An Examination of the Tariff‐Induced “Tug of War” Between Inventory Buffering and Inventory Leanness

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Abstract
The ongoing debate about tariffs is characterized by a lack of understanding of the effect of tariffs on supply chains. The tariff impact is often described with contradicting effects. In this research, the authors examined the opposing perspectives arising between resource dependency and social–ecological resiliency views in the context of tariffs and inventory leanness, a well‐established indicator of operational efficiency. Depending on the view, tariffs may induce a positive or negative effect on inventory efficiency—evidence of a tension ripe for examination. To investigate these opposing views, the authors created a novel database of firms operating in industries that imported 2018 tariff‐affected products and compared tariff‐affected versus non‐tariff‐affected firms using a difference‐in‐differences analysis. In doing so, the findings revealed that, perhaps surprisingly, firms that operated in tariff‐affected industries became leaner and more efficient with regard to inventory. The authors then discuss the resulting theoretical, managerial, and societal implications and lay the foundation for future research, including on the 2025 tariff announcements and increases.

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