Supply Chain Index Declines as Tariffs Hit Economy

The economy could be headed for a downturn as the supply chain starts to contract amid tariff policies and rising uncertainty, according to researchers at Florida Atlantic University (FAU), Colorado State University, Rutgers University and the University of Nevada at Reno.

“The recent announcements of tariffs, though widely broadcasted, have had considerable effects on global supply chains by way of increased material costs, and administrative complexity,” says Steven Carnovale, associate professor of supply chain management in FAU’s College of Business. “The heightened costs of doing business, coupled with slowing demand and decreased utilization of warehousing on the consumer-facing portion of the supply chain, could move the needle toward recessionary territory.”

Key takeaways:

• The March Logistics’ Managers Index (LMI) reads at 57.1, down from February’s 62.8 reading. March’s score is the lowest since August 2024 for the index. A score above 50 indicates that the logistics industry is expanding, while a score below 50 indicates that the industry is shrinking.
• March’s decline was due to contractions in inventory costs, warehousing prices and transportation prices. It is the third largest decline in the index’s history; a 6.6-point decline in April 2022 after Russia invaded Ukraine and a 7.6-point decline in April 2020 after the COVID lockdowns.
• The supply chain ramped up in the beginning of the year to accommodate for incoming trade policies. After the announcement of tariffs, cross-border traffic from Mexico to the United States slowed as some firms looked for alternative ways to import. Retailers like Walmart and Target are adjusting product mixes and warehouse networks to mitigate tariff impacts.

“Global trade dynamics are experiencing a shock, and supply chains are reconfiguring rapidly. Over the next 6-12 months, the key will be resilient and responsive supply chain management, focused on agility and risk management,” Carnovale says.