Alex Sutton, Head of Research at Gordon Brothers, joins ABF Journal Editor in Chief Rita Garwood to discuss how shifting trade policies, rising tariffs, and the complexities of reshoring are reshaping domestic supply chains and asset valuations in 2026.
In the wake of rapid shifts in global trade policy, businesses and lenders are grappling with the long-term implications of rising tariffs and the much-discussed trend of reshoring. To explore how these megatrends are impacting domestic inventory and asset recovery values, Rita Garwood, Editor in Chief of ABF Journal, sat down with Alex Sutton, Head of Research at Gordon Brothers, for a podcast interview.
Watch the full interview on YouTube or listen on Spotify.
Rita Garwood: Alex, toward the end of February, at Private Equity International’s Nexus 2026 conference, you spoke on a major panel about reshoring and domestic supply chains as a new megatrend. Now that those discussions have had a few weeks to settle, what was the one question you kept getting from investors that suggests where the market is most nervous right now?
Alex Sutton: I think how long this “new normal” of dramatic shifts in trade policy is going to last was one of the bigger questions. Everybody is looking for a crystal ball, which is very hard to find. We saw some companies taking action even before the end of 2024 in anticipation of the Trump administration raising tariffs. While many thought the process would have been resolved by now, we are still living in a world where tariffs are fluctuating, new mechanisms are in place, and Section 301 investigations are just starting. It certainly doesn’t seem like it will be over anytime soon.
Garwood: In response to that, there has been a lot of talk about reshoring as a long-term solution. But for a lender looking at a borrower’s balance sheet today, how much of that megatrend is actually hitting the ground in terms of domestic inventory growth?
Sutton: We haven’t seen the results of many near-shoring transitions within the companies we appraise yet. We have seen quite a bit of international source shifting, where companies try to reduce reliance on a single export supplier like China, but true greenfield facilities with associated raw materials and work-in-process inventory are still rare. I would say inventory growth related to near-shoring is still pretty small at this point.
Garwood: Gordon Brothers’ research suggests tariffs are hitting specific industries like electronics and furniture harder than others. Is this creating a valuation bubble in certain asset classes that lenders should be wary of?
Sutton: I don’t necessarily think so. When we look at inventory, machinery, and equipment, the tariff comes in as a value proposition where the cost is stepped up. As long as the trade policy is stable, that new value should be real rather than a bubble. A short-term bubble would only occur if there was a sharp reversal in policy and elevated tariffs were suddenly removed. We have not seen that yet. We are concerned about valuation bubbles in sectors like data center build outs or the beverage space, but those are related to specific demand issues rather than tariffs.
Garwood: How is Gordon Brothers helping firms navigate valuation challenges when the cost to replace an asset can shift dramatically in a single quarter due to geopolitical shifts?
Sutton: Related to tariffs, there are two strategies that we implement for two different customer bases. For companies bearing the brunt of tariffs, our lending practice provides support where traditional lenders may be unwilling to finance in-transit amounts or large inventory growth that puts a company “out of formula”. For example, we recently financed a Japanese-based auto supplier where we provided an international finance package that was outside the bailiwick of our competitors. On the appraisal side, our focus is on protecting lenders by ensuring tariff costs and potential liquidation expenses are properly accounted for in the borrowing base.
Garwood: In anticipation of tariffs, many firms over-purchased to beat deadlines. Now that we are in Q2 2026, are we seeing a “hangover effect” of high-cost inventory that can’t move, and how does that affect recovery value?
Sutton: We definitely saw a spike in inventory levels through the summer and fall of 2025 due to pre-purchasing. However, most companies have worked through that glut by now. Many actually did well by having that inventory on hand, maintaining margins, or even gaining market share by not increasing prices as quickly as others. That said, the long-term addition of tariffs makes inventory roughly 15% more expensive on average. This higher dollar cost often results in slower inventory turnover, which can lower the long-term value of inventory from a liquidation perspective.
Garwood: From a research standpoint, where is the “sweet spot” where the cost of domestic production actually outweighs the risk of tariff volatility?
Sutton: It’s hard to say generally because of industry variations. When making that decision, companies have to weigh raw material costs and domestic supply against labor intensiveness and the efficiency of a new greenfield facility. However, that “sweet spot” is certainly more favorable today than it was 12 months ago because the tariff structure has been added to the cost of imported goods.
Garwood: What are the key trade-related red flags you are seeing in borrower reporting right now?
Sutton: One of the most surprising challenges early on was simply determining which products in a company’s inventory were subject to new tariffs. Many companies were in industries where tariffs were historically non-existent or stable for 20 years, so their reporting structures didn’t segregate those costs. It has been difficult to isolate which inventory was on hand prior to a tariff versus what was purchased after. Identifying that impact is crucial for understanding a borrower’s true cost structure today.