Costs increases and supply chain reconfiguration the widespread consequences of tariffs and trade dislocation
Three-quarters of global businesses expect escalating costs and 85% see prices heading upwards in current environment, leading to companies prioritising new markets and sourcing from nearby markets
According to a global survey of over 5,000 international firms, companies are reeling from rising costs generated from tariffs to open 2025, with the overwhelming majority expecting upward pricing pressure to increase, leading to a reconsideration of supply chain strategy.
The HSBC 2025 Global Trade Pulse Survey from May found that two-thirds of businesses had already experienced cost increases due to ‘tariffs and trade uncertainty’, 72% expect further increases in the short term and 73% in the long term. That is causing companies to pass-through these costs, as 85% report having already pushed their own pricing upwards, or plan to do so shortly.
That environment is creating substantial pressure on balance sheets, as firms reported an average expectation of an 18% decline in revenues due to supply chain delays and the majority – 51% – said that rising costs are their single biggest strategic issue within their supply chain.
Strategic rethink in supply chains
With such a substantial shift in operating costs over the short and long term, as well as an increased risk of dislocation disrupting supply chains, businesses are reconsidering their strategies, with major implications for global manufacturing and sourcing.
Nearly eight-in-10 businesses (78%) said they are reconsidering their long-term business models and 43% cited specifically that they will change their international expansion strategy if tariffs continue to create volatility, while 39% said that they would focus more in domestic or regional markets in this scenario.
However, the most likely response to the current instability is to shorten supply chains. Among respondents, 77% report that they are currently nearshoring production or are planning to, with an even higher 83% saying the same for nearshoring.
The research notes that noticeably expanding trading relations are between businesses based in: Malaysia (61%) and Vietnam (52%) with China; India (54%) and the United States (51%) with Europe; and the United Kingdom (46%) and India (62%) with the United States.
Among sectors, it found that technology, media and telecoms is most aggressively pursuing nearshoring, with 87% in process of doing so, or planning to.
Companies aren’t losing faith in international markets
Even with this environment, 89% said they have confidence in increasing their international sales in 2025 and 2026, with respondents in India the most optimistic about prospects.