Tariff Havoc Is Forecasted To Create A Global Supply Chain Collapse

Forbes

2 days ago

FILE - The Ford logo is seen above the entrance to the Ford Motor Company Kentucky Truck Plant, ... More Wednesday, April 30, 2025, in Louisville, Ky. (AP Photo/Carolyn Kaster, file)
Everstream Analytics shared some data and insights from Mirko Woitzik, their Head of Risk Intelligence, with me. Everstream is a leader in supply chain risk management.
It is important to understand how supply chain risk management solutions work to understand whether Mr. Woritzik is just crying 'Wolf' when he warns that global supply chains are on the edge of collapse.
SCRM is a network-based solution. SCRM solutions are the most interesting application of AI and Big Data in the supply chain realm. Users are connected to real-time alerts generated by a vast number of online publications, social media feeds, and third-party purchased data. In 2025, Everstream reported that it had collected over 3 trillion data points over the last 10 years and processed 8 million sources daily. The numbers would be much larger today.
Examples of third-party data would include weather forecasts, sustainability ratings, or credit reports on a company's financial viability. One of the players in this market. AI is used to help surface the alerts and make sure they are valid.
This data needs to be curated. The curation is created by carefully mapping a customer's supply chain. For example, a manufacturer might have a supplier in Hanoi from which they purchase key components. Those components get trucked by the Vietnamese Railways, loaded, and then transported to the Haiphong port, where a freight forwarder ensures the container is loaded on an Ocean carrier. The goods are then shipped to the Port of Long Beach, unloaded, and then trucked to a factory in Fresno.
Every step in that digital twin of the supply chain has search terms associated with it. The names of the suppliers, carriers, and logistics service providers become search terms. Those search terms are paired with terms signaling a problem – those terms might be 'bankruptcy,' 'plant fire', 'port explosion,' 'strike', and many, many other terms. So, the term 'Haiphong', when combined in an article with the phrase 'port fire', would generate an alert. And because human language lacks sufficient precision, artificial intelligence is used to help generate fewer false positive alerts over time. So, AI learns over time that the term 'go belly up' can mean bankruptcy.
When this alert data is aggregated, an understanding of critical industries' end-to-end supply chains results. This allows for robust predictive analytics surrounding the larger macroeconomic environment. In short, Everstream has high-quality data on which they can base their dire forecast of coming supply chain turmoil.
The tariff situation in the U.S. continues to evolve. A panel of federal judges at a specialized court focused on customs and trade issues – the Court of International Trade - blocked most of the Trump administration's tariffs Wednesday, ruling that the president had exceeded his authority in imposing the sweeping levies on goods imported from around the world. The U.S. Court of Appeals then granted the administration's request, pausing the trade court's decision until the matter can be adjudicated by the appeals court. This means Trump's tariffs can continue for now.
Meanwhile, China's approach has been more consistent. While other nations' tariffs are negotiable, China realizes that they are likely to eventually be subject to much higher U.S. tariffs than the rest of the world. China has responded with export controls.
After President Donald Trump unveiled his 'reciprocal' tariffs on 'Liberation Day,' China retaliated with duties and export controls on rare earth minerals. These minerals are critical to the automotive, aerospace, tech, wind turbine, and defense sectors. Then, in the middle of May, those tariffs were paused, and China and the U.S. agreed to roll back their retaliatory levies to lower levels. China also agreed to roll back some of the non-tariff measures it implemented in retaliation against U.S. tariffs. It was hoped that this would include restrictions on exports of rare earth metals. For firms headquartered in the U.S., that has not occurred.
The Chinese export controls on rare earths, imposed in April 2025, are starting to ripple through global supply chains. Some of these disruptions are becoming public. The New York Times reported that Ford temporarily closed a factory in Chicago that makes Ford Explorer sports utilities because one of their suppliers ran out of these magnets. 'In most new cars, the magnets are used in dozens of electric motors that operate brake and steering systems, fuel injectors, and even power seats.' Close to 90% of rare earth metals are produced in China.
China granted the first rare earth magnet export permits in mid-May, but it remains unclear for what quantities and for which customers. However, U.S. companies appear to be the primary targets. European and Asian companies seeking licenses from China appear to be having better success in getting these licenses.
Everstream reports that in the next 3 weeks, we will see further impacts in the semiconductor and automotive industries. European semiconductor makers face severe shortages of rare earths. Production lines could grind to a halt as early as June 2025.
Car plants and suppliers in Europe, the U.S., and Japan typically hold a two to three months' stockpile of material. This is being quickly depleted. Indian car and motorcycle manufacturers, including Tata Motors, Bajaj Auto, and Maruti Suzuki, are running out of supply this week, and production could shut down as early as the end of May. U.S. and European car makers face the same thing. Automakers will likely respond by prioritizing high-margin vehicle production while halting other factory lines.
'This is reminiscent,' Everstream says, 'of the early days of the global semiconductor shortage that started to hit automotive supply chains first in late 2020 before spreading to most other manufacturing industries reliant on the critical components.' At the time Volkswagen was the first automaker to warn of a global chip shortage. It then became clear this was more than a one-company problem. The Ford Explorer news is a similar early indicator of a greater problem.
While stoppages due to difficulties getting rare earth materials are new, tariffs have disrupted the auto industry due to falling demand for pricier products. But in news the Trump administration welcomes, they have also led to plans to bring more production back to the United States.
Nevertheless, shortages of rare earth materials, coming on top of the Auto industry's need to rejigger global supply chains, makes responding to this new supply chain crisis even more difficult.
BMW announced a temporary halt to Electric Vehicle production in the U.S. in May. The automaker produces EVs in Germany rather than in its Spartanburg, South Carolina plant. They cited a murky tariff environment as the reason for the shutdown. This decision froze output for four electric models despite a 26% surge in EV sales in the first quarter of 2025. BMW also terminated 180 employees at a factory in Oxford in the U.K. BMW's strongest sellers in the U.S. are built in Spartanburg, South Carolina. The automaker is considering adding extra shifts there to increase U.S. production.
Mercedes-Benz said they plan to shift high-volume model production to Alabama, U.S. This will occur by late 2027. They may end imports of lower-priced models to the U.S.
Volkswagen has suspended shipping cars assembled in Mexico to the U.S. This resulted from the enforcement of 25% tariffs on vehicle imports on April 3. The company suspended rail shipments of autos from Mexico to the U.S. The German carmaker is also holding all vehicles delivered after April 3 at US ports of entry. This allows them to release vehicles to dealers when tariffs go down, re-export the vehicles, or charge more for the vehicles. The company will likely introduce an 'import fee' on affected vehicles after May. Volkswagen Group has claimed it will bring Audi production to the U.S. by 2027.
Executives from all three of these German automakers are set to meet with the U.S. Department of Commerce to see if they can come to a mutually beneficial deal. While all three manufacturers operate factories within the U.S., the Trump administration has deemed output from these plants as insufficient investment. As a result, impending discussions will hinge on each automaker's willingness to continue to expand U.S. production.
Among U.S. automakers, the news from General Motors is particularly bleak. The company laid off 750 workers at its Oshawa Assembly Plant in Canada and plans to reduce worker hours by moving from 3 shifts to two. This will begin in June. GM does plan to increase production at its plant in Fort Wayne, U.S.
Other European companies include Stellantis and Volvo. But because Stellantis was formed by the merger of Fiat Chrysler Automobiles and PSA Group in 2021, the company has a significant manufacturing presence in North America. Stellantis had layoffs at their Windsor Assembly Plant in Canada from April 7 to April 21 and moved to a rotating shift schedule that began in May and will last through at least August. They also had temporary layoffs at their Toluca Assembly Plant in Mexico for the entire month of April. This led to temporary layoffs at plants in the U.S. due to the production halts in Canada and Mexico.
Volvo has been hit hard. They had layoffs of 800 employees at three facilities in the U.S. that began in May and will extend to at least July. They are phasing out the China-made S90 model after 2025. And they announced a plan to cut 3,000 jobs in Sweden and other countries. They announced $1.87 billion in cost cuts and withdrew earnings forecast for the next two years.
The Japanese car makers include Honda, Mazda, Mitsubishi, Nissan, and Toyota. Honda has shifted Civic Hybrid production from Japan to Indiana.
Mazda has halted production of the CX-50 model for the Canadian market at the plant in Alabama, U.S. This halt began on May 12th. The company is withholding its annual profit guidance. Mitsubishi has suspended all vehicle deliveries to U.S. dealerships.
Nissan has indefinitely suspended Mexico production of the QX50 and QX55 models for U.S. market. They have reduced production of Rogue SUV at their Kyushu Plant in Japan. This began in May and will be continued through July. They are also withholding profit guidance in their calls with financial analysts due to the financial uncertainty kicked up by the tariff turmoil.