What Impact Could Donald Trump Have on Supply Chains?
On 6 November, Donald Trump was re-elected as President of the United States, being given a mandate from the American people.
Eight years after his surprise election win, Trump returns for a second term and with a range of promises made on the campaign trail.
Now, as Trump mulls over who gets a top job in his cabinet, many procurement and supply chain leaders are wondering what effect he will have on the sector when he officially takes office in January.
What a second Trump term will mean for supply chains
Alex Saric, CMO at Ivalua, a leading provider of cloud-based, AI-powered Spend Management software, believes a greater escalation of tariffs are on the way from the 47th president of the US, when asked what a second Trump term will mean for supply chains.
"Under a second Trump term, we would likely see a greater escalation of tariffs and 'Buy American' provisions as part of a broader industrial policy agenda," he says.
"At the same time, existing ESG regulations could face rollbacks, though major corporations may continue ESG practices voluntarily to meet consumer and investor expectations or maintain compliance with international standards.
"Organisations should prepare for the possibility of nearshoring or onshoring operations, factoring in evolving 'made in USA' thresholds and the potential exclusion of certain nations, most notably China.
"Ultimately, supply chain resilience will hinge on the ability to nimbly adapt strategies in response to shifting tariffs, trade agreements and market conditions."
A complex transformation
Dan Abramson, FourKites SVP of Growth Markets and NAM Board Member, echoed concerns about the impact Trump’s tariffs could have on industries.
“Trump's proposed tariffs could bring about a complex transformation for the manufacturing industry, and the timing couldn't be more challenging: companies rushing to beat new tariffs will compete for already-strained logistics capacity just as East Coast ports face possible labour disruptions in January 2025,” he adds.
“Different manufacturing subsectors will experience wildly different outcomes — electronics makers face potentially painful component shortages while chemical companies might actually benefit from reshoring.
“Small manufacturers will struggle with the transition costs while larger players can use this as a catalyst to rebuild their supply networks. The biggest winners won't be those who simply move production, but those who use this moment to fundamentally redesign their operations with more flexibility and redundancy built in."
The feasibility of shifting portions of supply chains away from China
With the increase in tariffs, we could see companies maybe try and look elsewhere when importing goods.
According to the Office of the United States Trade Representative, the United States is the largest goods importer in the world.
US goods imports from the world totaled US$3.2tn in 2022, up 14.6 percent ($413.7 billion) from 2021.
China was the top supplier of goods to the United States, accounting for 16.5% of total goods imports. The top five suppliers of US goods imports in 2022 were: China (US$536.3bn), Mexico (US$454.8bn), Canada (US$436.6bn), Japan (US$148.1bn) and Germany (US$146.6bn).
US goods imports from the European Union 27 were US$553.3bn.
The U.S. imports many products from China, including: Smartphones, digital automation systems, toys and scale models, video game consoles and console parts.
On the feasibility of shifting supply chains away from China, Alex adds: "The feasibility of shifting portions of supply chains away from China in response to increased tariffs heavily depends on the specific commodities involved.
"For some goods and materials — such as rare earth minerals, which predominantly come from China — relocating would be highly challenging. In other cases, nearshoring to Mexico or elsewhere may be possible.
"However, limited supplier options could drive up costs, at least until new sources ramp up production, given the long investment and extraction timelines for certain commodities.
"A key obstacle is the existence of well-established industrial clusters that have formed efficient supply chain hubs, such as auto manufacturing in Detroit. China has developed similar concentrations for many industries.
"Replicating these integrated ecosystems in new markets won't happen overnight. In the interim, companies would face higher costs, greater disruption risks and increased greenhouse gas emissions from lengthier transportation routes throughout their redistributed supply networks.
"Initially, businesses that haven't diversified their supplier base will struggle to identify new vendors and navigate the risks of onboarding unfamiliar supply chains. Maintaining flexibility and carefully evaluating sourcing options will be crucial for companies navigating this upheaval."
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