President-elect Trump will be sworn into office, as the 47th President of the United States, on Monday 20 January. And while many in his home country are celebrating the news, international governments remain nervous over his proposed trade tariffs. And with good reason.
“President-elect Donald Trump’s proposed tariffs risk unleashing a tidal wave of disruption to global trade and supply chains,” says Simon Geale, executive vice president at supply chain consultants, Proxima.
Why? Because production costs would skyrocket, forcing a complete logistical overhaul for international manufacturers, which export to the US.
“A tariff on imports would “force businesses to rethink their sourcing strategies – especially where there are multiple instances of cross-border activity during production,” says Geale.
This is particularly true for Mexico, where a 25% tariff has been proposed, and Canada, where a whopping 60% tariff has been proposed.
And, while not as steep, the proposed 10% universal tariff would still be incredibly costly for European manufacturers, with food and beverage, hit especially hard.
“Imported foods have become an increasingly significant part of the American diet, with the share of imported goods rising across nearly every food category in recent years,” says Federico Fontanella, senior director of product and solution management at Trace One.
Among specific food categories, bread and pastries are the largest import, valued at nearly $6.9bn, while prepared foods, coffee, and frozen shrimp also rank high in value.
In beverage, beer is the biggest import, followed by liqueurs, cordials, and wine.
President-elect Trump’s proposed tariffs are directly aimed at slashing the US reliance upon foreign imports, meaning foreign manufacturers will suffer.
So, what can the food and beverage industry do to prepare for the proposed tariffs?
How can food and beverage prepare for Trump’s tariffs?
If President-elect Trump does proceed with his plan to impose import tariffs, and that’s a big if, then it’s likely these will be enacted swiftly.
“These proposed tariffs could become a reality within days of Donald Trump taking office,” says Geale. “So, businesses need to move rapidly to prepare themselves. Firstly, it’s about analysing current import structure and identifying which products will be affected by the new tariffs, to understand the potential cost impact.”
And resilience is key.
“Companies need to work out their resilience and mitigation strategies,” he adds. “This will look different for every organisation, but may include optimising product classifications, diversifying suppliers, adjusting supply chains and financial planning.”
It’s even been suggested that tariffs could lead to a rush on manufacturers setting up operations in the US, in order to escape import costs.
Businesses have also been urged to remain vigilant, as the situation evolves. Tariff proposals could shift, new measures could emerge, or negotiations could result in no tariffs whatsoever.
“This is a fluid situation,” says Geale.
Will President-elect Trump proceed with tariffs?
Describing tariffs as “the greatest thing ever invented,” and labelling himself “Tariff Man”, President-elect Trump hung his 2024 election campaign on their enforcement.
However, some economists have questioned his commitment to the plan, claiming it played well with potential voters during the campaign, but would ultimately force costs up for consumers and damage the US economy, meaning he’d never follow through.
“While these policies may protect certain US industries in the short term, they could lead to increased costs, inflation, and reduced domestic competition,” says Geale.
In fact, the early and forceful declaration of intent, to impose tariffs, may have been a ruse all along.
“His pronouncements are undoubtedly designed to get trading partners to the negotiating table,” says Geale. “By announcing his intentions in public he can both appeal to his core support and put more traditional negotiators on the back foot. He holds a lot of cards, but he has a lot of hands to play.”
So, will President-elect Trump impose his much-discussed trade tariffs? We’re likely to find out within days of the inauguration – either his administration will forge ahead with the proposed plans immediately, or they’ll never be spoken of again. But one thing is for certain, the world will be watching.
Your move President-elect Trump.
