By Pei-Hwa Pai (白佩華)
In late February, the U.S. Supreme Court issued a 6:3 ruling, determining that the Trump administration’s use of the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs exceeded its legal authority, declaring this round of “global tariffs” illegal. This was a significant blow to the use of tariffs as a core economic and diplomatic tool. However, less than 24 hours after the ruling, the administration invoked Section 122 of the Trade Act—a rarely used provision—to announce a 10% tariff on global imports starting February 24, with potential increases to 15%.
For Taiwanese companies, the primary shock is not the tariff percentage itself, but the fact that institutional and policy uncertainty has become a new structural risk. In a world where courts can overturn policies, presidents can switch legal tools overnight, and Congress can intervene at any moment, the critical question is no longer whether tariffs will be rescinded, but how much “resilience” exists within a company’s operational and financial structures.
Beyond Tariff Rates: Uncertainty as a New Cost
Since early 2025, the United Nations Conference on Trade and Development (UNCTAD) has repeatedly warned that the global “Trade Policy Uncertainty Index” reached record highs in the first quarter. Enterprises are facing a continuous stream of unpredictable policy signals rather than single adjustments. Practically, the pressure on businesses extends far beyond the tariffs themselves:
- Inventory Strains: Companies are forced to pull orders forward and stockpile goods to avoid future hikes, increasing inventory costs and capital pressure.
- Logistics Inflation: To diversify risk, firms use costlier routes or transshipment countries, driving up logistics expenses.
- Financial Volatility: Policy instability triggers exchange rate fluctuations and tightening credit, making it harder for SMEs to secure trade financing.
As UNCTAD succinctly put it: “Uncertainty itself has become a new kind of tariff”. The cost of preparing for potential changes often exceeds the actual tariff percentage. Therefore, companies must view this as a “normalized environment of uncertainty” and design resilient frameworks from a risk management perspective.
Reframing Risk: From “Prediction” to “Absorption and Adaptation”
Traditionally, companies approach trade risks by asking: How much will they rise? How long will they last? Will they be refunded? This is a “quantifiable risk” mindset that assumes we can predict specific scenarios to calculate profit and loss.
In a world of constant flux, the core questions of risk management must evolve into the language of resilience:
- Can our business model withstand three years of fluctuating trade rules?
- How much margin compression or order volatility can we endure in a worst-case scenario?
- Have we designed “alternative channels” and “backup markets” so a single shock doesn’t destroy the entire operation?
Resilience assumes the world is inherently volatile and focuses on designing structures capable of absorbing that volatility.
The Evolution of Trade Risk: A Boardroom Priority
Trade risk has shifted from a technical “compliance issue” to a strategic “geopolitical trade risk”. Because policies can now flip due to executive orders or court rulings, we face “policy reversibility risk”.
This risk impacts more than just margins; it triggers customer churn, order delays, and accounts receivable risks. Consequently, trade risk must be integrated into corporate governance and ESG frameworks and discussed at the Board of Directors level.
Building the Three Layers of Resilience
Mature trade risk management involves three distinct layers:
- Layer 1: Tactical Buffers: Utilizing split shipments, bonded warehouses, and flexible delivery schedules to buy time.
- Layer 2: Structural Diversification: Assessing regional supply chain concentration, revenue-to-market ratios, and incorporating tariff adjustment clauses into contracts.
- Layer 3: Strategic Options: Maintaining the “option” to switch models—such as setting up light assembly points in major markets or participating in local subsidy frameworks.
Measuring Maturity: A Five-Point Self-Check
Enterprises can assess their trade resilience through five lenses:
- Supply Chain Diversification: Moving away from single-source origins.
- Customer Concentration: Reducing reliance on single markets or clients.
- Contractual Flexibility: Including “Force Majeure” and tariff adjustment terms.
- Policy Monitoring: Moving from passive news consumption to internal early-warning mechanisms.
- Financial Integration: Leveraging hedging, credit insurance, and supply chain finance.
Conclusion: Order Amidst Chaos
In a high-volatility era, competitiveness no longer stems solely from cost or technology, but from the design of operational continuity. Risk management is not about eliminating uncertainty; it is about building a structure that allows an enterprise to move forward steadily even when the environment is in chaos.
About the Author:
Pei-Hwa Pai (白佩華) is a Chief Strategy Officer and Consultant in Risk and Sustainability Governance. She focuses on geopolitical risk, supply chain restructuring, and resilience design, helping financial institutions and corporations integrate risk management into strategic and financial frameworks.
