One thing supply chain professionals have gotten used to dealing with is disruption. The tariffs, like the COVID-19 pandemic, are causing a new level of uncertainty and disruption of the supply chain. As more companies hope to shift production to the United States, the need to operate efficiently is critical. Better operational visibility will be necessary to offset higher U.S. labor costs and manage the upscaling of manufacturing and distribution facilities to meet demand.
Tariffs will prompt supply chains to shift to non-tariffed countries or back to the U.S. The new U.S. administration has clearly communicated its intent to re-domesticate vital industries like pharmaceuticals, steel, microchips, and others. Potential outcomes of this are:
Increased Costs and Pricing Pressures
- Tariffs raise the cost of imported goods, which directly affects warehouse operations by increasing the expense of inventory. For example, if tariffs are imposed on raw materials or finished products stored in warehouses, distributors either absorb these costs (reducing margins) or pass them on to customers, potentially reducing demand. This was evident during the U.S.-China trade war starting in 2018, where tariffs on goods like electronics and steel led to higher warehousing costs as companies stockpiled to avoid future price hikes.
Inventory Stockpiling and Space Constraints
- To mitigate tariff-related cost increases, companies often front-load inventory, importing goods before tariffs take effect. This surged during COVID-19 with products like PPE and consumer goods, causing warehouses to operate near capacity. As of early April 2025, warehouses and ports are hitting 90-95% capacity as businesses rush to beat tariff deadlines. This strains storage space, increases leasing costs, and complicates inventory turnover, especially if demand later drops during a lull, as seen in the bullwhip effect.
Supply Chain Reconfiguration
- Tariffs push companies to diversify suppliers or shift to domestic sourcing, altering warehouse logistics. For instance, if tariffs make Chinese goods costlier, a distributor might source from Vietnam or Mexico instead, changing shipping routes and warehouse locations. This requires operational adjustments like rerouting goods, renegotiating contracts, or even relocating distribution centers closer to new suppliers or ports, all of which increase costs and complexity. All of these adjustments will have to be done quickly, necessitating the need for real-time visibility as plans pivot.
Labor and Operational Efficiency Challenges
- Sudden inventory surges strain warehouse staffing. During COVID-19, the rush to stockpile led to labor shortages as warehouses struggled to handle influxes of goods followed by slowdowns. Tariffs can recreate this cycle, forcing warehouses to hire temporary workers or invest in automation to manage unpredictable volumes. However, with U.S. manufacturing facing labor constraints—26% of workers are over 55, per some analyses—scaling up quickly is tough.
Disrupted Flow and the Bullwhip Effect
- Tariffs exacerbate the bullwhip effect, amplifying demand fluctuations as they move up the supply chain. Companies overstock to hedge against tariffs, flooding warehouses during surges; then cut orders when demand stabilizes, leaving excess inventory. We saw this during COVID-19 with toilet paper and sanitizer hoarding, and tariffs could trigger similar patterns, tying up capital and space in warehouses.
Potential Decline in Demand for Warehouse Space
- If tariffs significantly raise costs and reduce import volumes long-term, demand for warehouse space near coastal ports could drop. A Wall Street Journal article warned that President Trump’s tariff plans might weaken demand for distribution centers, risking a “tailspin” in the sector. This reflects fears that higher costs could shrink trade flows, reducing the need for storage and logistics hubs tied to imports.
The Time to Act is Now
Change is coming rapidly, and without indications of when conditions might improve. That means warehouse operations need to prepare right now, and ensure you’ve got the visibility across your network to understand and respond quickly.
Cost and performance visibility are must-haves. Easy Metrics is able to unify the multitude of disparate data sources in your warehouse into a comprehensive Warehouse Performance Management model.
With Warehouse Performance Management, the data model and application are aligned with cost, performance, profitability, quality and engineering KPIs. The result? Real-time visibility across your warehouse operations that can change the game so you’ve got more control. In fact, customers regularly achieve a 10x return on investment.
By now, most of us in this profession have weathered uncertainty in the supply chain for years and I’m optimistic that our skills and insights have only strengthened our resiliency and agility. Managing disruption and coming out stronger in the end is the goal – and with the right data insights at your fingertips, you can outlast the wild tariff ride, as well.
