Article Highlights:
- In the era of high-stakes “cold wars” between superpowers like China and the U.S., geopolitical supply chain risks have become an everyday concern for businesses.
- China’s control of critical minerals and rare earths remains one of the most serious supply chain variables for many businesses.
- While circumstances have mellowed somewhat since “Liberation Day,” the average effective tariff rate remains near 17%. While splashy headlines around tariffs are no longer a weekly occurrence, U.S. businesses are now operating in a more expensive, restrictive trade environment, one that’s become the status quo.
- Government interventions via nationalization and other industrial policies can pose risks to the broader supply chain. Beyond just disruptions, increased government involvement in supply chains creates additional variables for companies to account for—including fears that nations will exploit their leverage to achieve geopolitical aims.
In the era of high-stakes “cold wars” between superpowers like China and the U.S. geopolitical supply chain risks have become an every-day concern for businesses—especially those with sprawling global supply chains. These include known risks such as armed conflict but also count a number of new and growing risks as well. These include known risks such as armed conflict, as well as a growing set of newer threats. Sanctions, critical minerals restrictions, tariffs, and protectionist policies are increasingly being used to shield domestic manufacturing—often at the expense of global manufacturers. In this article, we explore the prime geopolitical supply chain threats that manufacturers should be tracking to keep a pulse on potential disruptors—both to themselves and their network of suppliers.
1. Critical Minerals and Rare Earths
The U.S. may have a powerful form of leverage in its $70 trillion market, a massive revenue pool businesses all over the world will go to great lengths to access. But over the past 18 months, Western nations have learned that America’s chief geopolitical rival, China, has what is arguably an equally potent trade instrument in its control of the critical mineral supply chain. In recent years, China has shown a willingness to impose export restrictions on its minerals and rare earths, trade maneuvers that can have an immediate, devastating impact on OEMs all over the world. The country controls 70% of the worldwide mining and 90% of the global refining of rare earth elements, substances like germanium and gallium that are critical to myriad modern technologies.
As geopolitical tensions persist and power dynamics between leading nations continue to evolve, China’s control of critical minerals and rare earths remains a major supply chain variable. Businesses that rely on resources like gallium, germanium, tungsten, and graphite for their products are vulnerable to export controls and other trade measures implemented by China. These vulnerabilities—which have been repeatedly exposed over the past two years—are now compelling the U.S., Japan, and the European Union to invest heavily in a critical mineral supply chain free of China.
Those efforts, however, will take time. For now, critical mineral and rare earth sourcing remain a high-stakes risk—one that manufacturers need to find ways to develop effective mitigation strategies for. Because while the U.S. and China signed a trade agreement in November that saw the latter nation pause rare earth export controls for one year, that concession represents a temporary reprieve at best.
The country controls 70% of the worldwide mining and 90% of the global refining of rare earth elements, substances like germanium and gallium that are critical to myriad modern technologies.
2. Tariffs
Early in the first year of Trump’s second presidency, his administration established an aggressive trade policy that included heavy tariffs on global players. While the furor and initial panic around tariffs have mellowed since “Liberation Day,” which saw the Trump administration slap tariffs on over 190 countries and territories worldwide, the average effective tariff rate remains near 17%, according to the Yale Budget Lab, the highest it’s been since 1932. While splashy headlines around tariffs are no longer a weekly occurrence, U.S. businesses are now operating in a more expensive, restrictive trade environment, one that’s become the status quo.
Because of this, organizations are now forced to strategize around tariff costs on a continuous basis. For some, this means mastering designations like country of origin (COO), country of diffusion (COD), and HTS codes, while others are developing ways to utilize tariff engineering to cut import costs. And because switching to U.S. manufacturing is still not a viable option for most American businesses, these firms will continue to navigate a complex trade landscape replete with sectoral and country-wide tariffs.
3. Export Restrictions
As the recent Nexperia crisis vividly demonstrated, even modest, targeted export controls can have an outsized impact on supply chains. After the Dutch government tried to take control of Nexperia using the nation’s Goods Availability Act, China retaliated by prohibiting Nexperia’s Chinese unit from exporting any components and sub-assemblies manufactured in China to foreign countries. While this chain reaction began with the threat of U.S. sanctions and an ownership struggle, the export controls China ultimately imposed left the largest impact on global manufacturing.
The effects were swift and lasting. Automotive manufacturers across Asia, Europe, and the U.S. scrambled to respond to sudden shortages of Nexperia components critical to their vehicles, with automakers like Honda, Nissan, and Volkswagen warning customers of impending production shutdowns. While unusual, the fallout from the ownership dispute between China and the Netherlands shows just how fragile electronic supply chains are—and how sensitive they can be to disturbances that might initially appear limited in scope. As more federal governments consider the merits of playing a more assertive role in their domestic industries, incidents like these could become more frequent.
While unusual, the fallout from the ownership dispute between China and the Netherlands shows just how fragile electronic supply chains are—and how sensitive they can be to disturbances that might initially appear limited in scope.
4. Industrial Policy and Nationalization
One of the more unexpected trends to emerge in 2025 was the way that national governments started engaging directly with some of their nations’ largest companies. The U.S. invested over $11 billion in Intel, in exchange for a 10% ownership stake in the company. The Trump administration also struck deals with Nvidia and AMD, in which the government granted the chipmakers export licenses to sell specific AI chips to China, in exchange for an agreement that both firms pay the Commerce Department 15% of the revenue from those sales. Finally, the aforementioned efforts by the Netherlands to seize control of Nexperia represents a different, more turbulent flavor of government intervention.
These are all examples of industrial policy and nationalization, government strategies that China has been deploying for years. And while there are clear benefits for governments interested in protecting and even boosting their nations’ most critical, lucrative industries, such interventions can pose risks to the broader supply chain.
The Nexperia crisis provided one such example, as a government’s attempted takeover of a chip firm triggered a cascade of downstream effects that led to retaliatory actions and, ultimately, supply chain disruptions. Beyond just the prospect of disruptions, however, increased government involvement in supply chains creates additional variables for companies to account for—including fears that nations will exploit their leverage to achieve geopolitical aims.
5. Global Sanctions
Sanctions have emerged as one of the most consequential geopolitical risks to global manufacturing networks in the 2020s. The passage of the Uyghur Forced Labor Prevention Act (UFLPA) in 2022 resulted in the U.S. sanctioning 144 Chinese entities in the years that followed, while detaining tens of thousands of shipments at U.S. ports of entry. U.S. companies were scrambling to try to identify any potential sub-tier manufacturers in their supply chains who were either sanctioned by the UFLPA or were sourcing commodities from the Uyghur region of China.
Other important sanctions lists during the first half of the decade included the Bureau of Industry and Security’s (BIS) Entity List and the Specially Designated Nationals (SDN) list. According to the Center for a New American Security, the Trump administration has been much more restrained in utilizing sanctions than its predecessor: while the Biden administration added over 3,000 individuals to the SDN List and over 500 people to the BIS Entity List in 2024, Trump only added around 1,300 individuals to the SDN List, and roughly 140 to the BIS Entity List, in 2025.
Despite the decreased usage, sanctions remain a powerful tool. Administrations have a record of using them to punish rival nations and hold bad actors accountable for breaking international law and violating human rights. There’s always a chance that sanctions will return to prominence in the months and years to come, forcing businesses to carry out the necessary due diligence to ensure compliance with these trade laws.
6. Armed Conflict
With armed conflicts in Ukraine, Gaza, and Sudan, among other nations, the past few years have seen a dismaying resurgence in violent land wars with substantial casualties. While armed conflicts don’t always trigger major supply chain ramifications, it’s important to be aware of just how sprawling and multifaceted the chain reactions triggered by warfare can be.
Following Israel’s full-scale invasion of the Gaza Strip in October 2023, Houthi rebels began attacking commercial vessels traveling through the Red Sea—a critical international shipping channel—in protest of the invasion. These operations reverberated across manufacturers, logistics firms, and supply chains all over the world, forcing many companies to redirect cargo to alternative maritime routes. In the months that followed, container vessel traffic through the Red Sea plummeted by as much as 75%. This is just one isolated example of how armed conflicts can impact supply chains in a myriad of ways that are all but impossible to foresee.
With conflicts persisting in a number of regions, it would not come as a surprise if the warfare spilled out onto supply chains once again, imperiling shipping routes, raw material sourcing, and other key variables.
With conflicts persisting in a number of regions, it would not come as a surprise if the warfare spilled out onto supply chains once again, imperiling shipping routes, raw material sourcing, and other key variables.
Navigate Geopolitical Supply Chain Risks With a Complete SCRM Tool
Today’s geopolitical supply chain risks are layered and unpredictable, with tensions, conflicts, and rivalries bleeding into manufacturing networks in a bevy of complex ways. While organizations may not be able to predict how tariffs, export restrictions, or land wars will impact their suppliers and production continuity, they can equip themselves with the resources to respond to disruption with decisiveness and confidence.
Supply chain risk management (SCRM) platform Z2 offers a comprehensive suite of capabilities that allow businesses to identify, address, and mitigate geopolitical risks. Z2’s Risk Hub provides risk assessments at the supplier, site, and part level, allowing companies to utilize a range of different risk frameworks. The platform assesses 12 unique risk factors for its supplier evaluations, three of which are directly related to geopolitical risks.
Z2 analyzes companies’ exposure to evolving trade regulations by linking parts to key trade attributes, including HTS codes and country of origin (COO). As new tariffs and trade restrictions are introduced, customers can proactively upload and manage HTS classifications and sourcing locations across their products and suppliers.
Z2 evaluates suppliers’ overall risk of sanctions exposure, both through sanctions levied directly at the company itself and through susceptibilities within its sub-tier supply chain. The screening process covers all major global sanctions lists, including key regulations like the Uyghur Forced Labor Prevention Act (UFLPA); OFAC sanctions programs; and international trade restrictions. This information is all supplemented by the intelligence provided by Z2’s proprietary Sanctions Watchlist.
Finally, the tool assesses individual supplier and site exposure to political instability, regulatory volatility, and conflict zones. The hub also evaluates the risk that adverse geopolitical developments could impact production stability across all manufacturer sites.
To learn more about Z2 and how its features can help your business build resilience against geopolitical supply chain risk, schedule a free trial with one of our product experts.
Z2Data is a leading supply chain risk management platform that helps organizations identify supply chain risks, build operational resilience, and preserve product continuity.
Powered by a proprietary database of 1B+ components, 1M+ suppliers, and 200K manufacturing sites worldwide, Z2Data delivers real-time, multi-tier visibility into obsolescence/EOL, ESG & trade compliance, geopolitics, and supplier health. It does this by combining human expertise with AI and machine learning capabilities to provide trusted insights teams can act on to tackle threats at every stage of the product lifecycle.
With Z2Data, organizations gain the knowledge they need to act decisively and navigate supply chain challenges with confidence.