What Trump’s Tariffs Mean for Your Business
Since President Trump returned to the White House, he has introduced a series of tariffs affecting various sectors, from raw materials like steel and aluminum to specific country-based tariffs, such as those on Mexico, Canada, and China. These tariffs, which are import taxes paid by U.S. businesses, are designed to reshape trade and encourage domestic sourcing, but they significantly impact the cost of doing business, especially for companies with multinational supply chains.
Main tariffs
- Aluminum tariff: Increased from 10% to 25%, raising costs for U.S. companies importing aluminum
- Steel tariff: A 25% tax on steel, expanding to more steel derivatives
- Country-specific tariffs: A 25% tariff on imports from Mexico and Canada, and a 10% tariff on China (later suspended after retaliatory actions)
Trump’s tariffs aim to reduce reliance on foreign imports and boost U.S. manufacturing, but they come at a cost. The tariffs are expected to increase operational expenses for U.S. businesses, potentially raising the price of goods for consumers, which could reduce overall demand.
Impact on Global Supply Chains
- Raw material cost increases: The Trump tariffs are mainly focused on raw materials, which will create a major increase in the cost of materials like steel and aluminium for any US company. If any material impacted by the tariffs is a core part of your supply chain, you will have to either absorb the 25% tariff increase or increase your prices. These unfavourable conditions will especially impact any business that is heavily reliant on international suppliers.
- Manufacturing cost increases: Numerous businesses buy products from countries like China due to the lower cost of manufacturing in these places. As the tariffs arrive, these cheaper alternatives may no longer be a cost-effective solution, causing enterprises to turn back to US manufacturers. This shift will create a surge in demand in the US, causing major price increases and boosting manufacturing costs in the supply chain.
- Loss of core supplier connections: Due to increases in costs or new potential trade barriers, some trustworthy suppliers for a supply chain business may no longer be a feasible option. The sudden shift away from trusted partnerships due to these Trump tariffs can create friction in a supply chain and cause major disruptions.
Practical tips for managing tariff impacts
- Diversify supplier base: Reducing dependency on one supplier can help mitigate disruptions caused by tariffs.
- Explore local sourcing: Increasing local sourcing can help avoid high import tariffs and manage costs.
- Leverage trade agreements: Companies can explore Free Trade Agreements (FTAs) to reduce the impact of tariffs.
Businesses need to act proactively to adapt to the shifting tariff landscape. Diversifying suppliers, securing local contracts, and analyzing the full supply chain are crucial to managing the risks and costs brought about by Trump’s tariffs. By staying ahead of changes, businesses can mitigate disruptions and better position themselves in this evolving trade environment.
.png)