Trade talk: cars, sneakers and X-Men

Have you ever wondered how a jacket made in Vietnam with wool from Australia, linen from China, and plastic buttons and zippers derived from Middle Eastern petroleum products ends up on your back?

“Footwear importers have been known to add decorative features to shoes—like a fuzzy lining or a rubber sole—just to qualify them as House Slippers, a lower tariff category.”

It is thanks to supply chains.

What are they exactly? In its most basic form, a supply chain is the long cross border journey things such as raw materials, manufactured parts or other goods take before being assembled into a product for customers. The world today runs on supply chains, and they are often very complex.

This intricate chain is the backbone of international trade, enabling cost reduction, efficiency, and market access.

As of 2024, global trade in goods and services reached $31.7 trillion, underscoring the sheer scale and importance of these networks.

Valuable yet vulnerable

But supply chains are inherently vulnerable.

They can be interrupted by single points of failure — think of a critical supplier going bankrupt, a natural disaster, or a sudden regulatory change.

The COVID19 pandemic, for example, exposed how reliant manufacturers were on a handful of electronic chip suppliers, causing global disruptions in industries from automotive to electronics.

Supply chains are fragile

Sometimes, it’s a ship stuck in the Suez Canal (remember the Ever Given? The Inside Story of the Ship That Broke Global Trade ), blocking $9.6 billion worth of goods per day—about $400 million per hour—and delaying over 400 vessels.

The total trade loss from the incident is estimated at around $54 billion.

The blockage affected about 12 per cent of global trade, including 30 per cent of global container traffic and 10 per cent of the world’s oil shipments.

The ripple effects included port congestion, container shortages, increased shipping rates, and disrupted production schedules worldwide.
The most recent shock to supply chains has been the resurgence of tariffs in global trade policy, which has disrupted supply chains worldwide.

Understanding and mapping risk

Events like the Suez Canal blockage and global tariffs highlight a crucial reality: supply chains are deeply exposed to geopolitical risks.

Trade wars, sanctions, political instability, and infrastructure failures can disrupt transportation routes, increase costs, and delay deliveries, with cascading effects across industries and economies.

For Australian businesses and global enterprises alike, understanding and mapping these risks is no longer optional.

Concentrated sourcing from a single region or supplier can leave companies dangerously vulnerable to shocks.

Often the concentration is buried in tier two or three in the supply chain. You might have three suppliers for a particular crucial component, but if they all source the raw material for that component from the same supplier than you could face a supply chain risk.

Businesses who are not aware of this concentration can see their supply chains unravel when an unexpected event occurs.

Diversification, contingency planning, and proactive risk assessment are essential strategies for building resilient supply chains.

Artificial Intelligence is now able to help companies map their supply chains in a matter of weeks as opposed to months and increase computing power is enabling them to model for various scenarios.

A truck or a car?

Tariffs are not new in the world of trade - they have been around for centuries.

Businesses have found ways to get around them.

This is called “tariff engineering.” Here are some examples:

One of the most famous examples is the U.S. “Chicken Tax”—a 25 per cent tariff on imported light trucks, originally enacted in the 1960’s in retaliation for European tariffs on American chicken.

To avoid this tax, US automakers would import vans from Turkey with rear seats installed (classifying them as passenger vehicles, which faced lower tariffs), only to remove the seats once the vehicles cleared customs. Is it a truck or a car?

It depends on which side of the border you’re on.

Are X-Men human?

Tariffs on dolls (representing humans) were historically higher than those on action figures (representing non-humans).

This led toy companies to market their products as “mutants” or “aliens”—hence the tongue-in-cheek question: “X-Men are… not human?!”

House slippers or sneakers?

Footwear importers have been known to add decorative features to shoes—like a fuzzy lining or a rubber sole—just to qualify them as house slippers, a lower tariff category.

The result is not just higher consumer prices but also wasted resources and, at times, comically convoluted product designs.

Clear lessons

Tariffs, geopolitical risks, and supply chain shocks are not just abstract threats—they have real and measurable impacts on economies, businesses, and consumers.

Understanding these risks and leveraging technology to build resilient, transparent supply chains is now a strategic imperative for every organisation engaged in global trade.

The lessons are clear: anticipate the unexpected, diversify your risk, and embrace the tools that turn supply chain complexity into competitive advantage.

Hariramchakraborthy Janakiraman is Head of Industry and Innovation, Transaction Banking at ANZ