Tariffs: Are We Setting Up for a COVID-Style Supply Chain Shock?
Invested In Us | Issue 3
In 2020, COVID lockdowns were billed as “two weeks to slow the spread.” Markets stabilized quickly, but the real shock didn’t arrive until 2021–2022, when supply chain breakdowns drove global shipping costs up over 600%¹, delayed goods for months, and shaved an estimated $1.9 trillion off global GDP².
Today’s tariff policy could follow a similar trajectory. The immediate economic data show minimal disruption, but higher input costs are quietly accumulating. If the U.S. and major trading partners escalate measures, the lagged effect could hit corporate margins, tighten supply availability, and slow capital spending — just as we saw post-COVID.
Why Tariffs Are Really Being Used
Beyond the headlines, we believe the current tariff strategy serves three primary purposes:
Raise revenue – U.S. customs duties have already topped $152 billion this fiscal year³, helping offset record deficits.
Reshore manufacturing – Tariffs create an incentive to relocate production to the U.S., though many low-skill roles are likely to be automated.
Geopolitical leverage – Tariffs act as a pressure point in broader trade negotiations and energy diplomacy, particularly with nations still buying sanctioned commodities.
The policy aims are clear — but execution is constrained by structural labor shortages and political bottlenecks.
Markets Are Strong, But Leadership is Thin
The S&P 500 has gained 9.5% year-to-date, while the Nasdaq is up more than 10%⁴, driven largely by mega-cap technology and telecom. By contrast, healthcare and consumer discretionary stocks are flat to negative. The VIX, Wall Street’s fear gauge, remains below $20 — signaling investor optimism — but concentrated leadership and policy uncertainty suggest the rally rests on a narrower base than headline numbers imply.
Gold’s Climb Signals a Broader Shift in Reserves
Gold is within striking distance of all-time highs. This is not a retail speculation story — it’s a central bank strategy. Over the past decade, monetary authorities have purchased more than 5,500 tonnes of gold, with China and Russia leading the trend⁵. The goal: diversify reserves away from the U.S. dollar, hedge against sanctions risk, and build greater monetary autonomy. That structural demand supports gold even in risk-on markets.
Reshoring Meets Reality: Labor is the Bottleneck
According to the U.S. Bureau of Labor Statistics (BLS), there were 415,000 open U.S. manufacturing jobs in June 2025⁶. Many require advanced skills, and are hard to fill due to wage pressures, geographic mismatches, and slow permitting processes. Even with tariff-driven incentives, these constraints mean reshoring gains will take years to materialize.
401(k) Access to Private Equity and Real Estate: Opportunity with Caveats
Recent regulatory changes allow certain 401(k) plans to include private equity and real estate allocations. For sophisticated participants, these asset classes can offer diversification and potential outperformance over time. However, higher fees, illiquidity, and valuation opacity require a more institutional approach to manager selection and risk monitoring. Inexperienced plans or participants could face unfavorable outcomes if these investments are treated like public-market allocations.
Debt, Deficits, and the Cost of Carry
The U.S. will spend nearly $1 trillion on interest payments this year — almost four times the level of a decade ago and roughly 25% of federal revenue⁷. Unlike Japan, where debt accumulation has funded domestic investment, much of America’s deficit expansion has gone toward tax cuts for top earners and emergency responses to crises such as the Great Financial Recession of 2008 and the Covid-19 pandemic of 2020. With debt service costs rising, the government’s fiscal flexibility is narrowing — and future stimulus will face tighter constraints.
Corporate Capital Allocation: Record Buybacks, Limited Capex
U.S. companies have announced $984 billion in share repurchases this year, on track to exceed $1.1 trillion⁸. While buybacks support EPS in the short term, they also reflect a lack of compelling reinvestment opportunities. Overreliance on this approach may erode long-term earnings growth potential, especially if revenue growth slows in a weaker macro environment. Historically, large corporate tax cuts have often been followed by a surge in share repurchases and higher savings rates among top earners, rather than proportionate increases in productive investment. After the 2017 corporate tax rate reduction, U.S. companies spent a record $806 billion on buybacks in 2018⁽⁹⁾ — far exceeding the growth in capital expenditures. This dynamic can limit the flow of resources into sectors such as infrastructure, healthcare, and education that drive broader economic productivity.
Investor Perspective
The parallels between tariffs today and COVID’s delayed supply chain shock are too close to ignore. Add in concentrated market leadership, structural labor shortages, record buybacks, and rising debt service — and the case for proactive portfolio resilience strengthens. Diversification and disciplined allocation remain the best defenses against lagged shocks.
This Week’s Takeaway:
Markets reward preparation. Don’t wait for the lagging effects to appear before acting.
Community Spotlight
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Ingrid Zapata Read | Grow With Community & Community Made
This week, we’re spotlighting Ingrid Zapata Read — strategist, connector, and founder of Grow With Community and Community Made. Through her workshops, collaborations, and thought leadership, Ingrid equips entrepreneurs with the tools, confidence, and connections to grow with intention.
Her recent Sunday Send-Off newsletter explored the power of digital omnipresence — showing that true visibility isn’t just about being online, but showing up in ways that resonate and build trust.
Explore her work: Let's Grow With Community
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Sources:
Drewry World Container Index, 2021 shipping cost data.
Asian Development Bank, global GDP impact estimates, 2022.
U.S. Treasury customs duties data, FY2025.
FactSet market data, Aug 8 2025.
World Gold Council, Q2 2025 central bank gold purchases.
U.S. Bureau of Labor Statistics, JOLTS June 2025.
U.S. Congressional Budget Office, July 2025 budget update.
Birinyi Associates via Wall Street Journal, Aug 2025.
Birinyi Associates via Wall Street Journal, “Buybacks Surge After Tax Cuts,” March 2019.