Navigating Trade Uncertainty: Freund and Derry on Inflation, Reshoring, and Global Economic Pressures

AUTHOR | Selene Sundahl, Chihyu (Linda) Liu, Amitraj Mukund

Executive Summary

In a discussion facilitated by Tom Derry, CEO of ISM, Dr. Caroline Freund, Dean of UC San Diego's School of Global Policy and Strategy (GPS), provided critical insights into the current economic landscape marked by inflationary pressures and supply chain disruptions. Dr. Freund argued that prevailing policies are injecting significant uncertainty, acting as a supply shock and hindering long-term investment needed for initiatives like manufacturing reshoring. This hesitancy, coupled with potential consumer pullback, raises recession concerns. The conversation explored the complexities of global trade dynamics, the limitations of tariffs in addressing trade deficits or bringing back manufacturing jobs, the challenge of managing the US dollar's dual role, and the critical need for investment in technology and R&D as the true path to competitiveness.

Policy Uncertainty Clouds Economic Horizon

The current market is grappling with notable inflationary pressures and supply chain challenges. Dr. Freund characterized recent policy shifts as a significant "supply chain shock" introducing pervasive uncertainty. This lack of predictability makes it difficult for businesses to commit to long-term investments, such as building new manufacturing plants required for reshoring efforts. Investors, unsure about the trajectory of potential trade wars and tariffs, are largely "sitting on their hands."

This investment slowdown, combined with consumers potentially delaying purchases (despite short-term rushes, like recent car buying spurred by tariff fears, which may borrow sales from the future), creates a precarious situation that could lead to a recession. Dr. Freund drew parallels to the COVID-era semiconductor shortage in the auto industry, highlighting how underinvestment due to uncertainty can lead to significant production bottlenecks. Without a return to predictability, she anticipates continued economic shortages.

The Uncertainty Trap: Why Investment Is on Hold

Today’s supply chain leaders face a fog of policy ambiguity, where shifting trade rules and geopolitical uncertainties make long-term planning feel like a moving target. As a result, many companies are hitting pause on capital expenditures—not because opportunities don’t exist, but because the rules of the game keep changing.

This uncertainty puts strategic partnerships under strain, as timelines stretch and commitments waver. For supply chain professionals, the antidote to this uncertainty is focus. By managing what’s within our control—strengthening supplier relationships, building trust, and investing in agility—we can navigate this period of ambiguity with greater confidence.

Global Reactions and Trade War Dynamics

Observing the international landscape, Dr. Freund shared insights from a recent conference in Japan. The sentiment there reflected a sense of dependence on the U.S. for defense and a hope for negotiation. European nations appear to be adopting a cautious "wait-and-see" approach before formulating responses to trade tensions, while China is reportedly "doubling down" on its stance.

Regarding the U.S. position, Dr. Freund discussed the theoretical concept of an "optimal tariff." Given the U.S.'s large share of global imports, academic theory suggests it might possess monopoly power, allowing tariffs to potentially lower import prices globally and improve U.S. terms of trade (estimated optimal tariff between 15-60%). However, she cautioned that this power is not absolute. Retaliation from other major economies like Europe and China is a significant risk, potentially plunging the global economy into a detrimental trade war.

The Reshoring Dilemma: Investment, Jobs, and Technology

The discussion addressed the complexities surrounding bringing manufacturing back to the U.S. Dr. Freund, prompted by Tom Derry, noted the inherent conflict in simultaneously trying to maintain the dollar's global reserve currency status while potentially seeking to weaken it to aid domestic manufacturers – a difficult balancing act.

Furthermore, Dr. Freund highlighted significant hurdles to reshoring investment. Beyond policy uncertainty, she emphasized that modern manufacturing is heavily reliant on technology. Consequently, any manufacturing return is likely to be "in a jobless way," driven by automation rather than creating large numbers of traditional blue-collar jobs. Tariffs, she argued, are not an effective tool for this goal; companies will likely adapt by building plants elsewhere to circumvent tariffs before shipping to the U.S. The viable path forward involves focusing on technology and different policy levers, specifically advocating for robust government support for research and development to maintain the U.S.'s competitive technological edge.

Understanding the Trade Deficit

From Dr. Freund’s point of view, much of the current trade debate stems from a fundamental misunderstanding of economics. The Trump administration's focus on eliminating bilateral trade deficits—aiming for zero with each individual country—misses the bigger picture. Trade deficits are macroeconomic outcomes, not bilateral imbalances to be solved piecemeal. Imposing tariffs in an effort to protect U.S. industry didn’t reduce the overall U.S. trade deficit; it simply redirected sourcing to other low-cost countries. Worse yet, tariffs can have unintended currency effects, strengthening the U.S. dollar and making U.S. exports more expensive. The takeaway for supply chain leaders is this: before reacting to trade policies, it’s crucial to understand the economic logic—or lack thereof—behind them.

Strategic Resilience: Beyond the Buzzword

In times of uncertainty, supply chain strategy becomes business strategy. Leaders must prioritize optionality across sourcing and logistics to ensure operations can flex with changing policies and global shocks. Scenario planning is no longer a nice-to-have—it’s essential. Building models that account for multiple trade and macroeconomic outcomes can help supply chain leaders engage their board and finance teams.

Perhaps most importantly, invest in your people and partnerships. As Tom Derry wisely said, “In tough times, people come together. We business people have to find a way forward—and let the politics be the politics.”

Now more than ever, 2025 demands that we lead with clarity—by building trust, fortifying resilience, and staying flexible amidst change.

Conclusion

This discussion between Tom Derry and Dr. Caroline Freund offered us, as graduate student reporters, a front-row seat to the kind of high-level thinking that often gets lost in headlines. Their conversation brought together perspectives on policy, global economics, and supply chain strategy in a way that helped us better understand how trade uncertainty impacts both national economies and everyday business decisions.

One of the biggest takeaways for us was the realization that policy ambiguity can be just as disruptive as a physical supply chain shock. Dr. Freund’s explanation of how investment stalls in uncertain environments helped us see how critical predictability is for long-term growth. We were also struck by her emphasis on technology and R&D as the true levers of competitiveness—especially in contrast to short-term fixes like tariffs.

This session expanded our thinking about the global dynamics of trade and showed us that understanding the broader economic landscape is essential for anyone hoping to lead in this field. It reinforced the importance of curiosity, economic literacy, and the ability to hold both complexity and uncertainty when making strategic decisions.

Authors' Bio

Selene Sundahl, CPIM

Director of Supply Chain, Tek84 Inc.

Current MBA Candidate -Master of Business Administration – University of California San Diego Rady School of Management

Selene is the Director of Supply Chain at Tek84 Inc., where she leads procurement, planning, warehousing, and supplier management with a focus on aligning supply operations to support rapid growth and new product development. Since joining the company in 2020, she has rebuilt supplier relationships, implemented strategic inventory controls, and led cost-saving initiatives across key systems. Her collaborative approach with engineering and production ensures seamless execution from concept to delivery.

With over 13 years of experience in manufacturing, engineering, supply chain operations, and business administration. Selene has driven capital projects, waste reduction programs, and process improvements in industries ranging from medical devices to advanced security systems. She brings deep technical knowledge—from electro-mechanical assemblies to injection molding—and is known for her ability to solve complex problems, drive efficiency, and position the supply chain as a strategic business enabler.

Chihyu (Linda) Liu

Co-President at Operations and Supply Chain Club, UC San Diego

Full-time MBA candidate, UC San Diego, Rady School of Management

Linda is an MBA candidate at UCSD's Rady School of Management focusing on Supply Excellence and Innovation, currently serving as Co-President of the Operations and Supply Chain Club. She brings over five years of experience from Sunright Food Corporation, Taiwan's largest miscellaneous food manufacturer, holding roles in Product Management and as a Trading Specialist.

At Sunright, Linda demonstrated strong analytical and leadership skills, driving significant business growth by doubling the B2B client base and increasing key client revenue by 30% through data analysis and targeted digital marketing. She successfully optimized supply chain operations via strategic procurement and logistics management, achieving notable cost savings, and led cross-functional teams in launching multiple new products based on market analysis. Linda excels at leveraging data and collaboration to manage complex projects and achieve strategic objectives.

Amitraj Mukund

Vice President, Industry Partnerships

Operations and Supply Chain Club, UC San Diego

Amitraj Mukund is a graduate student in the Master of Science in Business Analytics program at UC San Diego, where he also serves as the Vice President of Industry Partnerships for the Operations and Supply Chain Club. With prior experience at Société Générale, Amitraj developed a strong foundation in operational strategy and process efficiency within the world of investment banking.

At the ISEI Summit, Amitraj contributed as a student reporter, observing and documenting conversations around global supply chain resilience, trade policy, and the evolving role of leadership. Passionate about connecting the dots between data, people, and impact, he is especially interested in how values-driven decision making can shape more sustainable and agile supply chains.

Amitraj is focused on bridging the gap between academic insight and industry practice by building relationships with professionals, organizing meaningful events, and helping his peers stay plugged into the real-world dynamics of global operations.