Supply Chain Resilience

According to the US Census Bureau (Department of Commerce), “Advance estimates of U.S. retail and food services sales for April 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $724.1 billion, up 0.1 percent from the previous month, and up 5.2 percent from April 2024.”

Bloomberg reported on some of the perceived behavioral shifts, “Growth in US retail sales decelerated notably in April, reflecting consumers pulled back spending on cars, sporting goods and other categories of imported goods amid concerns about rising prices from tariffs.” Many media reports reflect this concern regarding tariff-related price increases. It is a plausible claim. Personally I am not as certain regarding the mix of consumer motivations.

It is interesting that spending at food service and drinking places was up 7.8 percent from April 2024. Apparently, many folks were not averse to increased discretionary spending. The red line on the first chart below reflects continued strong grocery store purchases. The very slight decline from the March all-time-high might mostly reflect the increased number of meals eaten out.

April retail inventory numbers (see second chart below) do not suggest significant consumer-facing stockpiling. Even the opposite could be reasonably discerned — at least given the ratio of inventories to sales. Inventories may be fatter upstream. But at the consumer level, April sales were stable and inventories declined.

One usually credible observer headlined, “Retail Sales Muted in April as Front-Loading Fatigue Sets-In.” Entirely possible, but consumer satiation could also be hypothesized. The US is now four years into consumer spending climbing higher. Even without the early post-pandemic bounce, this spending boom has been remarkable. In April 2022 US consumers spent just a bit over 660,000 million dollars. Last month we spent just over 724,000 million dollars (not inflation-adjusted). Since 2022 I have not increased my personal spending by one-tenth (plus). Have you?

Last weekend the United States and China decided on a 90-day pull-back from mutual no-flow tariff rates.

On Tuesday Doug McMillon, chairman and CEO of Walmart explained, “Our short and longer-term opportunities are clear. The immediate challenge is obviously navigating the impact of tariffs here in the US… I want to thank President Trump and Secretary Bessent for the progress made recently. We’re hopeful that it leads to a longer-term agreement between the US and China that would result in even lower tariffs. We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.” A bit later the CFO added, “There are certain items, certain categories of merchandise that we’re dependent upon to import from other countries, and prices of those things are likely going to go up, and that’s not good for consumers.” Otherwise Walmart was reporting a stellar first quarter.

I perceive a US economy and related consumer behavior with remarkably robust spending habits. Enormous value is being generated. Enormous value is being offered. Enormous value is being exchanged. Somewhere between ten and twenty percent tariff-rates the flow of value will shudder hard and on some product categories basically stop. The higher the percentage, the quicker and more complete the stop. The more stops, the more collateral damage to everyone along the flow network. It is good that the maximum rates have been lowered for the next 90 days. June is not far away. We can see the future from here. The details may still be a bit obscure. New details may yet emerge. But the lay of the land is clear enough (more).

According to the Bureau of Economic Analysis, “Personal income increased $116.8 billion (0.5 percent at a monthly rate) in March… Disposable personal income (DPI)—personal income less personal current taxes—increased $102.0 billion (0.5 percent) and personal consumption expenditures (PCE) increased $134.5 billion (0.7 percent). Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $136.6 billion in March. Personal saving was $872.3 billion in March and the personal saving rate—personal saving as a percentage of disposable personal income—was 3.9 percent.”

Bloomberg summarized, “US consumer spending jumped in March while a key measure of inflation decelerated…” US consumers spent more on almost every major category of goods and services, with a big surge in automobile purchases (see first chart below). Suspicion also surged that the principal tail-wind for this increased consumption is widespread expectation of tariff-related price increases. Freight volumes and values were well off January bottoms and consistent with same-month results over the last decade (with the dramatic exception of March 2020). April flash-results have not — yet — been in free-fall (here and here and here). Bloomberg called the March outcomes “a welcome reprieve before tariffs are expected to broadly drive up prices.”

Below I display a couple of long-tailed charts. The blue line tracks total inflation-adjusted Personal Consumption Expenditures. The red line tracks real PCE for Food-at-Home. There are many indicators (here and here) suggesting consumer confidence is low, moving lower, and expectations are for choppy or worse economic conditions ahead. The surge in automobile purchases can be interpreted as reflecting these expectations. My personal assessment of what’s ahead — if current tariff policies persist — shares this pessimism. But despite all the turmoil, uncertainty, and very real challenges, through the end of March robust demand continued to pull robust flows of goods (and services).

Yesterday the US Census Bureau reported:

Advance estimates of U.S. retail and food services sales for March 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $734.9 billion, up 1.4 percent (±0.5 percent) from the previous month, and up 4.6 percent (±0.5 percent) from March 2024. Total sales for the January 2025 through March 2025 period were up 4.1 percent (±0.5 percent) from the same period a year ago. The January 2025 to February 2025 percent change was unrevised from up 0.2 percent (±0.2 percent). Retail trade sales were up 1.4 percent (±0.5 percent) from February 2025, and up 4.6 percent (±0.5 percent) from last year. Motor vehicle and parts dealers were up 8.8 percent (±1.8 percent) from last year, while nonstore retailers were up 4.8 percent (±1.4 percent) from March 2024.

Many observers treated this significant sales increase as reflecting consumer expectations of higher prices or emerging product unavailability. For example the Associated Press wrote, “U.S. shoppers stepped up their shopping last month, fueled by a spending spree on big ticket items, particularly cars, before President Donald Trump’s expansive new tariffs started kicking in. But analysts were quick to point out that the data wasn’t a sign of strength but underscored the extreme economic uncertainty that shoppers face and how they want to get ahead of higher prices.” (More and more and more.)

In any case, March retail results confirm a continued ability and willingness to consume — even after the consumption rate has rather consistently climbed for four years (see chart below). As demonstrated by the similar slopes displayed below, retail sales track (lead? follow?) other consumption indicators. In the post-pandemic period to date consumption has ranged roughly four to five percent above sustained pre-pandemic trends. Will this continue as tariffs have their effects? How will tariffs impact consumption shifts between product categories? Will reduced consumption in some categories mostly result in higher consumption in other categories? Might reduced consumption in particular categories have sufficient impact on overall wages-earned (people employed) to suppress overall consumption? How do we differentiate between lagging indicators and what could be characterized as “loss leaders?”

Pre-tariff US economic conditions are strong. The administration expects to preserve and build on this strength — even if there are some “transition problems.” Others are concerned these strengths — and other advantages — are being squandered.

Shallow men believe in luck or in circumstance. Strong men believe in cause and effect. (Ralph Waldo Emerson, The Conduct of Life, 1860)

Gravity’s effect is variable, but its influence (as far as I know) is unavoidable. Friction has both beneficial and problematic effects depending on context or purpose. Supply chains constantly manage gravity and friction. We pull. We push. We lift. We load. We wrap. We slide. We hold. We leave behind. We do whatever we can to keep flow going.

Supply Chain Resilience seeks to understand the cause of any slowing or stopping. If we can, we will correct the cause. But especially when causes are not well-understood or not quickly correctable, resilience involves transferring, avoiding, reducing or even accepting effects and continuing to flow the best we can.

As a long-time supply chain manager once told me, “Moving is living, stasis is death.”

I have seen this predisposition win again and again despite earthquakes and aftershocks, tsunamis, cyclones, pandemic, blackouts, wildfires, and riots. Pausing and probing are common. Shipping volumes and velocity are re-fashioned by due diligence and care. Different routes, altered schedules, longer cycle times, revised cargoes, and many more adaptations are undertaken — all designed to result in fulfilling demand the best as supply conditions will allow.

Dramatically Increased tariffs and related turmoil are already disrupting flows. Given the cost-related magnitude and rapid rate of change, full effects will unfold perniciously, accumulate, and multiply. When, where, and precisely why a toxic concentration of absence or congestion will climax is often the result of complex, almost unpredictable network behaviors.

The tariffs — and tariff-makers — are the cause of the problem. Whether the cause is justifiable prompts disagreement. There are cogent arguments for, against, and otherwise. In any case, the tariffs are causing serious disruption — and further destruction is reasonably anticipated. Channels are closing. Nodes are being cut off. Pull persists, but push is being pushed away. Feedback loops are being distorted, noise is increasing, signals are diverted, neglected, and sometimes lost. Demand is being silenced. Even worse, demand is being disrupted. Supply is being stopped.

This is not unprecedented. It happens everyday at lower end scope and scale. Everyday supply chain managers overcome these threats. At higher end scope and scale — such as the Triple Disaster in Japan or the Covid Pandemic — I have seen smart, creative, courageous supply chain strategists and practitioners overcome enormous challenges. Global to local supply chains are experiencing pain. The pain will get worse. But there is cause to anticipate resilient potential.

There is also cause for deep concern. The world’s largest economy is attempting to radically — rapidly — reform global trade by rationing access to US consumers. The tariffs will work (or not) by purposefully curtailing US consumption of products made outside the United States and spurring global consumption of products that are or may someday be made in the United States. Watch the curve on the chart of real Personal Consumption Expenditures. The angle of future ascent or descent will reveal a great deal.

The tariffs are the intentional use of surgical trauma to pursue a particular vision of enhanced economic wellness. For the United States, this is a whole-network trauma. For the rest of the world these network-effects are somewhat less all-encompassing, but still a serious body-blow.

Whole-network supply chain disruption/destruction is unusual. The pandemic came close. Otherwise, in my experience, even the deepest supply chain wounds have been able to depend on increased flows from other parts of the network. The March 2011 earthquake, tsunami, and nuclear accident was a a whole-network event for Tohoku, but its recovery was expedited by proximity to Tokyo and acceleration of flows from around the world.

Intentional whole network disruption/destruction of supply and demand is even more unusual. My only significant, sustained experience of this dynamic has been in the aftermath of Brexit (here too) and in the context of the war in Gaza (here and here). Brexit was — and remains — disruptive, especially to the British economy. Brexit’s supply chain disruptions were, however, caused by an explicit choice confirmed by democratic and due-process measures over several years. Destruction of Gaza’s already fragile demand and supply network was suddenly imposed by unilateral actions undertaken by decision-makers external to Gaza.

In the case of both Brexit and Gaza, perceptions of intention have had significant influence on how supply chains (and their operators) adapted to change. In the case of the United Kingdom exiting the European Union — for good or ill, right or wrong — intention was eventually perceived as deliberate and orderly. Supply chain operators have focused on making the best of a bad situation. In tragic contrast, Gazans and many others perceive the purposeful destruction of their supply chains to be punitive, perfidious, and worse. In the case of Brexit, perceptions finally prompted creativity and forward-leaning investment. In the case of Gaza, I have mostly witnessed deepening despair and paralysis.

There is a huge difference between: “This threat is real” or “I am being specifically targeted”. A natural disaster can prompt creativity and collaboration. A disaster discerned as avoidable and insidious incites blaming, scapegoating, and varieties of self-destruction. Before my experience with Gaza, I underestimated the practical power of this distinction. I tried to treat intentional harm as no worse than seismic aftershocks. I was wrong. Perceived malign intent is much more of a constraint on Supply Chain Resilience than any seismic recurrence.

During the presidential campaign Mr. Trump was explicit regarding his goals for tariff revenues and using tariffs to spur reindustrialization of the US economy. As with Brexit, his tariff policy benefits from its connection to this democratic process. As with Brexit, it was a close vote. Unlike Brexit, the presidential election involved issues extending well beyond any one policy. As with early implementation of Brexit, there is a perceived lack of deliberate and orderly implementation. There is a growing perception of arbitrary, contradictory, incompetent tariff implementation. Brexit implementation did, however, at long-last improve and is now the accepted reality. (Added on 4/16: Advice to shell-shocked Americans from Brexit Britain)

Still, Brexit would probably not win another referendum. Continuation of the current tariff strategy may well depend on how consumers — who also vote in November 2026 for the US House and one-third of the Senate — come to view tariffs. Well-intentioned and worth the trouble — or — punitive and perfidious? Even before voters have their say, supply chain operators are even now assessing causes, effects, and implications for future flows.

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When two things occur successively we call them cause and effect if we believe one event made the other one happen. If we think one event is the response to the other, we call it a reaction. If we feel that the two incidents are not related, we call it a mere coincidence. If we think someone deserved what happened, we call it retribution or reward, depending on whether the event was negative or positive for the recipient. If we cannot find a reason for the two events’ occurring simultaneously or in close proximity, we call it an accident. Therefore, how we explain coincidences depends on how we see the world. Is everything connected, so that events create resonances like ripples across a net? Or do things merely co-occur and we give meaning to these co-occurrences based on our belief system? Lieh-tzu’s answer: It’s all in how you think.

 Lieh-tzu: A Taoist Guide to Practical Living

Below is a helpful Bloomberg interview (under 8 minutes). David Warwick outlines fundamental tariff-related issues facing supply chain decision-makers. While the Tech supply chain is front-and-center, very similar issues face most other sectors. Warwick is wonderful at concisely capturing the challenge now complicating supply chains. I am less impressed by his hope that common sense will yet prevail and continued flows will be reasonably facilitated. My concise take on a very complicated context: Import costs have suddenly increased by more than ten percent (much more on products from China or those related to strategic sectors such as steel and aluminum; see more here). Tariff turmoil will continue to seriously disrupt supply, demand, physical movement, and financial options for the remainder of this year… and probably beyond. While an average twenty-five percent US tariff rate may now be avoided, fifteen to twenty percent remains plausible. Tactical and strategic options differ for each product category and each enterprise. But adapting wisely to this already changed context — and the prospect of further trade constraints — is absolutely in the self-interest of every enterprise and in the public interest as well.