The Trade Fog Thickens: Hormuz, Tariffs, and the Fragility of Diversification
The disruption around the Strait of Hormuz and freshly announced US plans to levy additional duties on 60 economies are often discussed separately — one as a geopolitical and energy issue, the other as a trade war. In practice, both operate as geoeconomic pressures that compound each other.
The challenge for companies is increasingly cumulative rather than isolated. Contingency plans are facing frequent twists. Assumptions embedded in existing supply-chain models are becoming unstable at the same time. The Hormuz crisis squeezes shipping access, freight pricing, insurance costs, rerouting pressure, delivery reliability, and energy flows. This also causes heavy timing pressure from supply-chain rerouting, inventory repositioning, and logistics disruption. Companies accelerating shipments ahead of tariff deadlines are now competing for the same constrained carrier capacity that the Hormuz disruption has already tightened.
Therefore, an additional layer of tariffs or even just uncertainty risks triggering another surge effect simultaneously.
The Proposed Tariffs Are Broader — and Narrower — Than They Appear
The United States has proposed new tariffs targeting 60 economies over alleged failures to prevent imports tied to forced labor. The proposal would impose additional duties of 10% or 12.5% across economies representing the overwhelming majority of US trade. The initiative follows the Supreme Court’s earlier decision striking down tariffs imposed under the IEEPA emergency-powers framework, which resulted in a refund order of approximately $166 billion. The proposed Section 301 approach effectively preserves tariff leverage using a different legal foundation centered on labor enforcement and supply-chain standards.
Despite the headline framing, actual impact may be narrower at aggregate level. Analysis published by Global Trade Alert suggests that the proposed forced labor tariffs would leave the US’ average close to today’s level. Further, although the tariffs target 60 economies, a large share of imports from those countries could remain excluded through product carve-outs and existing Section 232 treatment.
So, the key exposure question is not simply whether a country appears on the list of 60 economies. It is whether specific product lines fall inside the covered portion of trade or whether they are excluded. The proposed framework contains extensive carve-outs, including for products already subject to Section 232 measures and a lengthy list of exclusions. As a result, two companies sourcing from the same country could face very different risk outcomes depending on the classification of their imports and the structure of their supply chains. Firms therefore need to assess exposure not only by geography, but by tariff classification, sector treatment, and upstream supply-chain composition.
The forced-labor investigation is only one part of the evolving picture. A second USTR investigation into structural excess manufacturing capacity is still pending. That probe focuses on whether state support, industrial subsidies, export concentration, and overcapacity in strategically important sectors are distorting global trade conditions. Unlike the forced-labor investigation, which focuses on supply-chain compliance and import controls, the excess-capacity probe examines whether government policies are contributing to overproduction and export concentration across a broad range of manufacturing sectors. USTR has identified industries including electronics, semiconductors, batteries, machinery, transportation equipment, robotics, chemicals, solar modules, and automobiles as illustrative areas of concern. As a result, the investigation has implications not only for additional duties and landed costs, but also for manufacturing footprints, investment decisions, and long-term supply-chain strategy.
Taken together, the two investigations suggest something broader than a temporary tariff cycle. They point toward the construction of a more durable trade-risk architecture capable of reaching both how goods are produced and where strategic production is concentrated.
The Implications for Friendshoring
For several years, many multinational companies responded to geopolitical fragmentation by diversifying production into politically aligned or commercially stable jurisdictions — a strategy commonly described as friendshoring. Manufacturing shifted from China into countries such as Vietnam, Malaysia, Mexico, India, and parts of Eastern Europe in pursuit of lower geopolitical risk and more stable access to Western markets.
The new investigations complicate that assumption. Many of the same countries that benefited from diversification are now themselves exposed to forced-labor scrutiny, industrial-policy investigations, or both. Vietnam, Malaysia, Mexico, Taiwan, Thailand, India, and others remain deeply integrated into global manufacturing supply chains precisely because they developed strong export-oriented industrial ecosystems. Those same characteristics now place them inside emerging trade-risk frameworks.
This does not mean friendshoring is no longer advantageous. But it does suggest that geopolitical alignment alone is becoming a less reliable proxy for supply-chain security. As a result, diversification no longer guarantees insulation if replacement manufacturing hubs themselves become targets of tariff or excess-capacity scrutiny. A supply chain moved out of China may still face rising duties, shipping disruption, and industrial-policy scrutiny simultaneously if its alternative manufacturing hubs sit inside the new investigations.
The Window That Is Open Now
USTR is accepting written comments until July 6 on the scope of the proposed Section 301 measures, including which products and tariff classifications should be covered, excluded, or subject to different duty rates. For industries and companies with concentrated exposure, this creates a limited but meaningful opportunity to shape how the framework is ultimately applied.
The larger issue is timing. Many global operators are already under tremendous pressure from rerouting, logistics disruption, energy volatility, inventory repositioning, and longer delivery cycles associated with the Hormuz situation. Any anticipated implementation deadline for new duties risks compressing those pressures further, particularly if companies accelerate shipments, pull forward inventory, or compete for constrained logistics capacity ahead of potential tariff changes.
The most immediate priority is to determine whether products are actually covered under the proposed framework, whether existing exclusions or Section 232 treatment apply, and where exposure sits across tariff classifications, suppliers, and upstream inputs.
A further priority is financial resilience. Businesses with simultaneous exposure to shipping disruption, elevated freight costs, inventory accumulation, and potential additional duties may face significant short-term liquidity pressure even before longer-term strategic adjustments begin. In that environment, liquidity planning, supplier coordination, and access to operational flexibility are important.
