As President-elect Donald Trump prepares to return to the White House, his promises of sweeping tariffs—including an additional 10% tariff on imports from China, a 25% tariff on imports from Canada and Mexico, and a 10% to 20% universal tariff on all other imports—have businesses rethinking their supply chains. The potential impact of these tariffs is expected to be substantial and wide-ranging, affecting numerous industries like automotive, manufacturing, industrial, defense, pharmaceuticals, and high-tech electronics. The impact will be particularly acute for consumer goods.
Many companies are already taking proactive measures to mitigate risks and prepare for various scenarios. Some are accelerating efforts to diversify their production away from China, while others are stockpiling inventory in the U.S. before the new administration takes office. No matter what tactic they are taking, one effect is certain: Companies need to reevaluate their supply chain strategies.
My company Resilinc has identified five key ways that Trump’s proposed tariffs will affect supply chains. Companies should carefully consider how each of these consequences will impact their supply chains and what responses they should take to mitigate the changes.
#1 Increase in prices
Tariffs could have far-reaching effects on consumer goods, including those produced domestically. Many products that Americans use daily rely on imported components. A substantial portion of items manufactured in the U.S.—from appliances and industrial goods to pharmaceuticals, cars, and electronics—include imported parts. For instance, key smartphone components such as processors, displays, and batteries are often sourced from countries like China, South Korea, and Taiwan. Tariffs will make the cost to produce and sell all of these goods significantly higher. If these cost increases are passed on to consumers, tariffs could ultimately influence consumer purchasing behavior. This might include reduced demand or shifts in preferences toward products not subject to tariffs.
#2 Change in freight flows and rates
The potential impact extends beyond just the cost of goods. The shipping industry is likely to see significant changes as well. In the short term, freight rates could spike as retailers rush to buy safety stock ahead of potential tariff implementations. However, in the longer term, broad tariffs could discourage imports, potentially slowing freight volumes at ports and driving down rates. This could have a ripple effect throughout the entire supply chain ecosystem.
#3 Retaliatory tariffs from other countries
When Trump was previously in office, the administration applied tariffs on steel, aluminum Chinese imports, and automotive imports. Within a year, other countries enacted numerous retaliatory tariffs on U.S. imports in response. Some of the key products targeted included U.S. soybeans, pork, whiskey, and automobiles. Exports to China, the largest buyer of U.S. soybeans, dropped by nearly 75% in 2018 due to retaliatory tariffs and export volumes of some machinery products and vehicles dropped by 10%–20%. China placed tariffs on tens of billions of dollars’ worth of U.S. exports, and The European Union and Canada responded to steel and aluminum tariffs by imposing tariffs of their own. While it will be hard to predict how different countries will react this time, similar reactions are likely.
#4 Increased interest in nearshoring/reshoring
The proposed tariffs are likely to accelerate the trend of nearshoring and reshoring, with countries like Mexico potentially benefiting. Mexico is becoming more attractive due to its low labor costs, proximity, and potentially lower tariffs compared to China. In fact, Mexico was the United States’ top trading partner in 2024, surpassing China for the first time in over 20 years. In recent years, as companies have started increasing nearshoring initiatives, Mexico has become a critical part of these strategies. With costs potentially rising for Chinese goods, Central America could benefit as a nearshore option—even with a 10% tariff. Other countries like Vietnam, Thailand, and India are also emerging as alternatives to China.
However, both nearshoring and reshoring come with their own challenges. Setting up a new factory can be extremely costly and time intensive. Plus, labor in the U.S. is expensive. The average manufacturing wage as of January 2022 in the U.S. was $24.55 per hour, compared to an average of $2.80 per hour in Mexico.
Next, China has dominated as the “world’s factory” for a long time; its ecosystem of easy-to-find vendors for components of manufactured products will be hard to replicate. Scaling suppliers and finding availability of certain products and parts could prove difficult in the U.S., at least for the next few years. If a company reshores product assembly to the U.S., for example, but is still reliant on nuts and bolts from Chinese or Taiwanese suppliers, it has not solved its supply chain problem. Establishing new supplier networks can be time-intensive and costly.
While reshoring may help companies avoid tariffs, it introduces new challenges. For instance, Intel’s effort to establish a semiconductor plant in Arizona faces the hurdle of water scarcity, a critical issue for facilities that require an uninterrupted water supply. Meanwhile, Intel’s planned site in Ohio avoids this issue but faces a shortage of workers.
To be clear, the U.S. is not a risk-free region. Nowhere is risk-free. By reshoring or nearshoring, companies may mitigate certain risks but encounter a new set of uncertainties, potentially impacting supply chain stability.
#5 Tariffs may be applied unevenly
Companies are not just passively waiting for these changes to occur. Following the tariffs previously enacted under the Trump Administration, many U.S. companies responded by lobbying for product exemptions to safeguard their finances and operations. Apple, for instance, received 10 out of 15 requested exemptions for items like computer chargers and mice that were solely available from China. This time, certain products may face even greater tariff impacts. Automotive parts, which frequently across the Mexico-U.S. border, could incur rising costs with each crossing, prompting automakers to lobby for exemptions.
On the opposite side of the equation, the Trump administration may consider imposing tariffs on specific companies instead of country-specific tariffs. For instance, Chinese companies have increasingly shifted production to countries like Vietnam, making China Vietnam's largest trading partner in 2023, with trade totaling $172 billion. To prevent Chinese products from being rerouted through other countries to reach the U.S., the administration may impose targeted measures aimed at companies. In recent years, for instance, the U.S. has imposed significant sanctions on Chinese telecommunications companies like Huawei and ZTE, citing national security concerns.
How companies can prepare
To prepare for these potential changes, companies are advised to take several key steps. The most critical (and foundational) step companies can take is to map their entire subtier supplier network—identifying where their products and components originate and which could be affected.
Additional key steps for readiness include:
- 1. Modeling “what-if” scenarios to quantify potential business impacts.
- 2. Preparing detailed data for exclusion requests and to support rapid adjustments.
- 3. Evaluating supply chain diversification options, balancing risks and benefits by region.
- 4. Anticipating potential shifts in consumer behavior and financial impacts.
- 5. Closely monitoring announcements on tariffs and exemption procedures.
