TARIFF FEARS DRIVE U.S. STOCKPILING IN AUGUST, WHILE MANUFACTURING WEAKENS IN EUROPE AND ASIA: GEP SUPPLY CHAIN VOLATILITY INDEX

Rhea-AI Summary

The GEP Global Supply Chain Volatility Index declined to -0.39 in August from -0.35 in July, indicating increasing spare capacity in global supply chains. The report reveals significant regional variations:

North America showed strong activity with near-full capacity utilization, driven by companies stockpiling materials to hedge against tariff-related risks. Meanwhile, Asia's index hit a three-month low, with notable weaknesses in Japan and Taiwan, while Europe continued to decline, particularly in Germany's basic materials sector and UK manufacturing.

The UK experienced a sharp downturn, while China showed flat purchasing volumes. In contrast, South Korea, Indonesia, and particularly India demonstrated increased factory procurement activity. According to GEP's global head of supply chain strategy, companies must adapt to tariff uncertainty as a structural reality by focusing on resilience, supplier diversification, and enhanced demand sensing capabilities.

Positive

• North American supply chains operating at near-full capacity
• Increased factory procurement activity in South Korea, Indonesia, and India
• Companies actively adapting to tariff challenges through strategic stockpiling

Negative

• Global Supply Chain Volatility Index declined to -0.39, indicating increasing spare capacity
• Asia's index fell to three-month low with weakness in Japan and Taiwan
• European manufacturing deteriorated, particularly in Germany and UK
• China's purchasing activity remained flat in consumer non-cyclicals sector

Insights

Global Supply Chain Economist

Regional supply chain divergence with US stockpiling due to tariff fears while Asia and Europe show manufacturing weakness.

The latest GEP Supply Chain Volatility Index at -0.39 in August (down from -0.35 in July) reveals a striking regional divergence in global supply chain dynamics. North America stands out as supply chains operate near full capacity, primarily driven by defensive stockpiling across US consumer goods sectors preparing for potential tariff-induced disruptions.

What's particularly noteworthy is how this strategic inventory building contrasts sharply with deteriorating conditions elsewhere. Asia's manufacturing weakness stems primarily from Japan and Taiwan, with China showing flat purchasing volumes despite its economic size. Meanwhile, Europe continues its troubling trend with Germany's basic materials sector struggling and the UK manufacturing showing one of its steepest contractions since 2024.

These divergent patterns reflect a fundamental shift in global trade dynamics. The data suggests tariff uncertainty has evolved from a temporary disruption to a structural reality reshaping supply chain strategies. Companies aren't merely reacting to immediate threats but implementing longer-term resilience measures including supplier diversification and enhanced demand forecasting capabilities.

For investors, this indicates potential margin pressure for companies unable to quickly adapt their supply chains, while those with diversified supplier networks may gain competitive advantages. The regional disparity also suggests different earnings trajectories for companies with concentrated exposure to weakening markets versus those positioned to capitalize on North American stockpiling demand.

International Trade Policy Analyst

The August GEP Supply Chain Volatility Index reveals how tariff fears are creating profound regional disparities in global manufacturing. North American businesses, particularly in the US consumer goods sector, are implementing a classic defensive stockpiling strategy - building inventory buffers against anticipated tariff-driven shortages and price inflation.

This stockpiling behavior represents a textbook example of how trade policy uncertainty creates economic distortions. When companies divert capital to excess inventory rather than productive investments, it typically signals concerns about future trade conditions. The data shows this behavior is concentrated in specific sectors rather than economy-wide, indicating targeted rather than blanket concerns.

Meanwhile, Asia's manufacturing sectors display a more cautious approach, with purchasing activity weakening across Japan and Taiwan while China shows flat growth. Europe's continued deterioration (index at -0.90) represents one of the steepest declines since 2024, with Germany's critical basic materials sector showing particular weakness.

These regional divergences highlight how trade policy expectations create self-reinforcing economic patterns. North American stockpiling could temporarily boost manufacturing metrics while potentially creating inflationary pressure. Conversely, Asia's and Europe's manufacturing restraint might indicate longer-term strategic adjustments to changing trade conditions rather than cyclical responses.

Most telling is the industry expert's assessment that tariff uncertainty has evolved from temporary to structural - suggesting market expectations for persistent trade tensions rather than rapid resolution.

• North America's supply chains get busier, with sharp stockpiling of components to guard against tariff-driven shortages and price inflation
• Asia's manufacturers cut purchases, led by Japan and Taiwan, and to a lesser extent China
• Europe weakens further, dragged down by Germany and a sharp downturn in the UK

CLARK, N.J., Sept. 11, 2025 /PRNewswire/ -- GEP Global Supply Chain Volatility Index, a leading economic indicator based on a monthly survey of 27,000 businesses, slipped to -0.39 in August, from -0.35 in July, signaling rising spare capacity as global supply chain activity cooled.

The global figure concealed stark regional contrasts. North America was the outlier, with supply chains running close to full capacity as companies in the continent stockpiled raw materials and components to protect against tariff-driven shortages and delivery delays. This was particularly true for the US consumer goods sector, which includes industries such as food & beverages and household products.

By contrast, Asia's index fell to a three-month low as purchasing activity weakened in China's consumer non-cyclicals sector, although the region's weakness was predominantly across Japan and Taiwan. Europe also deteriorated, with Germany's basic materials sector faltering and UK manufacturing plunging deeper into contraction. The index here (-0.90) signaled one of the steepest declines since 2024.

"So far tariffs have neither spurred growth nor triggered collapse," said Michael DuVall, GEP's global head of supply chain strategy. "Tariff uncertainty is no longer a temporary, it's a structural reality in the supply chain. Companies need to manage it by reinvesting in resilience, diversifying suppliers, and building critical capabilities like demand sensing to make faster, smarter decisions."

Interpreting the data:
Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

REGIONAL HIGHTLIGHTS

• ASIA: Index fell to a three-month low to indicate rising spare capacity across Asia's supply chains as purchasing volumes in China was flat. In contrast, South Korea, Indonesia and particularly India saw greater factory procurement activity.
• NORTH AMERICA: Supply chains were practically running at full capacity as recent orders were delivered and companies added to stock.
• EUROPE: Index falls again as factories purchased fewer intermediate goods and destocked. The data continue to highlight the fragile nature of Europe's industrial recovery.
• U.K.: Index falls sharply to -as U.K. manufacturers cutback on procurement and inventories.

Interpreting the data:
Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

For more information, visit www.gep.com/volatility.

Note: Full historical data dating back to January 2005 is available for subscription. Please contact economics@spglobal.com.

The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, Oct. 10, 2025.

About the GEP Global Supply Chain Volatility Index 
The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global's PMI® surveys, sent to companies in over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.

• A value above 0 indicates that supply chain capacity is being stretched and supply chain volatility is increasing. The further above 0, the greater the extent to which capacity is being stretched.
• A value below 0 indicates that supply chain capacity is being underutilized, reducing supply chain volatility. The further below 0, the greater the extent to which capacity is being underutilized.

A Supply Chain Volatility Index is also published at a regional level for Europe, Asia, North America and the U.K. For more information about the methodology, click here.

About GEP
GEP^® delivers AI-powered procurement and supply chain solutions that help global enterprises become more agile and resilient, operate more efficiently and effectively, gain competitive advantage, boost profitability and increase shareholder value. Fresh thinking, innovative products, unrivaled domain expertise, smart, passionate people — this is how GEP SOFTWARE^™, GEP STRATEGY^™ and GEP MANAGED SERVICES^™ together deliver procurement and supply chain solutions of unprecedented scale, power and effectiveness. Our customers are the world's best companies, including more than 1,000 Fortune 500 and Global 2000 industry leaders who rely on GEP to meet ambitious strategic, financial and operational goals. A leader in multiple Gartner Magic Quadrants, GEP's cloud-native software and digital business platforms consistently win awards and recognition from industry analysts, research firms and media outlets, including Gartner, Forrester, IDC, ISG, and Spend Matters. GEP is also regularly ranked a top procurement and supply chain consulting and strategy firm, and a leading managed services provider by ALM, Everest Group, NelsonHall, IDC, ISG and HFS, among others. Headquartered in Clark, New Jersey, GEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.

About S&P Global
S&P Global (NYSE: SPGI) S&P Global provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world. We are widely sought after by many of the world's leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world's leading organizations plan for tomorrow, today.

Media Contacts
Derek Creevey	Joe Hayes
Director, Public Relations	Principal Economist
GEP	S&P Global Market Intelligence
Phone: +1 646-276-4579	Phone: +44-1344-328-099
Email: derek.creevey@gep.com	Email: joe.hayes@spglobal.com

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SOURCE GEP

FAQ

What is the current GEP Global Supply Chain Volatility Index for August 2025?

The GEP Global Supply Chain Volatility Index declined to -0.39 in August 2025, down from -0.35 in July, indicating increasing spare capacity in global supply chains.

How are North American supply chains performing according to the latest GEP index?

North American supply chains are operating at near-full capacity, with companies actively stockpiling raw materials and components to protect against tariff-driven shortages and delivery delays.

Which regions showed the weakest supply chain performance in August 2025?

Europe and Asia showed the weakest performance, with Europe deteriorating (particularly in Germany and UK) and Asia's index falling to a three-month low, led by weakness in Japan and Taiwan.

What is the outlook for supply chain tariff impacts according to GEP's analysis?

According to GEP, tariff uncertainty is now a structural reality rather than temporary, requiring companies to reinvest in resilience, diversify suppliers, and build capabilities like demand sensing for better decision-making.

When will the next GEP Global Supply Chain Volatility Index be released?

The next GEP Global Supply Chain Volatility Index will be released on October 10, 2025, at 8 a.m. ET.