Global supply chain stress is near tipping point

By Melissa Lucas

The negative spillover effect from the trade war between US and China is self-evident, not only having huge impact on both countries' economic growth, but disrupting global supply chain significantly, which is near a tipping point.

GEP’s Global Supply Chain Volatility Index shows a steep retreat in manufacturing orders after a massive stockpile, which means manufacturing demand in China is dropping steeply, and U.S. manufacturers are aggressively stockpiling key inputs to buffer against tariffs. The GEP Global Supply Chain Volatility Index tracks demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses.

The data showed North American companies aggressively stockpiling inventory at a “concerning rate.” Meanwhile, the data indicated the first sign of manufacturers anticipating slower demand and supply shortages have emerged. On the flip side, purchasing activity by manufacturers in Asia was at its weakest since December 2023 as well as an increase in spare capacity across Asian supply chains in April, led by China, Taiwan and South Korea.

The so-called ceasefire in trade between US and China will be a major relief for both countries' manufacturers. But the supply chain volatility data should be regarded as a warning sign about what would come next if the tariffs pause by U.S. and China aren’t extended permanently after the 90-day pause and the trade war re-escalates. Manufacturers should be positioned for the worst case scenario.

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