Just days after winning the 2024 U.S. presidential election, Donald Trump reaffirmed his commitment to imposing sweeping tariffs aimed at protecting American jobs and manufacturing. The president-elect has pledged to introduce a 25% tariff on goods from Mexico and Canada, along with a 10% tariff on Chinese imports, effective on his first day in office.
These proposed tariffs mirror the aggressive trade policies from Trump’s first term, which included extensive duties on Chinese goods during a prolonged trade war. Steel and aluminum imports from Mexico, Canada, and other trading partners also faced tariffs during his earlier presidency.
As Trump signals a fresh wave of tariff hikes, potentially starting this month, manufacturers and retailers are adjusting their supply chains to prepare for a shifting trade environment. Here’s how companies are bracing for the impact.
Stockpiling Inventories: A Temporary Fix
Some companies are preemptively increasing imports and stockpiling goods ahead of Trump’s inauguration, a strategy known as frontloading. Jonathan Todd, vice-chair of the transportation and logistics practice group at law firm Benesch Friedlander Coplan & Aronoff, describes this as a short-term measure to avoid immediate tariff costs.
However, Madhav Durbha, group VP of CPG and manufacturing at supply chain technology firm Relex Solutions, cautions that this strategy has limitations, particularly for perishable items. Long-term adjustments in supply chain structures are necessary to address persistent tariff challenges.
Shifting Suppliers and Diversifying Sources
The tariff policies from both Trump and Biden administrations have already driven companies to diversify their sourcing beyond China. Popular alternatives include Southeast Asia, Mexico, and Canada. Countries like Vietnam, India, Turkey, and Poland have also become increasingly attractive for sourcing, according to Todd and Durbha.
However, shifting sourcing locations can take years. “It can take at least five years to sufficiently change a company’s sourcing structure,” Todd explained, highlighting the financial and logistical hurdles. Compliance with new regulatory environments further complicates the process.
For businesses unable to shift entirely, renegotiating supplier contracts has become a priority. Todd suggests that some firms may consider cost-sharing agreements where foreign producers absorb part of the tariff impact.
Enhancing Supply Chain Visibility
Companies are increasingly focusing on mapping their supply chains to understand the origins of raw materials and components. Evan Chuck, a partner at Crowell & Moring law firm, describes this process as a detailed breakdown of every input’s origin, from raw minerals to the source of plastic materials.
Additionally, manufacturers are reviewing product classifications to ensure accurate tariff assessments and exploring manufacturing in foreign-trade zones where goods can be exempt from U.S. duties if intended for re-export.
Domestic Sourcing and Political Maneuvering
Trump has argued that higher tariffs will encourage domestic manufacturing, but experts remain skeptical. “Domestic capacity isn’t what it used to be,” Todd noted, emphasizing that many components still rely on imported materials subject to tariffs.
Some companies are hoping for exemptions, a policy tool used during the Biden administration. The U.S. Trade Representative previously allowed exemptions on certain manufacturing inputs, with companies able to submit requests through March 31, 2025.
Securing such exemptions often requires strong political connections. “Having influence on Capitol Hill could be critical for securing relief,” Chuck added.
Flexible Planning Over Panic
As Trump’s trade policies loom, companies are focusing on scenario planning instead of reacting to every social media statement. “The focus is on building flexibility and resilience within supply chains rather than making knee-jerk reactions,” Durbha emphasized.
While no single strategy offers a perfect solution, businesses are balancing short-term mitigation with long-term supply chain adjustments to prepare for a potentially more protectionist U.S. trade policy.
