Trump's new round of tariffs may trigger disruptions in global supply chains
President-elect Donald Trump's plan to impose tariffs on imports from China, Canada and Mexico could deal a blow to businesses across North America and negatively impact global supply chains, experts say.
Trump said on his first day in office, January 20, he would impose a 25 percent tariff on goods from Mexico and Canada. In a November 25 post on the Truth Social, Trump said the tariffs were aimed at forcing countries to stop drugs and illegal immigrants from crossing their borders into the United States. He also said he would impose an additional 10 percent tariff on Chinese imports to crack down on drugs coming from China.
Sri Laxmana, vice president for the Americas at CH Robinson, a freight forwarder and third-party logistics giant, said the company began listening to customers' concerns immediately after Trump's announcement.
"We have attended countless client meetings to address the risk scenario if Canada and Mexico implement tariffs," Laxmana told FreightWaves in an email. "Many of our customers - particularly in the automotive industry - view North America as an integrated supply chain, with some of their goods actually crossing the Mexico-Canadian border."
Mr. Laxmana said the biggest concern for shippers was timing.
"It usually takes months to fully implement tariffs through administrative means," Laxmana said. "On top of that, we're not sure what will happen in January, and since border policy is clearly a central theme of the Trump presidency, it's critical to plan for different scenarios."
Many of Trump's foreign policy initiatives are part of his broader "America First" approach, which began in his first term.
In 2018, the Trump administration imposed tariffs on $250 billion worth of Chinese imports, including microwave ovens and other home appliances, electronic components, pumps and valve systems.
In response, China raised tariffs on $60 billion worth of U.S. goods, with U.S. soybeans the hardest hit.
During the 2024 presidential campaign, Trump said fentanyl from China was being smuggled into the United States and that the additional 10 percent tariff was aimed at prod Chinese officials to stop the flow of the drug.
The 10 percent tariff on Chinese goods is lower than the 60 percent tariff on Chinese imports that Mr. Trump promised during his presidential campaign.
Andy Sherman, general manager of Fictiv's U.S. operations, said the company has been listening to customers' concerns about tariffs and their impact on global supply chains.
Fictiv is a SAN Francisco-based manufacturing technology company. The company has operations in the United States, Mexico, China and India. Fictiv has produced more than 30 million commercial and prototype parts for start-ups and large enterprises.
"I think by 2023, 11 percent of the U.S. gross domestic product will come from imports. This translates to about $3.1 trillion in imports in 2023, "Sherman said in an interview with FreightWaves. "If we're talking about tariffs of around 10 to 20 percent on all countries and 60 percent on imports from China... This means that a large portion of US GDP will suddenly be subject to tariffs. I think for many of our customers, they are able to see the importance of having a highly flexible supply chain and are beginning to be able to assess whether it makes sense to move to a China plus one strategy or to be able to produce domestically. But across-the-board tariffs like this don't necessarily equate to 'let's move everything to the U.S.,' that's not how it works."
Sherman said the products most affected by tariffs include clothing, toys and other consumer goods.
"When you're talking about products like clothing, toys, when you're talking about a lot of low-cost or cost-sensitive goods that are often made in China and the suppliers or parts of the manufacturers haven't moved their supply chains away from China, we know those are the products that are going to be most impacted," Sherman said. "At the end of the day, if there's a 60 percent tariff, it's very likely that it's all going to be passed on to consumers."
Sebastien Breteau, founder and CEO of QIMA, said Trump's tariffs and immigration policies will raise consumer prices.
Trump promised during his campaign that his immigration policy would include implementing the largest deportation program in U.S. history.
"Mass deportations of illegal immigrants could severely impact industries such as agriculture, construction, and manufacturing that rely heavily on immigrant labor," Breteau told FreightWaves in an email. "A reduced supply of labor will lead to higher wages, higher production costs, and ultimately higher commodity prices." This will add to inflationary pressures that are already being exacerbated by tariffs."
Headquartered in Hong Kong, QIMA is a quality and compliance solutions provider that works with 30,000 brands, retailers, manufacturers and food growers worldwide. The company employs more than 5,000 people worldwide and operates in more than 100 countries.
Breteau said Trump's tariffs could force companies to shift supply chains, which could increase their costs.
"Tariff increases will force companies to reevaluate their supply chains, a process that is complex and expensive," Breteau said. "In the short term, this could lead to delays, increased logistics costs and higher prices for consumers." While diversification efforts are increasing, no country can absorb the scale of manufacturing that China currently manages."
Breteau said North American brands and retailers have moved their supply chains to China's Asian neighbors.
"The Asian region's share grew from 35 per cent in 2018 to 47 per cent, with India and Vietnam emerging as the clear winners, with their share of US purchases overall growing from 14 per cent to 22 per cent over this period," Breteau said.
Sylvia Ng, CEO of ReturnBear, said another part of the supply chain that could be affected by Trump's proposed tariffs is the e-commerce logistics industry.
Toronto-based ReturnBear is a cross-border reverse logistics platform whose mission is to make e-commerce returns easier for shippers and customers while reducing fraud and landfills.
"Recent events have made it harder for merchants to manage profitability, which has made the returns process actually play a bigger role in their operations than before," Ng said in an interview with FreightWaves. "Trump's possible tariffs are one of the things businesses have to consider. But before that, strikes by dockworkers in the United States and Canada had rolled in. In Canada, postal workers have been on strike for a whole week, affecting many businesses in the United States.
Employees of Canada Post, the country's national postal company, have been on strike since Nov. 15 over the failure of contract negotiations between the Postal Service and the Canadian Postal Workers Union.
Key negotiating points between the postal Service and the union include wages, safety and automation in the workplace.
"Obviously, if you're selling products in the U.S., you may not know that these things are happening in another market," Ng said. "Add to that the potential tariffs, and I think there's a lot going on in the macroeconomic space right now that merchants are going to have to deal with during the holidays."
According to Fortune Business Insight, the global reverse logistics market will be worth $769 billion by 2023.
ReturnBear was founded in 2021. The platform provides shippers with more than 1,000 packless, label-free return delivery locations across Canada. The company also has hubs in Portland and Buffalo in the United States and recently launched operations in the United Kingdom.
Wu said Trump's proposed tariffs would likely hit small and medium-sized e-commerce retailers hardest, whose sales have already fallen due to inflation.
"Unfortunately, the impact of tariffs on smes will be greater," Ng said. "Smes don't have enough bandwidth or additional resources to cope with all these changes. The National Retail Federation also predicts that American consumers will lose $78 billion a year in spending power due to these new tariffs, including clothing, toys, furniture, footwear, travel, and more. What I care about is actually making sure that we help as much as possible smes and mid-market merchants deal with these shocks and help them mitigate the need to pass on more of their costs to the consumer."