The Fair Labour Association (FLA) published a brief on ‘The impact of tariffs on sourcing decisions’ (February 2025) providing recommendations for companies to implement responsible purchasing, exit and entry strategies as they face supply chain disruptions.
Human Level’s Take:
- In February 2025, the Trump administration imposed new tariffs on imports to the U.S. Tariffs have already been placed on steel and aluminum, and President Trump has announced further tariffs on Mexican and Canadian goods. Tariffs on Chinese imports have also increased.
- These tariffs will have impacts on buying companies in the U.S., who may need to re-organise their supply chain in response. These decisions and actions from U.S. companies are likely in turn to negatively impact workers in their supply chain. Abrupt changes in procurement strategies—such as exiting factories and farms—can impact workers' livelihoods and create economic instability in affected regions.
- The FLA provides three key recommendations to help companies mitigate these risks. First, companies should implement responsible purchasing practices by assessing the impact of tariffs on their supply chains and identifying high-risk suppliers based on product type, number of workers and volumes sourced. Businesses can explore whether orders already in place can be consumed locally or diverted to other markets instead of cancelling them. Second, if exiting a sourcing region is necessary, companies need to disengage responsibly by providing 6 months notice, supporting suppliers in ensuring fair severance for workers, and consulting local stakeholders such as unions and civil society organisations. Third, companies should thoroughly assess human rights risks in new sourcing markets, evaluating labour conditions, human rights issues, and ensuring supply chain transparency.
- Strong human rights due diligence practices amid shifting trade policies is needed now more than ever!
Some key takeaways:
- How tariffs impact sourcing decisions and workers. President Trump’s administration imposed new tariffs on products entering the United States in 2025. The measures currently cover steel and aluminium exports, as well as increased tariff prices for goods coming from China. Further tariffs may be imposed on goods coming from Mexico and Canada (with Canadian oil and energy exports taxed at a lower rate). Economists have warned of potential harms to manufacturing workers in case companies rapidly shift sourcing markets, leading to job losses and wage reductions. Abrupt changes in procurement strategies—such as exiting factories and farms—can impact workers' livelihoods and create economic instability in affected regions.
- Implementing responsible purchasing practices. To mitigate these potentially severe and widespread impacts, the FLA invites companies to adopt responsible purchasing practices, and to foster internal communication and dialogue with suppliers. To implement responsible purchasing, companies must first evaluate sourcing volumes, suppliers, and the number of workers who may be impacted in countries who face or may face tariffs. Then, companies can identify high-risk suppliers and assess business continuity risks in those supply chains, which is essential to mitigating disruptions. Additionally, they should communicate with suppliers around how to continue business operations while respecting labour standards. Exercising caution when placing new orders until cost and tariff implications are clear is also a prudent approach. Further, businesses can explore whether orders already in place can be consumed locally or diverted to other markets instead of cancelling them.
- Disengaging responsibly, and engaging new sourcing markets responsibly. If a company has no other choice but to cease production in a specific country, it should evaluate the impact of its exit from a supplier, including whether the supplier is at risk of retrenching workers and/or closing. By ensuring a structured, transparent disengagement process, companies can mitigate negative impacts. On one hand, companies need to provide adequate notice, ideally with at least six months, to allows stakeholders to prepare for their exit. It is also important to consult other local stakeholders, such as unions or civil society organisations, to identify and find ways to mitigate worker and community impacts. Additionally, companies are invited to proactively monitor factory closures to safeguard workers’ benefits, establish contingency plans such as severance funds, and guarantee access to grievance mechanisms and fair compensation. Using existing tools like FLA checklists for retrenchment, exit, and closure can further guide companies through these processes. As part of companies’ responsible sourcing strategy, it will also be important to evaluate new sourcing markets holistically, considering the company’s responsible sourcing commitments. The assessment of human rights risks at the point of engagement can include a thorough review of labour laws, wage levels, risk factors for forced labor and child labor, and health and safety issues. The mapping of the new supply chain mapping is also needed to complete full upstream or downstream due diligence. Furthermore, companies can check whether factory lists are up to date in the FLA factory disclosure database or other public sources.
