Tariffs Are Here. What It Will Be: Inflation, Recession, Stagflation… or Nothing at All?

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Introduction

Tariffs are back in the spotlight. The business world—especially supply chain management, procurement and logistics—now faces a critical question: How will tariffs affect the economy and day-to-day operations? In our scenario-planning workshops, we regularly simulate shocks just like these. One thing is certain: those who prepare survive and grow; those who don’t… ask the dinosaurs.

Over the past year, tariffs have become the biggest geo-economic shock of the new decade. Last week, however, brought a dramatic twist: the United States and China signed a 90-day “truce,” slashing duties to levels both sides deem “bearable for continued negotiations.” Washington cut most tariffs on Chinese goods from an average of 145 % to roughly 30 %, while Beijing reciprocated by lowering duties on U.S. products from 125 % to 10 %.

Global markets breathed a sigh of relief—stocks rallied and freight rates dipped in the short term—yet analysts warn the truce lasts only 90 days and could be reversed “with a single tweet or a new decree.”

McKinsey Warns of “Radical Uncertainty”

According to McKinsey & Company’s April 2025 report, the world is facing the largest wave of tariffs in a century. The U.S. raised its average tariff rate from 2 % to more than 20 %. Over 75 countries have expressed willingness to negotiate, but global trade is already feeling the strain.

McKinsey recommends a three-step playbook for companies:

  1. Analyze Your Relative Position – Assess how potential tariffs reshape your cost structure versus competitors, factoring in geography, product mix, and supply chains.
  2. Define Your Strategic Posture and Actions – Decide whether to invest for growth, optimize operations, or withdraw, based on that analysis.
  3. Pressure-Test Decisions – Gauge the resilience of strategic choices under multiple scenarios to stay agile amid uncertainty.

Survey Results

We recently surveyed business leaders and procurement/logistics professionals on the likely fallout from new tariffs. Opinions vary:

  • “Roller-coaster” economy – 45 % expect rapid, unpredictable swings.
  • Recession – 26 % fear a broad economic slowdown.
  • Inflation – 19 % worry about direct price surges on imported goods.
  • Stagflation – 10 % fear the double punch of rising prices and shrinking demand.

Divergent perceptions—but a shared concern over economic uncertainty. As we said earlier in article you must be prepared for any development. So we analysed 4 scenarios and gave some advice for each.

How Different Tariff Scenarios Hit the Economy

1. Inflation

Tariffs often lift the landed cost of imports, fueling inflation. Procurement becomes critical for protecting margins.

How to prepare?

  • Inventory as a hedge – Building stock can pay off if prices climb, but only with precise SKU and quantity decisions backed by solid data.
  • Alternative suppliers – Diversify across regions to cut dependence on tariff-heavy sources.
  • Smart sourcing strategies – Negotiate long-term contracts with fixed prices or pivot to local providers where feasible.

2. Recession

Excess stock turns into dead weight if demand falls. Cash-flow management takes centre stage; cost-cutting becomes imperative.

How to prepare?

  • Inventory optimisation – Trim stock levels and tighten order planning to preserve liquidity.
  • Ordering calendar – Build a schedule that flexes with seasonality and real-time market signals.
  • Cash-flow monitoring – Track liquidity in real time and run downside-demand simulations.

3. Stagflation

Prices rise while sales shrink—the hardest scenario, as you fight inflation and revenue decline simultaneously.

How to prepare?

  • Ultra-precise sourcing – Maintain flexibility and constantly reassess priorities.
  • Process digitalisation – Real-time data is vital for fast, accurate decisions.
  • Portfolio optimisation – Focus on high-rotation essentials; slash slow movers.

4. A “Roller-Coaster” Economy

Wild price and demand swings make long-term planning nearly impossible.

How to prepare?

  • Scenario planning – Draft multiple playbooks and triggers for each situation.
  • Agile procurement – Continually revisit contracts; keep supply chains flexible.
  • Rapid response – Establish quick decision loops and routine market-review sessions.

Practical Tools & Resources

For readers who want hands-on guidance and a practical solution:

Conclusion

Tariffs have landed—and their impact may be profound. The winning move is proactive adaptation: rigorous scenario planning and agile procurement strategies are essential for surviving—and thriving—in turbulent times.

How do you see it? How will tariffs reshape the economy? Like, comment, and repost if you find this information interesting, useful, or relevant. Thank you in advance!

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