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Now that the election guessing is over, the next guessing game begins – what will trade (and the overall economy) really look like under President-elect Donald Trump’s 2025 agenda?
The administration-in-waiting has signaled that it plans to aggressively utilize tariffs to protect certain United States economic sectors and industries, as well as the threat of tariffs to secure favorable trade terms in other areas. These and other international trade policy tools will be used alongside a broad domestic deregulation push and tax reduction strategy to boost growth.
Briefly, Trump has announced plans to impose a blanket tariff on all U.S. imports of between ten (10) and twenty (20) percent, and tariffs of between sixty (60) and one hundred (100) percent on goods from China.
Tariffs – when implemented – increase the price of imported goods and components in the United States. However, tariffs used strategically are intended – and can – “reshore” jobs in the United States and even revive industries, although this is often a difficult balancing act. This was the case with Trump’s 2018 washing machine tariffs, which created American jobs but also dramatically increased the cost of washing machines (estimates in the time since have placed the cost of each new manufacturing job at $800,000). These moves also raise the risks of retaliatory tariffs and the triggering of wider trade wars which can drastically raise prices and disrupt global trade – and thus the wider economy.
In other cases, Trump has acknowledged his intention to threaten tariffs in order to secure more favorable trading terms for the United States. This has been referred to as “tactical tariffs”, although there is little clarity currently on where Trump will ultimately impose tariffs versus threaten tariffs.
Tariffs mean everyone in the supply chain must reassess their pricing, and potentially re-source goods and materials from countries without tariffs. This is the scramble already taking place among some U.S. companies, such as the American shoe company Steve Madden, which has already begun moving its manufacturing operations out of China. This maneuvering does not necessarily mean that the affected jobs will all simply move to the United States – they could move virtually anywhere, from Vietnam, to Pakistan, to Mexico.
The coming period of uncertainty will likely result in a lot of scrambling and realignment, particularly as manufacturing operations shuffle around the globe and U.S.-side importers seek goods and materials from alternative sources. The domino effects can be difficult to predict; as one example, just last week amid talk of “universal tariffs”, the European Union is said to be preparing potential retaliatory tariffs against the U.S. if necessary.
Once the dust settles on the implementation stage, the longer term economic effects will begin to materialize, which may include new trade paths, new trade terms with international partners, a reduction – or increase – in jobs and economic growth, and new manufacturing patterns around the globe.
If this picture feels troublingly murky, this is understandable. However, businesses who foresee impacts to their operations should begin by analyzing their operations and Trump’s most likely list of target countries and target sectors. From there, begin mapping out scenarios and considering options. While there may be uncertainty in which countries or sectors will be hit with tariffs, there is considerably more certainty over which global manufacturing centers are unlikely to be specifically targeted for substantial tariffs.
January 20, 2025, is not the day to begin thinking about how tariffs and the United States’ broader trade policies will impact your business and operations. Today is the day to begin thinking about – and planning – for contingencies. Contact us to discuss your contingency plans for 2025 and beyond.
Give our office a call today at (917) 546-6997, we would be happy to speak with you.
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