The hidden costs of resilience: Financing the new supply chain reality

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Dominic Drew: For decades, supply chains have been optimized for efficiency with just-in-time delivery models, meaning less inventory and global sourcing. That model is now being fundamentally repriced. Geopolitics, security of supply, and shifting trade dynamics are forcing companies to rethink how they operate, requiring more buffer stock, more capital, and more complex supply chain strategies. The result is a clear tension. Strategic priorities are accelerating. Balance sheets and operating models are struggling to keep up. Today, we'll explore how the shift is playing out, what companies are seeing on the ground, where the pressure points are emerging, and how financing is evolving to support more resilient supply chains. Welcome to J.P. Morgan's Making Sense. I'm Dominic Drew from the Trade and Working Capital Team. Joining me today in New York is Natasha Condon, global head of Sales for Trade and Working Capital.

Natasha Condon: Good morning.

Dominic Drew: I'm also joined by Kyle Hutzler from the J.P. Morgan Center for Geopolitics.

Kyle Hutzler: Great to be with you.

Dominic Drew: So, Natasha, what are you hearing from clients that tells you the urgency around supply chain resilience has changed?

Natasha Condon: I want to answer that in two parts, because obviously, this year, a lot has changed. If you had asked me that question in February 2026, I would have talked to you about tariffs. I would have talked to you about the retreat of globalization, and the impact of geopolitics on trade and the weaponization of trade. I would have talked to you about the shifts in global supply chains as a result of all these things. For example, you know, anyone who looks at the trade statistics, you can see how much direct exports from China to the U.S. have gone down. I would have talked to you about the huge macro trends that are impacting global trade and global supply chains. The biggest and most dramatic of which is the AI CapEx boom. A lot of it comes out of the U.S. because a lot of the hyperscalers, of course, are in the U.S., but it's not at all limited to the U.S. And the huge increase in purchasing around defense, I would talk to you about energy security and critical minerals, security, and all the different ways that geopolitics are impacting global supply chains. And now, we have the instability in the Middle East as well. And so right now, we have conflict impacting trade flows very directly. I have a very large number of transactions that, that J.P. Morgan was supporting that are physically stuck behind the, the Strait of Hormuz. I have clients in the Middle East whose export flows or, you know, inbound revenues have been significantly impacted by the conflict, and therefore they are in need of liquidity and working capital to support them until their, their businesses are back to normal. There is a shortage of helium, of sulfur, of aluminum. And the knock-on effects of these are significant, right? If you don't have helium in the end, you don't have semiconductors. If you don't have sulfur in the end, you don't have copper mining. And so, on top of all these broad micro trends, there is this short-term impact that is echoing out through the global economy.

Kyle Hutzler: And I'll just add, I think Natasha's got it exactly right in terms of just how dramatic these past two handful of months have been. But we have to put that in context with what has been an extraordinary, essentially, decade. Starting from the first trade, now going almost a decade ago, we rolled from that into the COVID pandemic. We had the Russia invasion of the Ukraine, and the associated supply chain disruptions, and all of these, in many ways, still have lingering long half-lives, are still having impacts on global supply chains around the world, and now we bring into the conversation all the things that, that Natasha has just mentioned. You've got to have some empathy, uh, for the supply chain managers and trade financiers of the world. This is a rolling disruption in terms of, of just growing magnitude and complexity.

Natasha Condon: It's tough out there.

Dominic Drew: So what we're hearing is a combination of structural shifts in trade flows compounded by multiple overlapping disruptions from geopolitics through to critical components shortages, all feeding into a much more complex operating environment for companies. So Kyle, against that backdrop, the key question becomes, are we seeing a cyclical adjustment in supply chains, or a more lasting shift in how global commerce is organized?

Kyle Hutzler: Global trade's in constant evolution, but there are aspects about a paradigm that was governed around globalization just in time that is clearly changing. And so even though, you know, we're in a world in which last year we still hit a record in terms of global, we are seeing real shifts, and I think the greatest evidence that this is not cyclical but structural comes in the form of, of the FDI data. We are seeing firms make, uh, what are inherently long-term decisions that evidence some material and meaningful shifts in terms of how they are structuring themselves to operate globally. In some cases, building new resilience and bringing new resilience into the fore, of course, always going to where the next phase of growth is. But I think in, in the, the decisions that we're seeing, particularly through the FDI data, our corporations are telling us that they think that this change is real and is going to be an enduring one.

Natasha Condon: Kyle, can I ask you a question about that, because I think that's really interesting. If you look at the WTO stats from last year, I look specifically at merchandise trade. Obviously, you know, digital and services is always growing like crazy. But on the merchandise side, I saw that they, their analysis suggested that a lot of that record growth last year was driven by AI and the data center CapEx. When you're talking about structural change, are you including things like... Is AI structural to the future, effectively? Are you thinking of that as a structural component of trade growth?

Kyle Hutzler: Certainly AI and the broader revolutions we're seeing in embodied AI, robotics, advanced manufacturing, even in some cases starting to go out into places like biomanufacturing, have the potential to affect some real changes in global trade patterns. In some cases, it's actually for, for, particularly for countries that feel that they have become too vulnerable. The emergence of these new technologies and the ability, and of course, the question's always going to come down to the ability to deploy at scale and to do so economically. But this is, you know, for perhaps for the first time is offering the ability for advanced economies to potentially reset in some of their, the industrial sectors that have been lost or in some ways meaningfully seeded to other countries.

Dominic Drew: So Natasha, in light of this context, how are leaders balancing the need for greater resilience with the ongoing pressure to maintain efficient operations and healthy balance sheets?

Natasha Condon: So of all these big micro trends that we've talked about, what does this mean for a, a treasurer or a CFO, right? A lot of it means that there is more friction in the supply chain than there used to be. In some cases it is as simple as I used to sell to this country, now there is a tariff in the way. It's no longer quite as profitable for me to sell to this country, so I'm going to sell to that country. But that means the ship is going to spend five more days on the water and therefore, I have to pay five more days of insurance. I got to think about a different port. Maybe I have gone and found a new customer base in that new market. And all of that disruption requires a little bit of extra cost. Then you have the concern of sort of sudden shocks. If geopolitics can change overnight, then a supply chain that was healthy yesterday might not be healthy tomorrow, a ship cannot leave, a tariff has rendered your, your sale unprofitable or similar. And so people are holding more inventory, are holding more liquidity than they were previously to protect themselves, to give themselves a bit of a buffer from disruption like that. And so that causes pain. That causes working capital, extra working capital cost. Somebody's got to pay for that. And if you're a company in a big globalized, complex supply chain, you have to decide where that cost is going to fall. And you have to decide if you're going to take it. If you're a power player in that supply chain, are you going to push it onto your suppliers, onto your customers? You may have the power to do that, but if you push that pain onto a smaller supplier, for example, who has higher borrowing costs than you, that can actually be counterproductive because you're building incremental cost into your supply chain that didn't need to be there. I think resilience costs and how you finance those and who in the supply chain carries the pain is a really interesting conversation. If you look at the really sophisticated large companies, the ones with treasurers and CFOs who are really thinking strategically about this, they are thinking about, you know, how can the strongest player in the supply chain help the weaker ones? And they are starting to think of that as an actual competitive advantage versus their peers.

Kyle Hutzler: Agree completely. And I think one of the biggest differentiators between the companies that are successfully navigating the disruptions in this moment and are being most successful in their ability to diversify at scale, is did they retain enough of the in-house process and production and implicit knowledge that comes with the reality of making tangible things that they can do that role that Tasha's talking about is to orchestrate the ecosystem, to bring them along to new environments, to new geographies where there's new workforces to be trained, uh, new ecosystems to be built up? And more than anything, I think that's the differentiator right now is over the past generation of globalization, did you keep enough of the knowledge in the house in terms of what it takes to make real things is determining how quickly you can pivot to alternatives in this moment.

Dominic Drew: So where are you seeing the most acute pressure points emerge in the supply chains? Is it specific regions, critical materials, or access to financing?

Kyle Hutzler: Another way of framing it might be, where aren't you seeing it? As political scientists, uh, Henry Farrell and Abraham Newman describe, we're in an era of, of weaponized interdependence is what we are seeing as countries. Not just the, the large ones, but increasingly small ones becoming sophisticated in the recognition of choke points that they hold over material aspects of global supply chains and a breakdown in the reticence with respect to using them. And so arguably the most important source of stress in this moment is in critical minerals. And we saw that as one of the key, uh, retaliatory responses to Liberation Day was the decision to impose export controls on critical minerals, which essentially are the hidden ingredients to all of modern life. It was a very sobering moment, not just in Washington, but in capitals around the world. And has spurred what we saw in the past year is a slew of activities, not just by the U.S. government, but other governments in an attempt to address what was long recognized as a vulnerability, but for many respects was never acted upon. Never acted upon for a variety of reasons, in part can be for reasons of ideological complacency. Can be reasons as well that these are just incredibly difficult markets to stand up, particularly when you have a dominant supplier who is willing and has demonstrated its willingness to exercise at dominance to keep competition at bay. So where we're going, particularly in the critical minerals space is, uh, lots of ad hoc transactions that we saw over the past year increasingly towards the push for systemic solutions. And we've got a new report at the Center for Geopolitics out now looking at what we anticipate to come in the months ahead on critical minerals in particular. And it's that focus on more global partnerships, more systemic solutions, whether that comes from common price floors or regulatory environments that allow and give confidence to producers and align the private sector incentives to come online as a true and enduring alternative. That's where we're going next. And we can see the intense downstream interest from automakers, to semiconductors, to aspects of healthcare, where there is intense interest in the success of the ability to diversify and ensure reliability of those critical mineral supply chains.

Natasha Condon: And I think that's really interesting just from the perspective of that downstream effect on the supply chain, right? It's not limited just to critical minerals. We've talked already a lot in this conversation about AI data center and this huge sort of CapEx boom around it. I have been to see construction companies where that conversation turned out to be an AI data center conversation. They told me, "Oh, we're setting up a whole new division to build data centers.” I have been to see power companies who told me that they are setting up whole new departments to figure out how to do local generation for data centers. There have been global shortages of heavy duty cable of the kind that is used to hook up these power generation entities to the grid. So this kind of knock on effect down through the supply chain is much broader than just tech, and it hits companies and industries you, you may not naturally kind of think of when you think about AI. And of course, the implication of that is there's a risk of shortage of supply of one component, that creates a delay, a delay creates a cost overrun. You're building a data center, you want to start computing, and earning money from your compute power. But every single component of that data center build has to be complete before you can do that. And the companies who do that, they need working capital, they need liquidity all the way up and down that supply chain.

Dominic Drew: Thanks for that, Natasha. The overarching theme which is apparent is that as supply chains become more complex and more strategically important, they're also becoming more capital intensive with liquidity and working capital needing to flow across the entire ecosystem. So Natasha, accounting for these dynamics, how does financing need to evolve to help companies navigate this environment while maintaining liquidity, flexibility, and ultimately the speed to adapt?

Natasha Condon: So look, we've talked a lot about the challenges. What does a healthy supply chain look like in 2026, right? A healthy supply chain in 2026 has enough liquidity to absorb a shock, a supply shock, a geopolitical shock, a regulatory shock, whatever it might be. A healthy supply chain has enough assured supply of its critical inputs all the way up and down. I think Carl used this example a moment ago, we were talking about the, the semiconductor supply shortage that happened during COVID, and now there's a little bit of a, another one emerging because of the, the AI data center CapEx ecosystem. You saw this situation during COVID where the, the automotive companies were competing with the big tech companies for semiconductor supply and the company with the deepest pockets usually won. Now you're kind of seeing that again. So, uh, a healthy supply chain has security of supply of whatever it really needs. And a healthy supply chain is financially healthy across its entire value chain. So there is no point being an incredibly sophisticated high-tech manufacturer. If your entire production line can be stopped by one supplier, four steps down the supply chain, who makes one tiny critical component that they have tooled for, and so you can't just replace them overnight and they hit trouble. So what are we trying to achieve here if we're, you know, uh, the CFO or treasurer of a modern globalized company? We're trying to achieve an end-to-end holistic approach to that supply chain that is proof against shock, that is proof against stress, and has optimized liquidity from end to end.

Kyle Hutzler: Supply chains are more than just their physical manifestation. And we hear that as Tasha's speaking to the financing of those supply chains, but they are also incredibly dependent upon the continued ability for not just capital, but for data, for people, for ideas to flow around the world. And what we are seeing in this moment is not only are physical supply chains becoming increasingly subject to that weaponized interdependence in industrial policy actions, but we're also seeing a host of other actions, either real or threatened, that would disrupt those other enablers. And we see right now in, in particular is it is not uncommon as companies are seeking to diversify. The country that they are often seeking to diversify from throttling the flow of inputs, personnel, and equipment to those third countries so that they can set the pace on your ability as a company to diversify. And so we talk about all of the just natural frictions that come with doing something as extraordinarily hard as orchestrating a large global supply chain. It becomes even harder not just when you have the ambient noise that's driving you to do that, but in many cases very active opposition to that intent to diversify.

Dominic Drew: So the discussion unambiguously points to the fact that a resilient supply chain is no longer just about physical flows, it's about having a system that is financially and operationally robust end-to-end with liquidity and flexibility built in across the entire value chain. So Natasha, looking ahead, what does a more resilient supply chain look like in practice? And what are the key steps, whether through financing, innovative strategic planning, or cross-sector collaboration that can help industries and companies get there?

Natasha Condon: So I would suggest a three-step process. If you're running a company, you need to, you want to achieve a healthy supply chain despite all the, sort of the risks and the challenges that are out there. Number one is to make sure that your cash is in the right places. So do you have enough liquidity? Do you need financing? Do your customers need financing to buy more from you? Do your suppliers need financing to keep up with your increased demand? For example, if you're in one of the industries where there are positive demand shocks like defense or AI or energy, any of these places, get your cash into the right places. Then go through your supply chain end to end and identify where are the points of weakness? Is there a supplier that's under stress? Are there gaps in the supply chain? Is there a difficult geopolitical pair in there somewhere? This bit's often the most difficult, right? You may remember there was a point last year in 2025 when the tariffs between the U.S. and China got really high for a short period of time. And I called round a few of my clients to kind of understand what the impact of that was going to be. And I spoke to this really big commodity trader and they were really relaxed about it. They said, "Look, I've got ships that were going from the U.S. to China, and now they are going to go somewhere else. And I've got ships that were coming from Brazil to somewhere else, and now I'm going to send them to China. So I have, I have a commodity that I sell, it is fungible, and therefore I can redirect that supply chain really quickly." And then when the Liberation Day tariffs kicked in on April the 2nd last year, I spoke to one big industrial company, for example, that had a really difficult decision to make about whether they were going to build a new factory in the U.S., whether they were actually going to build a whole new industrial facility, they were going to maybe mothball one that they had somewhere else because the tariffs had no longer, rendered it unprofitable. And obviously, that is a much bigger decision, right? Takes longer, requires financing, requires lots of strategic planning, requires you to take a view on whether those tariffs are medium to long term. I guess my point is: depending on the nature of the industry, some industries can react really quickly to this stuff. And so for some of them, it is a much bigger and more difficult decision.

Dominic Drew: A lot of OEMs, what we're seeing is they have direct visibility into their initial suppliers, the direct suppliers, but they have zero visibility beyond that supply base. And it's being able to identify and look through that initial tier one supplier to look basically your tier three and tier four suppliers who are going to have limited access to working capital and unable to ramp production to meet demand. One sort of sector where we're seeing resilience being embedded is in the defense sector in United States, where if you look at the Department of War's defense acquisition strategy they've got advanced market commitments in place, which effectively make the supply chain far more financeable rather than seeing it as speculative working capital where there's no demand signals or visibility.

Kyle Hutzler: And I would add that sometimes, even when you get the visibility, you still come face to face with a structural reality that you are dependent on an upstream input that is often the byproduct of a completely unrelated industry.

Kyle Hutzler: And so the appreciation sometimes that your risk, what you think may be uncorrelated with that of another sector, is actually very closely linked. And how do you re-engineer or engineer some degree of independence bisectorally from that upstream byproduct dependency? We learned that lesson during COVID. We are seeing it again in the context of the events that are playing out in- in the Gulf. And that is one of the trickiest ones to address.

Natasha Condon: Yeah, that's really hard. I mean, you know, right now, because Qatar and Kuwait are not able to export liquid natural gas, there is going to be a fertilizer shortage because the fertilizer components are a side product of production of liquid natural gas. And because there is a fertilizer shortage, all of our food prices are going to go up. And that's a very difficult thing to manage for in advance.

Dominic Drew: We've covered a lot of ground today, from macro shifts to financing evolution to sector dynamics. For listeners, what's the one takeaway or action you'd want them to walk away with?

Kyle Hutzler: I'd start by making sure that we continue to think holistically about supply chain risk as we diversify from one geography. We might be tamping down one form of risk, whether it's geopolitical or another, but introducing other forms in the destination geography, whether that's climate, regulatory, you name it. And so we've got to make sure that we've got the competency a- as aligned up against that. And then would say that in this, uh, transition period, if anything, we are on net arguably increasing risk because you are, in effect, still lengthening supply chains. And still, the ecosystem has successfully transitioned at scale to wherever you ho- are hoping to diversify or build up capacity. And you are, more than anything in this moment, introducing additional risk that needs to be actively monitored and measured.

Natasha Condon: Right. And to that, I would add, it's a mindset shift as well, right? So treat your supply chain as one organism. Think about it from beginning to end, protect it and support it even far down the chain. Dominic used that example of defense in the U.S. a moment ago. I think that's an excellent example. You see the U.S. government taking steps to make that chain more financeable with the direct intention of making it easier to push liquidity further down that supply chain. You see the OEMs starting to look down to their, not just their Tier 1 suppliers, but Tier 2, Tier 3, Tier 4. Because the further you get down that supply chain, often the smaller the companies get. And when there is constraint on liquidity, you know, when you're talking about access to financing, it's the smaller companies that- that struggle, not- not the big ones. So if the big ones can help the little ones, then everybody wins in the long run. And I really do want to emphasize that the message coming from my clients is extremely clear, that being good at this is a direct competitive advantage. A company that understands the risks in its supply chain, that has optimized for working capital, not just for themselves, but for their key customers and their key suppliers, we're all living in an environment of heightened risk and volatility. That is the company that is going to win.

Dominic Drew: Yeah, so I would echo Natasha's point insofar as resilience isn't just an operational decision, it's also a capital allocation decision. The companies that move earliest will define the new standard operating model, and those that wait will be left reacting. I think that's a really good place to wrap up. Natasha, Kyle, thank you very much.

Natasha Condon: Thank you.

Kyle Hutzler: Thank you.

Dominic Drew: And thank you to the listeners for joining. Have a great day.

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