The trade conflict hasn’t derailed supply chains. Here’s why.

Global supply chains have been working well despite abrupt shifts in US trade policy and rising global tensions in 2025. A big reason for this is that companies have improved how goods are shipped and warehoused to keep products flowing around the world. But these supply chains could be tested even more if the trade conflict worsens.

Global supply chains have had a rough go over the past five years.

First, the COVID-19 pandemic brought the flow of goods around the world to a near standstill. Now, an ongoing global trade conflict led by abrupt changes in US trade policy is adding stress on these trade networks.

Any disruptions in global supply chains—at any time—can raise production and shipping costs, lengthen delivery times and, ultimately, increase inflation. Yet a range of indicators show that supply chains worked well in 2025. Let’s take a closer look.

Assessing the health of global supply chains

We can use many indicators to evaluate the state of global supply chains, including:

• manufacturing delivery times
• production backlogs
• inventory levels
• global shipping costs

The Federal Reserve Bank of New York uses these and other indicators to build its Global Supply Chain Pressure Index.

By the end of 2025, the index remained close to its historical average, indicating little strain on supply chains. For instance, suppliers reported normal delivery times, suggesting no significant shipping delays. Similarly, costs to ship containers declined considerably from their pandemic peaks, indicating minimal pressures on global supply chains (Chart 1).

Shipping costs from China were an exception—they have been somewhat volatile since the beginning of 2024. One reason is that carriers were forced to take longer—and more expensive—routes after Houthi rebels in Yemen began attacking vessels in the Red Sea, which led to a decline in traffic in the Suez Canal. Costs also spiked in the first half of 2025 as manufacturers responded to various announcements of US tariffs on Chinese imports. Still, costs were well below their pandemic peaks.

Canada has seen few effects on its supply chains from the trade conflict. Indicators of supply chain difficulties from the Bank of Canada’s Business Outlook Survey remained low in 2025.

Why supply chains have kept working

Several factors have supported global supply chains since the start of the trade conflict.

Manufacturers and shipping companies learned from their experiences during the pandemic and, in recent years, improved how they move products and manage inventories. For example, major shipping companies have adopted leading-edge digital technologies to more efficiently coordinate the transport of goods by land, sea and air. This has helped make shipping networks more flexible, allowing businesses to quickly shift vessel routes and container configurations. As well, companies have been buying ultra-large container ships to replace aging vessels and expand their fleets (Chart 2). In fact, purchase orders for new ultra-large ships have surged since the start of the pandemic.

Businesses have also changed how they manage their inventories to reduce supply chain risks. This is especially the case for multinationals that make motor vehicles, semiconductors and medical supplies.

These and other businesses have shifted their approaches to managing inventory from what’s known as just in time to just in case. These companies are now holding larger inventories just in case something happens with their supply chains, instead of having goods arrive just in time to be used or sold. For example, companies stockpiled inventory before US tariffs came into effect just in case there were supply disruptions and to buy themselves time to adjust their strategies for sourcing goods.

But risks to supply chains remain

The trade conflict, if it worsens, could impair the movements of goods across borders. For example, it could trigger delays at borders and force manufacturers to rethink where they source goods from. Firms may scramble to find new suppliers or rush to stockpile goods as a precaution. Either action could stress supply chains by:

• creating or adding to production backlogs
• extending delivery times
• driving up shipping costs

Another possibility is that countries might restrict exports of inputs that are critical for some products—like semiconductors, rare earth minerals and pharmaceuticals—directly causing supply chain bottlenecks.

Another risk comes from the Middle East, which is home to particularly vulnerable trade routes. Any further instability in the region could quickly turn the Suez Canal, for example, into a choke point, further affecting the smooth operation of supply chains. Most companies have yet to resume shipments through the Suez Canal because of previous attacks in the Red Sea. Instead, companies have opted for the longer route around the Cape of Good Hope in South Africa, which has increased transport costs and caused delays (Chart 3).

Find out more