or efficient option; it’s about making supply chain decisions that reflect and uphold fairness, equity, ethical standards and long-term sustainability.

“With the risk of shifting priorities, tariffs can change the attitude of organizations in the supply chain, even without knowing it, who are perhaps committed to ethical and fair-trading practices,” Oyedijo said. “We are beginning to see a shift in this direction. Tariffs are now being tied to ethical objectives, such as restricting the import of goods produced through forced labour or environmentally destructive practices.

“Rather than being purely punitive, when aligned with ethical values, tariffs can help shape a more just and sustainable global trade,” he said. 

ABOUT ADÉ OYEDIJO, PH.D.

Award-winning scholar Adé Oyedijo, Ph.D., is an assistant professor in the Department of Management at Baylor University's Hankamer School of Business. Prior to joining Baylor, he spent 15 years in the U.K. and worked at various institutions, most recently as an associate professor of operations and supply chain management at the University of Leicester. 

Through a supply chain management perspective, Oyedijo’s research and published scholarship tackle important challenges confronting organizations, policymakers, consumers and other stakeholders today such as food production and security, ethical and responsible sourcing, sustainability and healthcare delivery. His work has been recognized by the U.K. Parliament, The Chartered Institute of Logistics and Transport,and received external funding from The British Academy and the Wellcome Trust. He is an agenda contributor at The World Economic Forum and serves as regional editor (Africa) for the Journal of Supply Chain Management and an editorial review board member of the Journal of Purchasing and Supply Management.

Prior to his academic career, Oyedijo worked in logistics and transport for TNT Express and FedEx (U.K. and Ireland), where he was part of a team that managed the global distribution of complex commodities.

ABOUT THE HANKAMER SCHOOL OF BUSINESS 

Baylor University’s Hankamer School of Business strives to further God’s kingdom through the realm of business, using God-given gifts and academic talents to do so. Faculty and students conduct purposeful research and participate in experiential learning opportunities, all while operating in a Christ-centered mission. Undergraduate students can choose from 13 major areas of study. Graduate students can earn their MBA on their terms, either through the full-time, online or a Dallas-based executive program. The Business School also offers three Ph.D. programs in Information Systems, Entrepreneurship or Health Services Research. The School’s top-ranked programs make up approximately 25% of the University’s total enrollment. Visit the Hankamer School of Business website for more information.  

ABOUT BAYLOR UNIVERSITY

Baylor University is a private Christian University and a nationally ranked Research 1 institution. The University provides a vibrant campus community for more than 20,000 students by blending interdisciplinary research with an international reputation for educational excellence and a faculty commitment to teaching and scholarship. Chartered in 1845 by the Republic of Texas through the efforts of Baptist pioneers, Baylor is the oldest continually operating University in Texas. Located in Waco, Baylor welcomes students from all 50 states and more than 100 countries to study a broad range of degrees among its 12 nationally recognized academic divisions. Learn more about Baylor University at www.baylor.edu.