Global trade has been disrupted significantly over the past year, driven by ongoing trade disputes between the United States and China. One of the most outstanding disputes has been the so-called “fentanyl tariffs”, disrupting markets in pharmaceuticals, agriculture, and chemicals. When tariffs were raised on chemicals linked to the illicit production of fentanyl, a synthetic opioid, markets experienced immediate shocks. The Dow Jones US Pharmaceuticals index reacted with a sharp dip in March, when the tariffs were announced, and a similar uptick this November, when the tariffs were reverted to the original 10% level.

With this and similar examples of tariff uncertainty dominating the headlines, how can enterprises mitigate the impact of tariffs in a way that they minimise regret when tariff policies revert, while insulating them from further uncertainty in the future? Lots of advice circulates and one strategy seems persistently dominant: Wait until the dust settles.

It is time that this strategy is challenged.

UNDERSTANDING THE REAL DYNAMICS BEHIND TARIFF SHOCKS

Supply chain mapping is a daunting but necessary first step to see the full picture and create a resilient supply chain. Abstracting away unnecessary detail and focusing on critical suppliers simplifies the task, but the devil lies in the details.

Looking back to the fentanyl-tariffs example, a traditional data review would quickly reveal the largest suppliers affected by tariffs, their paths, and their turnover. The seemingly obvious conclusion: Shift business from tariffs-affected suppliers to cheaper, unaffected alternatives. However, buyers who followed such a reactive strategy would now face higher prices, switching costs, or unstable supply – potentially before they had even managed to transfer the supply chain over.

A game-theoretical approach, however, shifts the focus away from the tariff levels and price impact, and toward the second-order responses, i.e. the potential reactions of the rest of the market:

• Which competitors are likely to absorb the shock into their bottom line?
• Who will pass it onto customers?
• Who may attempt to resource or renegotiate with suppliers?
• Which suppliers are now seeing demand increase – and who sees demand drop?

The more effort put into this analysis, the more surprising the results can be. For each option, payoffs can be evaluated, and a more reasonable picture of the changing buyer/supplier landscape forms.

WARGAMING THE FIRST MOVE

In a volatile environment, proactive buyers often gain a first-mover advantage.

In the same example, suppliers in China suddenly facing projected drops in demand may be very open for renegotiation. The purchasing leverage is high, with Chinese suppliers competing harder for future sustained business. Buyers who spot this early could create value through:

• Redesigned commercial agreements
• Competitive auction formats
• Increased contractual flexibility
• Long-term partnerships

And after a deal was struck, the retraction of the tariffs would be icing on the cake.

To avoid speculation, a robust game tree, with the key players, their possible moves, and their expected payoffs, becomes invaluable. The next step is then to identify positions of leverage and begin to optimise accordingly.

BUILDING FLEXIBILITY INTO CONTRACTS

What strategy ensures a favourable position for an enterprise regardless of whether tariffs rise, fall, or fluctuate unpredictably?

Instead of committing fully, it would make sense to consider flexible options:

1. Contingent contracts that lock in capacity or pricing bands if tariffs change again. This would protect against tariffs whilst avoiding negative impacts if tariff pressure subsided.
2. Similarly, buyers can set up volume-flexible structures, where committed volumes are adjusted automatically with market conditions,
3. or joint-risk clauses, where sellers offer to share part of the tariff burden in exchange for longer-term relationships.

Such mechanisms anticipate the incentives and responses of the other party, a fundamentally game-theoretical perspective.

CONCLUSION

This way of thinking is not tied to tariffs; it can apply to any form of shock. The key takeaway is that the future is not a binary outcome, but it is linked to the actions of many unique players (and in the example above, including the president of the United States). By anticipating scenarios, acting early, and designing flexible mechanisms, Procurement leaders can minimise regret, secure competitive advantage, and protect long-term value, even when circumstances can deviate.

“What will happen next with tariffs?” is difficult to answer. The better question is “Which decisions can we make today to ensure we are ready for any future?”.

What’s your view on this?  I’d be interested to hear your perspective.

Sources:

Trump Reduces IEEPA Fentanyl Tariffs to 10% Effective November 10; Continues Suspension of Heightened Reciprocal Tariff Rate By Husch Blackwell Trade Team on November 6, 2025 https://www.internationaltradeinsights.com/2025/11/trump-reduces-ieepa-fentanyl-tariffs-to-10-effective-november-10-continues-suspension-of-heightened-reciprocal-tariff-rate/

1-Year snapshot of the Dow Jones US Pharmaceuticals index: DJUSPR 1,027.55 (▲1.06%) Dow Jones U.S. Pharmaceuticals Index | Google Finance