Supply chain impact of incoming tariffs likely to vary from country to country

Trump has floated the idea of a 10% or more tariff on all goods imported into the U.S., a move he says would eliminate the trade deficit. But critics say it would lead to higher prices for American consumers and global economic instability. Tariffs inhibit global trade, lower growth for exporters and weigh on public finances for all parties involved. They are likely to raise inflation in the United States, forcing the Federal Reserve to act with tighter monetary policy.

Impacting prices of imports will have huge repercussions on supply chains, on where and how manufacturers and retailers will source their supplies. This consequently will affect logistics routes and trade lanes. Firms mostly pass import costs on to the customer, so tariffs are likely to be inflationary for U.S. buyers, forcing the Fed to keep interest rates high for longer or to even reverse course and hike borrowing costs once again.

Trump has also said he should have the authority to set higher tariffs on countries that have put tariffs on U.S. imports. He has threatened to impose a 200% tariff on some imported cars, saying he is determined in particular to keep cars from Mexico from coming into the country. He has also suggested that allies such as the European Union could see higher duties on their goods. But Trump has targeted China in particular. He proposes phasing out Chinese imports of goods such as electronics, steel and pharmaceuticals over four years. He seeks to prohibit Chinese companies from owning U.S. real estate and infrastructure in the energy and tech sectors.

While the Trump administration might hit countries like China and Mexico the hardest, other countries may benefit. Among potential winners, Brazil might enjoy greater trade with China given that Beijing replaced all its U.S. soybean imports with Brazilian ones when trade tensions flared during Trump’s first presidency.

U.S. oil producers are looking forward to less regulations on crude production under a Trump presidency, meaning higher oil supply and consequently lower prices. This would be great news for the logistics industry that has seen high costs of operating fleets while faced with low freight rates. But it’s not that straightforward. Trump has also vowed to put more sanctions on Iranian and Venezuelan barrels, meaning the global market could become tighter, potentially boosting prices. At the same time, the increased likelihood of trade wars under Trump could dampen global economic growth and slow oil demand.

Trump has vowed to reinstate his first-term policies targeting illegal border crossings and to forge ahead with sweeping new restrictions. He has pledged to limit access to asylum at the U.S.-Mexico border and to embark on the biggest deportation effort in American history, which would likely trigger legal challenges and opposition from Democrats in Congress. In light of an aging population, this might impact supply chains already under pressure of a labor constraint and in need of immigration reforms.

When it comes to sustainability, the new administration will change course there as well. Trump explicitly promised to pull the U.S. out of the Paris climate accords again, after the U.S. reentered the agreement under President Joe Biden. While that is a step back, reversing the Environmental Protection Agency’s electric truck rule with national emission standards might be a more realistic approach for trucking operations, especially in California.

Although it will be months before the new administration takes office and the suggested changes are implemented, one thing is for sure: We will see greater volatility in supply chains, creating an even larger need for companies to be prepared for the disruptions ahead by becoming more agile and for industry organizations to work closely with Capitol Hill.

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About the author

Bart De Muynck is an industry thought leader with over 30 years of supply chain and logistics experience. He has worked for major international companies, including EY, GE Capital, Penske Logistics and PepsiCo, as well as several tech companies. He also spent eight years as a vice president of research at Gartner and, most recently, served as chief industry officer at project44. He is a member of the Forbes Technology Council and CSCMP’s Executive Inner Circle.