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The Tariff Decade

Protectionism stopped being an event and became the operating environment — and it shows up in places you wouldn't expect.

For thirty years, tariff exposure was a line item managed by a specialist somewhere in the finance function. It is now a board-level input into where facilities get built, and that change is more consequential than any individual measure that produced it.

The mechanics are well documented: duties across a widening set of categories, supply chains reorganised in response, two decades of just-in-time orthodoxy quietly abandoned. What is less well documented is the cost, because most of it does not appear as a tariff line. It appears as something else.

Where the cost actually shows up

Working capital. Buffer stock has returned as deliberate policy. Companies that spent twenty years minimising inventory are now holding it on purpose — and holding inventory at current interest rates is materially more expensive than holding it at the rates that prevailed when the strategy was designed.

Gross margin. Relocating production is not a one-off cost. Yields at a new facility are lower for years, supplier relationships have to be rebuilt, and the labour cost advantage that justified the original location is rarely fully replicated.

Prices. The clearest example sits elsewhere in this issue: Apple attributed roughly $100 of its new iPhone pricing to a memory shortage — a shortage worsened by supply chains that are less fungible than they were a decade ago.

The regional opportunity

For readers in India and the Gulf, the reorganisation is not only a cost. Capacity leaving single-country dependence has to arrive somewhere. India has captured a substantial share of relocated electronics and pharmaceutical manufacturing. The Gulf has positioned around logistics, re-export infrastructure and energy-intensive industry, where cheap power is a structural advantage rather than a policy choice. Both are beneficiaries of a process neither started — the open question is whether they capture durable capacity or merely the assembly stages that move again when the calculus changes.

What to watch: gross margin trends at multinational manufacturers. That is where the tariff decade eventually becomes visible in earnings, and where it will be visible long before anyone declares the era over.