Develop a Local Strategy. When the time for waiting is over.

First Published to Substack (Journal Bites) May 03, 2025
Authored by: H J Schmitt, SCMP
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A simple laundry list that business leaders need to consider before migrating globalized supply chains into a more regionalized production and distribution strategy.

This article includes descriptive rationale for relocation, a 5 question self-assesment of your “wait and see” approach to risk, and a brief update on USA tariffs, up to date as-of May 3, 2025.

Why Develop a Regionalized Supply Chain?

In an era of escalating tariffs and disrupted global trade, businesses face the challenge of rethinking their supply chains. When traditional global supply chains become unviable due to increased costs, delays, or geopolitical risks, developing a regional supply chain offers a strategic solution.

By sourcing materials, manufacturing, and distributing within a closer geographic area, companies can reduce costs, enhance resilience, and improve responsiveness to market demands.

This short guide explores the *how*—practical steps to localize your supply chain—and the *why*—the compelling benefits of agility, cost savings, and risk mitigation in a tariff-heavy world.

Recent Tariffs and Port Taxes Impacting Supply Chains

A Summary of Tariffs and Taxes (as of May 3, 2025)

Recent U.S. tariff policies and port-related fees, primarily targeting imports from China, Canada, Mexico, and other global trading partners, have significantly disrupted global supply chains, necessitating a shift toward regionalized and localized value chains.

The Economic Impact

Tariffs are projected to raise consumer prices, with an estimated $1,300 average tax increase per U.S. household in 2025, contributing to inflation and potential economic slowdown.

U.S. Tariffs on Imports

Below is a concise summary of key tariff and port tax updates relevant to rebuilding supply chains:

China

As of April 2025, tariffs on Chinese goods have escalated to 145%, with some products facing up to 245% due to additional levies tied to fentanyl-related concerns. The elimination of the de minimis exemption for low-value goods (under $800) effective May 2, 2025, subjects these imports to duties of 90% or $75 per item, increasing to $150 after June 1.

These measures have led to a 45–60% drop in container bookings from China to U.S. ports, causing supply chain disruptions and potential retail shortages.

Canada and Mexico

• Imports not complying with USMCA rules of origin face a 25% tariff, while energy products and potash outside USMCA preferences incur a 10% tariff.
• USMCA-compliant goods are currently exempt, but non-compliant goods may face a 12% reciprocal tariff if exemptions end.

Other Countries

A baseline 10% tariff applies to most nations, with higher reciprocal tariffs (11–50%) subject to a pause of 90 days for 60 countries.

• The EU faces a 20% tariff, and specific sectors like autos (25%), steel, and aluminum (25%) are also targeted.

Port Taxes and Fees

• New port fees on non-U.S. ships, combined with tariffs, have exacerbated port congestion and empty container imbalances, particularly at West Coast ports like Los Angeles and Long Beach, where incoming vessels from China are down nearly 50%.
• These fees, alongside a sixfold increase in blank sailings (canceled voyages), have reduced container volumes by 640,000–800,000 TEUs, straining logistics.
• A Customs system glitch in April 2025 disrupted tariff exemptions for in-transit freight, increasing paperwork and costs for importers, further complicating supply chain operations.

U.S. Tariff Resource:

• For detailed tariff schedules, refer to U.S. Customs and Border Protection updates at www.cbp.gov

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In a nutshell….

How to Develop a Regional Supply Chain.

Because maybe it’s time if your company’s supply chain management system is not profitable, at high risk of distruption, or it could be much, much better.

Who is impacted by your supply chain performance?

• Suppliers
• Employees
• Investors
• Local Communities
• Customers

Regardless of whether things are going good or bad, you take everyone along with you. When disruption impacts your supply chain and services are failing, suppliers are unpredictable, or you cannot make a profit – then everything must be brought into question.

Questions to ask when you are waiting for the tough times to end are important and will help to understand if the situtation is becomming detrimental to the longevity of the business. For example, is “wait and see” avoidance, or is there a likely chance that change is in the future?

Assess your “Wait and See” mentality and learn, is it helpful or harmful to the business?

Five Key Questions for Leaders
If you have decided on a wait-and-see strategy amid the current political uncertainty, you should explore the following questions and be ready to explain the answers to your team.

5 Questions from MIT SMR from the Article “When Wait and See is Smart Strategy” (2025, Job et al.)

1. Are we just drifting, or actively waiting?
2. Do we understand which decisions may lead to lock-in risks or political pushback? Moreover, how could the company actively reduce or defer these decisions?
3. How confident are we in our ability to detect signals on policy moves and competitor shifts?
4. What precise triggers will shift us from “pause” to “go” mode?
5. Do we have playbooks ready for reengagement, and have we practiced deploying them?

Try the MIT questionnaire above, visit their site for the guide, and assess your answers to understand your companies approach to meeting the challenges of the day.

If you find it is time and these issues are not the type that a “wait and see” strategy can improve upon, then start with the simple task of evaluating your requirements before beginning the tough task of relocating business operations to greener pastures.

When it becomes clear that fortunes are not going to change by inaction, business leaders must take the role of certainty and act in the best interest of the company.

How do you get started?

Secure land:

• Preferably co-located within vertically integrated region of manufacturing specialization

Build factories:

• Invest in new, renewed, or repurposed buildings and facilities for local operations

Procure equipment:

• Select and finance required production equipment to meet budgetary constraints and provide maximum return on revenue

Hire and train workers:

• Incentivize relocation of talent from other locations or invest in regional upgrade of existing labour for the purpose of production while weighing the time and cost of both options with demand.

Establish logistics network:

• Plan requirements and outsource contracts or develop customer delivery services to best meet demand to maintain capacity and limit inventory carrying costs.

Manage imported materials:

• Substitute, source, or remove production of goods (SKU) and services which require inputs that are unavailable regionally, are too risky, or cost-prohibitive to maintain.

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Rebuilding a Supply Chain

Is this easy?

No.

Is it guaranteed?

No

Is it necessary?

No

What are the Alternatives?

Options for companies facing tariffs which substantially change their business operations include

Adaptation, Continuation, or Transformation.

➡️ Wait and see.

➡️ Stop and sell.

➡️ Manage and adapt.

➡️ Blend of all-of-the-above.

The Implications of Rebuilding Supply Chains

Why Localize?

High tariffs and port fees make importing cost-prohibitive, especially from China, pushing businesses to source materials and manufacture closer to their markets. Regional supply chains reduce exposure to tariff volatility, shorten lead times, and mitigate risks from global trade disruptions.