What: US trade policy creates four-tier system of trading partners with varying tariff rates, fundamentally altering global trade relationships and supply chain dynamics.

Why it is important: This unprecedented restructuring of trade relationships forces retailers to develop sophisticated response capabilities, from tariff command centres to AI-powered analytics, while managing projected additional import costs of USD 640 billion.

The global trade landscape is transforming as the WTO's "most favoured nation" principle gives way to a complex network of bilateral agreements. The new system categorises trading partners into four groups: China with its separate negotiations, Vietnam and the UK with new deal frameworks, fourteen partners receiving specific tariff letters, and remaining countries under extended pauses. Brief framework agreements of three to six pages, rather than traditional 1,500-page trade deals, highlight the ongoing complexity. Starting August 1, non-exempted goods will face tariffs approximately four times higher than January 2025 levels. Japan and South Korea, as major trading partners, face particular pressure with potential 25% tariffs. Both countries bring significant automotive trade and investment potential to negotiations, though domestic political constraints may limit their flexibility. For businesses, this new system demands sophisticated monitoring, scenario planning, and dedicated command centres to navigate increased complexity.

IADS Notes: The retail industry's response has evolved significantly throughout 2025. BCG's January projection of USD 640 billion in additional import costs catalysed widespread restructuring, with Costco and Walmart pressuring Chinese suppliers for concessions by March. The industry's adaptation accelerated as McKinsey documented how retailers established geopolitical nerve centers in April, while May saw widespread adoption of tariff command centers for real-time monitoring. This evolution is exemplified by Shein's February initiative offering 30% higher procurement prices to relocate manufacturing to Vietnam. The elimination of the USD 800 de minimis rule, affecting 4 million daily shipments, further underscores the shift toward bilateral complexity.

Tariff clarity will be a patchwork affair