Potential tariffs could lead clients to re-evaluate their supply chain funding strategies, according to a Well executive.
In the current economic landscape, tariff volatility is causing significant disruptions for many businesses, particularly large corporations. According to Jeremy Jansen, managing director of supply chain finance at Wells Fargo, there's been a surge in interest from clients to engage in discussions about working capital and the bank's ability to provide liquidity to suppliers and buyers of products that need to be imported [1].
The recent tariff menu announced last week had a significant impact on global markets, prompting predictions of recession [2]. The bank, which focuses on traditional trade products such as import and export letters of credit and supply chain financing, is gearing up to address these challenges [3].
Wells Fargo's corporate clients are grappling with higher and unpredictable costs. U.S. average effective tariff rates have surged to 20.6%—the highest since 1910—with some effective rates even above 50%, particularly on goods from China [2]. This tariff environment is causing cash flow and margin pressures, as tariff hikes compress margins due to limits on the ability to pass higher costs fully to consumers amid fragile economic conditions [4].
The recurrent tariff changes and trade restrictions are also causing supply chain uncertainty. Finance teams are constantly reassessing import costs, generating fragmented cash flow projections that complicate capital allocation and credit risk management [1][2].
To navigate this unsettled environment effectively, many finance functions are turning to digitization. However, many still struggle with low levels of automation, reducing their ability to respond instantly to tariff changes, risking slower financial cycle times and missed opportunities in supplier leverage or spend shifts [1].
Large firms, including Wells Fargo’s clients, depend on supply chain finance products that must adapt dynamically to tariff-induced cost volatility. Wells Fargo likely sees heightened demand for flexible financing solutions accompanied by increased risk monitoring as clients face revenue declines of 10%-40% and sharp fluctuations in input costs [2].
As the U.S. trade policy could remain dynamic for some time, President Donald Trump has paused the "reciprocal" tariffs for 90 days, with the exception of those imposed on China [5]. This pause offers a brief respite, but the need for real-time financial tools and flexible credit arrangements remains crucial for businesses to navigate this challenging environment.
Walmart CEO Doug McMillon described the current situation as "very fluid" with many "variables" [6]. Many companies are finding it difficult to make reaction plans due to the lack of certainty around tariffs. However, with flexible financing solutions and a focus on digitization, businesses like those served by Wells Fargo are better equipped to weather the storm of tariff volatility.
References:
- Supply Chain Dive
- The Wall Street Journal
- American Banker
- CNBC
- CNBC
- CNBC
The current tariff volatility, affecting industries across the board, has sparked increased interest among businesses for discussions about working capital and banks' capacity to provide liquidity, such as Wells Fargo's supply chain finance services [1]. In the finance sector, there has been a growing focus on digitization, aiming to respond instantly to tariff changes, streamline capital allocation, and manage credit risk more effectively during this volatile economic period [1].
