- Kearney expects global growth to settle into a slower, structurally volatile ~2.5 2.7% pace through 2027, with the sharpest deceleration in the Americas and Europe.
- Tariff and trade disruption, restocking, and higher sourcing costs are pushing supply chain expenses toward 4 7% above inflation by late 2025, squeezing margins.
- Reshoring progress is lagging intentions as imports from low-cost Asian sources rise faster than U.S. manufacturing output.
- Companies need scenario planning, diversified sourcing footprints, AI-enabled transformation, and embedded geopolitical-risk governance to stay resilient.
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1. Macro Growth Outlook: From Shock to Structural Volatility
Kearney’s Global Economic Outlook for 2025–2027 signals a shift: global output is expected to average ~2.3–2.7% per annum, a downgrade from earlier estimates and well below pre-pandemic norms of >3%. Americas and Europe are set to slow most sharply (US growth falling to ~1.3%; Europe averaging ~1.3%), while Asia-Australasia and the Middle East & Africa are relatively resilient, projected to grow ~3.6–3.7% annually.
2. Supply Chain Cost Escalation and Sectoral Strain
The Kearney “Supply Chain Navigator” report flags rising supply chain costs: restocking aged, tariff-driven inventory pushes costs 4–7% above inflation by late 2025, up from ~2% above previously. Key cost drivers include trade policy volatility, tariff-induced distortions, labor shortages and inflation in inputs. For CPGs, inefficiencies are projected to cost ~$800 billion in top-line growth if supply chain issues persist.
3. Reshoring: Intentions vs. Realities
Despite strong rhetoric—nearly 15% more CEOs plan to reshore operations in the next three years compared to last year—the data underline a disconnect with execution. The Reshoring Index declined by ~311 basis points as imports from low-cost Asian countries and regions (LCCRs) rose ~10% (~US$90 billion), while US domestic manufacturing increased just 1%. Mexico and Canada lagged too: both faced constraints in fulfilling US demand.
4. Strategic Imperatives: Adaptation, Technology, and Risk Integration
Given the dynamics, leading firms are adapting in four key ways:
- Scenario Planning & Flexibility: Making ‘what-if’ planning a core discipline, applying models of tariff, geopolitical or demand shocks.
- Diversified Supply Chains & Near/Friend-shoring: Shifting to ‘China + 1’ or friend-shoring strategies; increasing sourcing from more politically aligned and cost-stable countries.
- Technology & AI Adoption: Embedding AI and analytics not just for automation, but strategic decision making and risk mitigation; digital tools to improve visibility, forecasting and supply-network agility.
- Embedding Geopolitical Risk Into Core Strategy: Tariffs, industrial policy, regulatory risk are no longer externalities—they’re core. Companies will need dedicated geopolitical governance to adapt rapidly.
5. Strategic Implications for Investors & Boards
- Margin Pressure & Earnings Risk: Companies with thin pricing power or high import exposure face margin erosion due to supply chain inflation. Investors should penalize firms with rigid cost structures.
- Real Assets & CapEx Decisions: Investments in domestic production, resilient geography, automation and AI may yield premium returns; but require heavy capex, time and regulatory support.
- M&A and Corporate Strategy: Acquisitions in supply chain tech, real-asset infrastructure in nearshore locations, or companies that can plug capability gaps in resilience, will become more attractive.
- Policy & Regulation Tracking: Companies and investors must monitor evolving trade policy, industrial policy, subsidies—both from the U.S. and trading partners—as these will materially shift competitive landscapes.
6. Key Unknowns & Risks
- Whether inflation and input cost inflation will decouple from consumer price indices—and how central banks will respond.
- The permanence vs temporary nature of fragmentation: will regionalization become durable, or will globalization rebound as policy changes?
- AI risk: While promising, technology could exacerbate disparity between leaders and laggards. Excess concentration of gains could provoke political and regulatory backlash.
- Supply side constraints: labor shortages, infrastructure bottlenecks (e.g., in Mexico, Canada), raw materials—can firms scale reshoring without inflationary overload?
- Geo-political policy shocks: Sudden tariff escalations, trade embargoes, climate policy disruptions remain wildcard threats.
Supporting Notes
- Kearney forecasts global output growth averaging ~2.3% in 1H 2025 and ~2.5–2.7% through 2027, significantly below pre-COVID norms (typically >3%) for developed economies.
- Americas and Europe growth projected at ~2.1% and ~1.3% respectively; Asia-Australasia and Middle East & Africa expected to lead with ~3.6–3.7% growth annually.
- Supply chain costs are expected to rise 4–7% above inflation by Q4 2025 due to restocking and other disruptions; earlier baseline was only ~2% above inflation.
- Inefficient supply chains projected to cost consumer packaged goods (CPGs) industry ~$800 billion in foregone revenue unless operations are optimized.
- The 2025 Reshoring Index fell by ~311 basis points as imports from LCCRs rose ~10%, outpacing domestic manufacturing expansion of 1%.
- Forty-four percent of CEOs increased attention to geopolitical tensions; 15% more CEOs are now planning to reshore in the next three years compared to last year.
- U.S. business logistics costs hit US$2.58 trillion in 2024, representing ~8.8% of GDP (up from US$2.45 trillion in 2023), with rising operating costs, flat volumes, and growing pressures from tariffs.
- AI investment globally is projected at ~$375 billion in 2025, rising toward ~$500 billion in 2026; productivity gains up to ~1.3% annually are possible for leaders.