Consumers might experience higher prices and reduced availability of products due to an increase in tariffs that could disrupt the global supply chain, according to Gurram Gopal, professor and chair of Illinois Tech’s Department of Information Technology and Management.
“If something doesn’t change, then you will see shortages probably in late summer,” said Gopal, based on his extensive research in supply chains. “Will it be across every category? Probably not. But in certain ones because there’s not much inventory—sneakers, clothing, back-to-school items, toilet paper, those kinds of things.”
The supply chain is a network involving various players and processes that transform raw materials into consumer products. As nations developed specializations within this network, global trade policies became necessary.
“The thesis depends on understanding that not everybody can do everything,” Gopal explained. “The second thing is trying to figure out an equitable way of exchanging. What tariffs do is they essentially change the equation for an equitable exchange.”
Post-World War II trade agreements have laid the groundwork for reliable supply chains to deliver goods efficiently at affordable costs. Tariffs threaten these systems as companies seek ways to maintain affordability while maximizing profits.
Gopal noted that companies might pass tariff costs onto consumers if they are perceived as short-lived or minor. Alternatively, businesses may invest in U.S.-based manufacturing plants or explore new supply routes but will only build plants domestically if tariffs persist long-term.
He emphasized that relocating a manufacturing plant takes at least two years and doubted such moves would create many jobs domestically due to advances in robotics and artificial intelligence.
“When I look at the developments in robotics and artificial intelligence, and I see what a lot of startups are doing, we are not going to be able to create those manufacturing jobs here,” he stated. “Manufacturing takes very little labor today, especially electronics.”
Some household goods may become scarce as businesses adjust their supply routes with less inventory on hand.
Gopal pointed out that major retailers have reduced inventories from three-month supplies to six-to-eight-week supplies to cut holding costs. Finding new routes may temporarily decrease inventory levels further leading to empty shelves.
“When we’ve had a big disruption such as COVID-19 all of sudden we couldn’t get products in time and we saw empty shelves,” he said. “In certain categories of goods you will see shortages just because there is not that much supply and inventory on hand.”
Business managers previously managed COVID-19 disruptions once essential production policies were set but find current tariff situations more challenging due largely unpredictable rule changes appearing first on social media platforms.