When I started reviewing tariff impact data from our major clients this year, one thing became immediately apparent: many of us underestimate the true cost.
Take tech manufacturers—the ones selling laptops and tablets you see in every office. The duty charges alone represented millions in unplanned (originally not forecasted) expenses. These costs were presented as distinct charges on invoices and while unplanned, they were easily measured. They turned out to be the smallest part of the story.
What the numbers revealed was far more significant: tariffs didn't just add cost. They fundamentally redefined how companies manage inventory, triggering a six-month supply chain disruption whose full consequences we're only now beginning to understand.
The Great Inventory Pull-Forward of 2025
The Logistics Managers' Index tells a remarkable story. Every single month in 2025, inventory costs registered above 70.0—the threshold economists use to indicate significant expansion. In August, costs hit 79.2, the second-highest reading since the post-pandemic chaos of October 2022.
This wasn't market volatility. This was strategic repositioning on a massive scale.
Facing the threat of substantial duties, procurement/logistics operations teams made a rational calculation: pull forward months of purchasing to avoid potential tariff exposure. Pay carrying costs now at 8-12% annually, or pay a 25% duty later? The math seemed clear and unambiguous.
The result was a change in the balance between inventory cost vs. transportation cost , and under normal conditions, this is a fairly well calculated and balanced equation. Companies filled warehouses with inventory they wouldn't need for months, tied up working capital far ahead of schedule, hoping the transportation capacity and pricing would remain low when this inventory is finally shipped to the end consumer. Many shippers executed transportation cost mitigation strategies due to more flexible transit times such as load consolidation, and or modally shifting loads to a slower, less costly means of transportation.
The traditional just-in-time philosophy—stock as little as possible, meet demand with precision timing—became impossible. Risk mitigation trumped efficiency.
A Tale of Two Supply Chains
What made this particularly interesting was monitoring how shippers navigated these “turbulent waters”.
Throughout the summer months, upstream firms—wholesalers, distributors, and smaller manufacturers—held inventory. They bore the storage costs, the capital costs, the risk of obsolescence. Many lacked the market power to pass these expenses downstream.
Then came October and November. The Logistics Managers' Index captured an extraordinary shift: downstream inventory levels surged to 65.8 while upstream levels collapsed to 46.3. That 19.5-point differential represents the largest such spread in the Index's history.
The accumulated inventory was finally transferred from hundreds of smaller firms to dozens of large retailers preparing for holiday sales. The cost burden shifted dramatically—from companies with thin margins and limited pricing power to corporations with both the scale and leverage to negotiate.
This raises the critical question: who ultimately paid?
The answer is nuanced. Large portions were absorbed—smaller firms accepting compressed margins, unable to pass costs through without losing business entirely. Some reached consumers as price increases, though nowhere near proportional to the duty rates. The remainder simply evaporated from corporate profits.
The bifurcation was stark. Size and agility determined survival.
The Transportation Cascade
As mentioned, tariffs also impacted transportation logistics.
November's transportation pricing hit 64.9 on the Logistics Managers' Index—the fastest expansion rate since February. Yet capacity showed zero movement, registering precisely at 50.0. That 14.9-point spread between pricing and capacity marked the second-largest gap since April 2022.
While the additional CDL regulations did not help carrier capacity planning, it was genuinely difficult to properly forecast demand as accumulated inventory finally moved from warehouses to retail locations for the holiday season. Prices rose because the market needed the capacity, not because carriers were manipulating supply.
In isolation, this would signal a healthy freight market. But the underlying cause—months of inventory accumulation driven by tariff avoidance—meant traditional peak-season patterns changed. In general, carriers are also looking at cutting costs and improving margin so there will always be a fine balance between capacity improvements and pricing.
The Manufacturing Reshoring Bet
Here's what makes this entire episode consequential: tariffs were never primarily about revenue. They were policy tools designed to incentivize domestic manufacturing investment.
The question is whether the disruption produces the intended outcome.
If I were managing procurement for a major corporation right now, having navigated six months of tariff-driven chaos, I'd want to see results. Specifically, where are manufacturing facilities being built and how do they impact my inbound supply chain? Are production lines coming online? Is the trade imbalance actually improving? Reducing transit time, transportation costs and simultaneously maximizing inventory storage costs is the magic formula if all works out as planned.
We're seeing movement. Companies are expanding operations in Mexico to take advantage of near-shoring. Domestic manufacturing investments are underway. But these operate on 2-3 year timelines. Facilities don't materialize overnight.
The equation could work. Bring manufacturing closer to end markets, reduce transportation costs and cycle times, create quality jobs in regions that need them—everyone benefits.
But it requires patience. And patience isn't our strong suit.
The 2026 Reckoning
The binary nature of this moment is striking.
Either these strategies succeed—manufacturing investments come online mid-year, employment in industrial sectors rises, supply chains stabilize with better geographic diversification—or we've put the entire ecosystem through extraordinary stress for nothing.
The fundamentals suggest optimism is warranted. The investments make strategic sense. The math works. Fuel costs remain stable. No major disruptions loom on the immediate horizon. If the Federal Reserve cuts rates as expected and affordability concerns get addressed, 2026 could be strong.
But there's a nagging counter-narrative: we're an impatient society increasingly focused on immediate results. The mentality is "what have you done for me lately?" These structural changes require time to materialize. Trust that patient capital will yield returns.
The tariff bill came due in 2025—paid in disrupted supply chains, compressed margins, and billions in duties and carrying costs.
The return on that investment? We'll know by mid-2026.
If manufacturing reshoring delivers as promised, the disruption becomes a calculated trade-off that repositioned American industry for a generation. If it doesn't, we've spent six months in supply chain purgatory for an outcome that never materializes.
Either this is the beginning of a boom year, or we've fundamentally miscalculated.
Time will tell which story we're actually in.
Steve Beda is an Executive Vice President at Trax Technologies, where he analyzes freight market trends and advises Fortune 500 companies on transportation spend optimization.