VULNERABILITY TO TRADE BARRIERS

Identifying reliance on import
and export dynamics

VULNERABILITY TO TRADE BARRIERS

WHY TRADE BARRIERS MATTER MORE THAN EVER

While trade barriers are not new, their scale, speed, and strategic use have grown dramatically, reshaping the trade landscape almost in real-time. From US–China trade tensions to new green regulation in the EU (e.g., the Carbon Border Adjustment Mechanism), sourcing strategies are being remodeled for continuity and access rather than just cost.

This chapter introduces our Trade Barrier Vulnerability Index, which ranks country-sector pairings based on their dependence on imported inputs, a key indicator of exposure to tariffs and non-tariff barriers (NTBs). The index draws on Trade in Value Added (TiVA) data to assess not just conventional trade flows, but the deeper web of global supply chain interdependence.

Governments are using tariffs and NTBs to protect domestic industries, enforce sustainability standards, and gain geopolitical leverage. For procurement, the question is not just what might happen; it’s which countries and sectors are inherently more vulnerable.

UNDERSTANDING VULNERABILITY

A country’s trade barrier risk is shaped by its economic model, trade profile, and integration into complex supply chains. The more a country relies on imported inputs for production, the greater its exposure to disruption when trade relationships shift. The supporting insights, however, provide a broader perspective.

The countries that score most highly on this index tend to have a relatively smaller population; as such, these economies typically have a greater reliance on international trade. While Singapore, a high-income country, scores most highly, the second highest-scoring country is Vietnam, a lower-middle income country.

IN FOCUS - SINGAPORE (#1) AND VIETNAM (#2)

Singapore’s economy is highly exposed due to its re-export model, whereby the production of key exports relies heavily on imported inputs. It imports (more than it exports) from the US and serves as a refining and distribution hub for China and Malaysia. Key industries, such as petrochemicals and semiconductors, depend on cross-border flows and are vulnerable to export control, particularly from US-China trade disputes.

While Singapore has diversified its trade partners through the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), its trade surplus with China creates a single-point risk. If China restricts imports or slows trade, Singapore’s re-export sector is hit hard. The concentrated reliance on a few neighbors for essentials creates a vulnerability.

Vietnam’s model is reversed: it runs a trade surplus with the West (notably in electronics, textiles, and furniture) but faces an $83 billion deficit with China, its key input supplier. This dual exposure makes it highly sensitive to both tariff hikes and policy shifts. Despite free trade pacts, Vietnam’s sharp export growth has in the recent past been met with the threat of significant tariffs, which highlighted the scale and pace of impact changes in trade barriers could have on the Vietnamese economy.

Singapore has a SIGNIFICANT RELIANCE on imported energy and natural resources

OTHER APAC COUNTRIES OF NOTE

Other APAC countries in the top 10 are Korea, Taiwan, Malaysia, and Thailand. These countries show similar vulnerability via concentrated export markets and tech-heavy portfolios. Korea sends over 40% of its exports to the US and China; Taiwan is deeply embedded in tech flows and vulnerable to chip export controls.

EUROPE: NETHERLANDS AND SPAIN

In Europe, countries including the Netherlands and Spain are exposed through specialization and logistics roles. The Netherlands serves as a gateway for Chinese goods via Rotterdam. At the same time, Spain is highly integrated into the EU auto and aerospace chains, making it sensitive to upstream disruptions or downstream tariffs.

SECTOR SENSITIVITY

Sector-wise, the most vulnerable are those with high input cost structures, global supplier footprints, and complex cross-border flows e.g. automotive, aerospace, consumer electronics, and chemicals.

For sourcing professionals, resilience to trade barriers requires more than watching headlines. It means understanding supply origins across tiers where necessary, scenario planning for tariff and non-tariff barrier impacts, and taking corrective actions where barriers are deemed too high-risk.

APAC & EUROPE

SINGAPORE & VIETNAM

SOURCING AND SUPPLY TACTICS

To reduce tariff exposure, buyers must understand the true origin of components, materials, and services within their supply chains, not just final assembly locations. Working closely with legal and logistics teams, businesses can map origin risk and consider potential alternatives to what they buy or where they buy from. For example, products assembled in Vietnam or Mexico may still use Chinese components, falling foul of US tariffs.

Taking a strategic approach, Toyota restructured its North American supply chain to comply with USMCA content rules. Similarly, H&M shifted its sourcing to Vietnam to leverage its Free Trade Agreement (FTA) with the EU.

Diversifying supplier bases and production geographies remains a core tactic to manage trade risks. Multi-sourcing from countries with lower tariff exposure or Free Trade Association (FTA) benefits helps reduce dependency and improve flexibility.

Companies accessing the US market are onshoring where viable. Others, like Malaysian firms, use CPTPP access to mitigate US tariffs, while Spanish businesses increasingly look to Latin America.

Apple, for example, has moved manufacturing capacity from China to Vietnam and India. Bosch uses a multi-tier supplier model across Europe and Asia to maintain continuity despite customs disruptions.

Tariff engineering involves adjusting a product’s design, materials, or packaging to reduce duties. This could mean reclassifying goods under lower-tariff Harmonised System (HS) codes or modifying the amount of value added at each production stage.

Some companies ship goods partially assembled to avoid high finished-product tariffs. Others change sourcing configurations to meet rules-of-origin thresholds. Columbia Sportswear, for instance, lowered tariffs by shipping jackets and linings separately, each classified under lower-duty codes. These tactics require cross-functional collaboration with customs and tax experts but can unlock significant savings when applied strategically.

3 | PRODUCT REDESIGN AND
TARIFF ENGINEERING

2 | DIVERSIFY SUPPLY AND
GEOGRAPHIC SPREAD

1 | UNDERSTAND ORIGINS TO BUILD
MORE ADVANTAGEOUS TRADE ROUTES

In a world of shifting trade policy, supply networks must withstand tariff storms and regulatory hurdles. Sourcing professionals need to understand exposure and potential impact but may also find a competitive advantage as the trade pieces settle.