As leadership shifts and changes in policy follow, many industries will have to grapple with confusion in the global supply chain. Read on to learn how businesses can implement diverse, adaptable financial solutions to stay resilient in the face of rising costs and shifting trade dynamics due to tariffs.

Tariffs during the next Trump presidency

President-elect Donald Trump has expressed his intent to implement tariffs on several fronts.

• 10-20% tariff on all imports: Trump’s blanket tariff plan could affect a wide range of imported goods, raising prices across sectors.
• 60-100% tariff on goods from China: Goods imported from China could face substantial tariffs, with a focus on high-tech and consumer products.
• 25% tariff on goods from Mexico and Canada: Proposed tariffs on imports from Mexico and Canada, critical trading partners under the United States-Mexico-Canada Agreement (USMCA) agreement, could disrupt established trade flows.
• Retaliatory levies: Any country that taxes U.S. imports would face repercussions, potentially increasing global impacts beyond the biggest trade partners.

Considering China, Mexico, and Canada are the three largest trade partners of the U.S., these hefty tariffs could result in vast alterations to supply chains worldwide with the potential to cause chaos.

Shifting dynamics between the U.S. and its three biggest trade partners

China has dominated as the largest U.S. trade partner for the better part of the past two decades. However, trade patterns shifted dramatically following the onset of the COVID-19 pandemic.

When the landed cost of goods exported from China skyrocketed due to a spike in container rates and factory shutdowns, businesses that were previously reliant on Chinese companies for their supply chain had to pivot. Once the flow of goods began to settle closer to a state of normalcy, around 2022, there was a spike in imports from China compared to the COVID-era lows.

The shifting trade dynamic between the U.S. and China is highlighted by 2023 imports remaining stagnant with what was seen ten years ago. As a result, in 2023, imports from Mexico surpassed those from China for the first time in over two decades.

Trump’s authority to implement tariffs

Once in office, a president has a few channels for enacting tariffs. During the first Trump presidency, duties paid on U.S. imports roughly doubled, jumping from $37 billion in 2015 to $74 billion in 2020.

Article 1, Section 8 of the U.S. Constitution provides Congress with the ability to set tariffs. However, Congress can delegate that power to the President. An example would be Section 103(a) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015).

Another avenue for Trump includes Section 301 of the Trade Act of 1974, which specifically allows a sitting president to evoke retaliatory tariffs against any country that “… is unjustifiable and burdens or restricts United States commerce.”

The tariffs Trump implemented using Section 301 of the Trade Act of 1974 during 2018 and 2019 were mostly upheld by the Biden administration, meaning it would take no involvement from Congress to expand upon these existing measures in Trump’s upcoming term.

There’s also the Trade Expansion Act of 1962, which provides an avenue to impose tariffs on imports of aluminum and steel. The Tariff Act of 1930 has the potential — though unlikely — to empower a sitting president to impose hefty fees in the event that a foreign trade partner discriminates against U.S. commerce.

Tariffs during the first Trump administration

In January 2018, the U.S. imposed a 30% tariff on imported solar panels from countries including China, South Korea, and Malaysia, which aimed to protect domestic manufacturers from foreign competition. This led to higher solar panel prices, benefiting U.S. producers but raising costs for solar installation companies. Retaliation from trade partners reduced global solar trade, resulting in job losses in the U.S. solar installation sector and hindering renewable energy progress.

Also in January 2018, a 20% tariff was placed on the first 1.2 million imported washing machines, with a 50% tariff on units exceeding that threshold, targeting South Korean manufacturers like Samsung and LG. The tariff aimed to boost U.S. production, but it raised washing machine prices and dampened consumer demand. Foreign producers responded by building U.S. factories, reducing the tariff’s impact.

In March 2018, the U.S. introduced a 25% tariff on steel and 10% on aluminum imports, citing national security concerns, affecting countries such as China, Canada, and Mexico. While U.S. steel and aluminum industries gained protection, sectors dependent on these materials — such as automotive and construction — faced higher costs.

Between 2018 and 2019, the U.S. imposed tariffs on approximately $370 billion worth of Chinese imports, targeting electronics, machinery, and other products due to disputes over intellectual property theft and trade imbalances. As tariffs increased from 10% to 25%, U.S. companies faced higher costs on Chinese-made goods, leading to price hikes for consumers.

The U.S. also imposed tariffs on South Korean products amid broader trade disputes in 2018. However, the U.S. and South Korea renegotiated their free trade agreement to include provisions related to these tariffs.

Retaliatory Tariffs

In response to U.S. tariffs on steel and aluminum, Canada imposed tariffs on about $12.8 billion worth of U.S. goods. U.S. exporters faced reduced demand for their products due to the higher costs.

China imposed tariffs on a wide range of U.S. goods, including soybeans, aircraft, and automobiles. The total value of retaliatory tariffs from China was about $110 billion.

The European Union (EU) responded to the U.S. steel and aluminum tariffs with retaliatory tariffs on various goods, including motorcycles, bourbon, and jeans.

India reacted to U.S. tariffs by imposing tariffs on 28 U.S. products, including almonds, apples, and steel products.

Mexico retaliated against U.S. tariffs on steel and aluminum with tariffs on U.S. products including pork, apples, and cheese. The total value of Mexico’s retaliatory tariffs was approximately $3 billion.

5 sectors that could be negatively impacted by tariffs

The U.S. International Trade Commission conducted a report on the 2018 and 2019 tariffs and ultimately found that U.S. importers bore the brunt of the resulting costs. Looking ahead to Trump’s second term, U.S. importers could be facing an even tougher climate.

Automotive

With tariffs on steel and aluminum, critical materials for vehicle manufacturing, the automotive industry could be hit hard. Some experts estimate a $100 billion strain, with the Auto Care Association noting tariffs would lead to financial strain on companies across the industry, especially small- and medium-sized businesses (SMBs). Additionally, Mexico and Canada were the U.S.’s two largest automotive trading partners in 2023, accounting for 58% of imports and 76% of exports.

Technology and Semiconductors

Tariffs on products from Mexico and Canada could impact semiconductors and other tech components, which previously would have been more industry-relevant to Chinese trade partners; however, the shift away from manufacturing in China following the COVID-19 pandemic brought that business elsewhere, with Mexico being a particularly popular destination.

Retail

During Trump’s first term, retailers fared better than others, but heading into the next four years, things could look different for the retail industry. Pricing power varies greatly by the type of goods being sold. Nonessential items will experience weakened demand, resulting in lowered ability to raise prices. Electronics including smartphones, tablets, laptops, and other devices are likely to see price increases. Clothing items could also become more expensive, given that the U.S. imports nearly all of its apparel, primarily from countries like China, Bangladesh, and Vietnam. Additionally, about 90% of toys sold in the U.S. are imported.

Agriculture

The U.S. agricultural industry was one of the sectors hit the hardest by the trade war with China during Trump’s first presidency. In an industry worth $1.5 trillion, economic headwinds caused by tariffs on agricultural products can be widespread. Because they affect both imports and exports, tariffs would likely lead to higher costs for imported foods and potential retaliatory tariffs on U.S. agricultural exports.

Energy

The energy sector — including oil, natural gas, and renewables — could see disruptions in supply chains and increased costs due to tariffs on imported equipment and materials. Canada and Mexico were responsible for approximately 52% and 11% of petroleum imports to the U.S. in 2023, respectively. Most U.S.-based refineries cannot process domestically sourced crude oil and, instead, source it from Mexico or Canada. Certain parts of the country, including the northwest and northeast, also rely heavily on electricity and natural gas from Canada.

How companies can prepare for potential tariff disruptions

Many U.S. businesses are taking proactive steps to mitigate the potential financial impact of increased tariffs during Trump’s second term. With uncertainty surrounding the exact scope and timing of new tariff policies, companies are exploring strategies to safeguard their operations.

Accelerating orders and stockpiling inventory to try and avoid immediate cost increases is an option; however, there are additional inventory carrying costs with this model, such as storage, handling, and additional risks from damage, theft, or product obsolescence. This strategy also requires additional capital to front larger purchases before selling it off to buyers.

Identifying alternative suppliers and adjusting supply chains can help reduce dependency on imports from countries facing higher tariffs. Although, when switching to a new supplier, many buyers find that they get less favorable payment terms than with those they have a more established purchasing relationship with.

Negotiating with suppliers to lock in prices or secure better terms before the tariffs are implemented could help to create a buffer against price hikes. However, this requires strong supplier relationships and purchasing power.

To maintain liquidity amid rising tariff costs and supply chain disruptions, companies can use alternative financing solutions like Accounts Receivable Finance (ARF) and Supply Chain Finance (SCF). ARF allows businesses to leverage the power of their outstanding invoices and other receivables, and SCF finance enables companies to extend payment terms while offering suppliers early payment. These solutions can provide quick access to working capital without taking on debt.

Raistone provides scalable solutions

In times of economic uncertainty, leveraging solutions like ARF and SCF can help businesses survive the chaos and outlast their competition. Having the funding to implement new strategies — such as adjusting supply chains to source from non-tariffed countries or improve operational efficiency and reduce costs — can provide a competitive advantage.

Businesses can take a proactive approach to overcome these obstacles by implementing a robust working capital strategy. If you’d like to connect with a financial expert from Raistone, please fill out this form or call 888-626-6593.

About the Author

Pete Kienlen, Sales Director at Raistone, leads efforts to develop tailored working capital solutions for clients. With over 15 years of experience in sales and finance, including more than a decade at American Express, Pete specializes in helping businesses optimize cash flow, across multiple industries including manufacturing, construction, retail, and logistics. Pete values Raistone’s agile environment, which enables quick, customized solutions, and is passionate about supporting small- and medium-sized businesses.

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