The U.S. Election and Supply Chains: Potential Geopolitical Challenges

Supply Chains and Geopolitical Challenges

In 2024, the U.S. will hold a major presidential election, an event with the potential to disrupt global supply chains and market systems. This is happening as cost pressures and inflation continue to rise, requiring businesses to optimize their supply chains to mitigate risks from geopolitical instability. According to an Economist Impact survey, 33% of C-level executives identify geopolitical factors as the top organizational risk for the next 12–18 months. This concern calls for procurement and production teams to prepare strategies to guide their companies through election-related uncertainties.

Recently, the International Longshoremen's Association (ILA) strike, representing 45,000 workers at major East Coast ports, raised significant concerns for businesses reliant on these shipping routes. Though the strike was averted, it served as a reminder for companies of the importance of contingency plans within supply chains to ensure uninterrupted production and service.

Flexible Preparedness for Post-Election Scenarios

The election may serve not only as a major event but also as a catalyst for significant trade policy changes. American businesses could face shifts in trade regulations, new tax policies, and even pressure from revised international trade agreements. When such changes occur, supply chain flexibility will allow companies to adjust sourcing to countries less affected by geopolitical influences. This requires not only Plan B but also Plans C and D, enabling businesses to switch suppliers and distribution channels as needed.

To build diverse supply chains, companies should seek alternative suppliers and logistics partners from various countries, considering factors such as production capacity, logistics costs, tariffs, and the challenges of diversification. An Economist Impact report reveals that 40% of executives are focused on expanding their supplier networks, while 35% prioritize multi-sourcing to safeguard supply chains from external threats.

Advanced Technology: Strengthening Supply Chains

Technology plays a vital role in maintaining supply chain flexibility and meeting the complex demands of global supply chains. Generative AI and collaborative supply chain solutions can greatly support optimization. AI can analyze and select high-quality suppliers based on past success, forecast risks, and suggest suitable adaptation strategies to align with current market demands.

Furthermore, business-to-business (B2B) networks provide robust platforms for international collaboration, helping companies expand supplier networks that meet key criteria like sustainability, cost, and diversity. These technologies enable companies not only to find responsible suppliers but also to maintain and report sustainability metrics across the supply chain—a factor growing increasingly important with sustainability policies like the EU’s Corporate Sustainability Reporting Directive (CSRD).

Adapting to New Regulations and Potential Incentives

January 2025 will see a new U.S. administration that may introduce policies directly impacting businesses. Domestic manufacturing in the U.S. has significantly recovered in the last decade, and McKinsey predicts that restoring competitiveness in this sector could add 15% to U.S. GDP. To achieve this, tax incentives for domestic industries, such as steel and iron, are likely to increase, offsetting the costs of relocating production from lower-cost countries.

In addition, sustainability regulations are becoming a mandatory aspect of compliance. The EU’s CSRD now requires companies to implement sustainable standards in their supply chains, and similar policies are emerging in U.S. states like California. This requires companies not only to select suppliers that meet standards but also to report detailed sustainability metrics. B2B technology can streamline this process, ensuring transparency across the supply chain.

Building Resilient Supply Chains Amid Geopolitical Risks

To mitigate threats from global politics, diversifying trade partnerships is essential. With over 2 billion voters participating in elections across 50 countries in 2024, political instability could arise at any time. Being prepared with contingency plans and multiple sourcing options helps businesses reduce risks, maintain stability, and stay flexible in the face of challenges.

The U.S. election and ongoing geopolitical instability are placing unprecedented strain on global supply chains. To survive and thrive, companies need to build resilient, adaptable supply chains, not only to respond to short-term disruptions but to remain sustainable in the long term. Modern technology, like AI and B2B collaboration solutions, plays a crucial role in helping companies mitigate risk, enhance sustainability, and maintain a competitive edge.

More than just responding, companies must proactively prepare for risks. The combination of strategic thinking, supply diversification, and technology adoption will be key to creating a sustainable and efficient supply chain in an ever-evolving economic and political landscape.

By Van Tam