A general view shows container terminal in Hong Kong, China, April 23, 2025.
Tyrone Siu | Reuters
The trade truce reached between the U.S. and China arrived just as President Donald Trump’s tariffs took a big bite out of North American & Asian manufacturing, with a steep retreat in April purchasing activity after the rush to hoard supply, according to the GEP Global Supply Chain Volatility Index.
“The pause on tariffs is a major relief for manufacturers in both the U.S. and China,” said John Piatek, vice president of consulting for GEP. “Our Supply Chain Volatility Index shows manufacturing demand in China is dropping steeply, and U.S. manufacturers are aggressively stockpiling key inputs to buffer against tariffs.”
But according to Piatek, the trade deal won’t quickly quiet U.S. manufacturers’ anxiety about how to reduce risks related to China for the long-term. “As they maneuver to de-risk and limit exposure to China, the rapidly changing landscape and uncertainty is clouding manufacturers’ outlook and dampening their capital investment and supply chain,” he said.
The GEP Global Supply Chain Volatility Index tracks demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses.
“The first blows of the tariff war have landed on global manufacturers,” Piatek said. The supply chain volatility data should serve as a warning about what would come next if the temporary pause in tariffs by the U.S. and China aren’t extended permanently after the 90-day pause and the trade war re-escalates.
The data showed a “hockey stick”-like upturn in April, according to Piatek, with North American companies aggressively stockpiling inventory at what he described as a “concerning rate.” At the same time, “the first signs of manufacturers anticipating slower demand and supply shortages have emerged,” he said.
Purchasing activity by manufacturers in Asia was at its weakest since December 2023.
One bright spot to offset pull back in manufacturing is Europe, where an industrial recession is coming to an end. The U.K., the first nation to sign a preliminary trade deal with the U.S., recorded significant manufacturing weakness, with supplier activity down to a rate near a record low based on the past two decades of data. But supply chain capacity in Germany and France, which was underutilized over the past year, is reflecting growth. Piatek cautioned that this could reverse if global trade conditions worsen.
The GEP data also shows an increase in spare capacity across Asian supply chains in April, led by China, Taiwan and South Korea.
Stephen Edwards, CEO of the Port of Virginia, told CNBC in an interview published this week that if the supply chain future is less China and more Southeast Asia, South Asia and Europe, the U.S. port is positioned for that growth.
“Our fastest growth over the last four years has been the Indian subcontinent, then Vietnam, then Europe,” said Edwards.
Trade from China has been flat for the last four years at Port of Virginia.
“It is our second-largest trading bloc after the European Union. So it’s still a big block,” he said. “But if that is going to migrate over time, whatever the new trade environment is, there’s an opportunity. We have not yet seen the trade agreements, but we believe that it’s going to be less China and more from Southeast Asia and Europe. I think we’re in a pretty good spot,” Edwards said.
