Responding to Tariff Volatility

Impact of Tariffs on the Global Supply Chain

The imposition of new tariffs by the United States has disrupted global supply chains. Major technology companies such as Apple, Nvidia, and AMD are struggling to maintain their supply chains as components manufactured in China become more expensive due to tariffs. In response, Apple has announced a major expansion in Texas, investing billions of dollars into new chip manufacturing facilities in Houston. However, building new fabrication plants takes years, creating a temporary gap in the existing supply chain.

The retail sector is also feeling the effects. Walmart, despite focusing on American-sourced goods, still faces rising costs for imported electronics and household appliances. Some retailers are stockpiling inventory to mitigate the impact, but this strategy only buys time and does not address the core issue.

Additionally, the food supply chain has suffered negative consequences. Packaged food companies may absorb part of the increased costs due to tariffs rather than passing them entirely to consumers, aiming to retain market share amid consumer fatigue caused by inflation.

Close cooperation between businesses within the same industry and across countries will be key to overcoming these challenges. Vietnamese businesses must fully leverage free trade agreements (FTAs) to access larger markets while strengthening partnerships with strategic suppliers to secure raw materials and stable distribution channels. Expanding domestic production, reducing reliance on external suppliers, and enhancing internal competitiveness are also long-term solutions.

Strategies for Vietnamese Businesses

Amid these fluctuations, Vietnamese businesses have swiftly implemented strategies to minimize negative impacts and seize new opportunities.

Wood Industry: Vietnam is one of the largest exporters of furniture to the U.S. and also a major consumer of American raw wood materials. Companies in this sector have increased imports of roundwood and sawn timber from the U.S. at reasonable prices to ensure a stable supply of high-quality raw materials that meet sustainability standards.

Textile and Garment Industry: Vietnamese textile and garment companies have proactively diversified their export markets, reducing reliance on key partners such as the U.S. and Europe. They have maximized the advantages provided by FTAs to expand into new markets while broadening their network of suppliers and partners to mitigate risks associated with market fluctuations.

Footwear Industry: The footwear sector has also adopted flexible strategies, including diversifying export markets, expanding investment partnerships, and tapping into emerging markets like the Middle East to mitigate risks from tariff changes.

Current tariff volatility presents numerous challenges for businesses worldwide, but it also creates opportunities for restructuring and enhancing supply chain efficiency. Proactively responding, adopting flexible business strategies, and capitalizing on market fluctuations will not only help businesses survive but also thrive in this highly dynamic environment.

Future Directions and Recommendations

To enhance resilience against tariff volatility and ensure sustainable growth, businesses should focus on several key strategic directions:

Diversifying the Supply Chain: Companies should redesign their supply chains by incorporating alternative suppliers, preferably from different geographical locations. Utilizing local suppliers or those in nearby regions is also an effective strategy to minimize risks associated with tariff fluctuations.

Optimizing the Supply Chain: Businesses must optimize their supply chains to maximize cost savings by leveraging Vietnam’s FTAs with major economies. Diversification should also involve relocating production and storage closer to demand centers to enhance efficiency.

Adopting Technology and Automation: Investing in technology and automation enables businesses to improve productivity, reduce costs, and increase competitiveness. The application of advanced technologies helps enterprises quickly adapt to market fluctuations and enhance operational efficiency.

Companies need to adopt a long-term perspective and be prepared to adjust their business strategies to keep pace with rapid changes in global trade policies. Establishing a resilient, flexible supply chain capable of responding to disruptions will be a critical success factor in the coming years. Businesses that are well-prepared, quick to adapt to new trends, and able to capitalize on opportunities arising from tariff changes will have a significant advantage in sustaining growth and expanding market presence.

Conclusion

Businesses must recognize that tariff changes are not merely obstacles but also catalysts for innovation and adaptation. Rather than reacting passively, companies should take advantage of bilateral and multilateral trade policies, optimize supply chains, and invest heavily in technology to improve production and management efficiency. Building a flexible supply chain, leveraging the benefits of FTAs, and seeking alternative markets will help businesses mitigate risks and create long-term competitive advantages.

Furthermore, investing in technology and digital transformation plays a crucial role in optimizing supply chains and minimizing the impact of trade fluctuations. The adoption of AI, Big Data, blockchain, and IoT in supply chain management not only improves visibility and control over product flow but also enhances operational efficiency, reduces costs, and optimizes delivery times.

Ultimately, in an increasingly volatile global economy, only businesses with well-structured, agile strategies and long-term vision will remain resilient and thrive. Rather than focusing solely on mitigating the negative effects of tariffs, companies should view them as opportunities for transformation, business model optimization, and competitive advancement. Developing a modern supply chain system, combined with proactive adaptation to trade policies, will enable Vietnamese businesses to establish a strong global presence and lay a solid foundation for sustainable growth in the future.

By Van Tam