This is going to hurt.
With tariffs set in place by President Trump against Mexico and Canada, and expanded tariffs being levied against China, there is absolutely no disagreement that consumers and manufacturers will feel immediate pain in the form of increased prices.
The unknown is how much relief will be realized once the fallout from these economic sanctions normalizes. Ideally, U.S. manufacturers will benefit from an even playing field across business-to-business and retail environments – allowing them to expand and increase the hiring of workers at higher wages.
Putting the politics of the situation aside, there are a number of key questions that need to be answered:
- How much will costs increase?
- Will manufacturing be able to absorb the immediate price increases and still have the ability to invest in the resources needed to increase production and re-organize supply chains?
- With a NAM-estimated 428,000 unfilled manufacturing jobs, does the workforce capital exist that will allow U.S. manufacturers to reshore or expand operations to meet tariff-based supply chain adjustments?
- Will retaliatory tariffs negate any of the actual or potential gains sought by these initiatives?
Supply chain, finance and commerce experts from the industrial sector recently offered their perspectives on what to expect and how to respond.
Ben Johnston, COO of Kapitus: “Tariffs of this significance could, over time, make manufacturing in the U.S. more economic relative to importing goods from abroad, which could be good for some industries.
“But in the short to medium term, these tariffs are likely to drive inflation significantly higher and cause significant disruption to the global supply chain, threatening many U.S. jobs at manufacturers, wholesalers and retailers. Higher tariffs will certainly cause prices to rise for U.S. consumers. This will not only spur inflation but will lower overall consumption, slowing the economy.
“However, in the long run, higher tariffs may help protect the viability of certain U.S. manufacturers and could incent greater investment in U.S. manufacturing. While this would be a positive for some sectors of the economy, the impact of tariffs is difficult to predict as we can expect U.S. exports to impacted nations to be struck by retaliatory tariffs, reducing demand for goods produced in the U.S. and sold abroad.”
Seth Weisblatt, Director, TrueCommerce: “With so much uncertainty surrounding tariffs, the best approach is to focus on developing mitigation strategies that preserve flexibility and resilience. This includes keeping contracts short, maintaining diversified supplier relationships, and safeguarding cash flow.
“Drawing from lessons learned during the COVID-19 shutdowns, businesses should prioritize managing inventory carefully and ensuring liquidity to weather potential disruptions. While price adjustments, when necessary, can serve as a short-term measure to sustain profitability, they should be viewed as one component of a broader strategy, not as a reactionary step. “
Simon Kim, CEO and Founder of Glassdome: “Even if aluminum producers and manufacturers don’t pass the full cost on to their customers, it could still be a shocking jolt for people from all walks of life, from aerospace executives looking at engine parts to families at the hardware or grocery store. Products like soda cans, appliances and cars contain lots of tariffed metals. Everyone says they want American-made products, and then they select cheaper foreign alternatives when it comes time to swipe the credit card.
“The American steel and aluminum industries have been battling higher running costs than international competitors for years, and that’s without getting into issues like Chinese companies dumping state-backed steel overproduction for pennies on the yuan.
“Automating production can help to a degree, but it won’t solve every problem associated with an expensive and aging manufacturing labor pool. Many manufacturers are struggling to find quality workers. If that shortage of qualified, or just ready to be trained, workers can’t keep up with increased orders, prices will stay high.
“In the long run, the tariff on steel and aluminum could be a positive force. If we invest in training a new manufacturing workforce and building a newly strengthened domestic manufacturing base. It could especially benefit those ‘left behind’ areas that have been such a focus for both Trump and Biden.”
Vinny Licata, Director of Logistics, Fictiv: “It seems we’re heading into supply chain disruptions reminiscent of 2020. Although the specifics may vary, the effects on manufacturing are likely substantial, especially for companies that rely heavily on a single region for manufacturing.
“This will probably result in rising prices for certain consumer goods, particularly those tied to imports or raw materials. Items like cars, electronics, and clothing. Manufacturing costs are also set to rise, especially for businesses relying on materials from countries targeted by Trump’s tariffs. Companies using tariffed steel or aluminum will face higher material costs, which could lead to reduced profits, decreased investment, or even the need to relocate production.
“Advanced manufacturing should be a consideration as it could lead to efficiencies that might not fully absorb the tariff impact but could help maintain pricing. It will be important that businesses be careful about making snap supply chain decisions focused solely on tariffs. Companies must focus on long-term strategic investments and understand that geopolitical change will occur. Supply chain resilience will be the name of the game over the next four years.”
Oshri Cohen, CEO, Cybord: “The tariffs imposed by the Trump administration are a wake-up call to the manufacturing industry, and if they aren’t paying attention, they should be. These tariffs will create short-term confusion and chaos in the electronics supply chain globally, shining a spotlight on the current lack of transparency in material sourcing and the pervasive disconnect between where components actually come from and what’s listed on the bill of materials.
“In the long run, these tariffs will force the industry to prioritize traceability to insulate itself from the many risks of sourcing unauthorized, counterfeit, or tampered with electronic components and other materials. Once the industry meets this urgent clarion call, the tide will raise all boats.”
Matt Lekstutis, Director, Efficio: “Companies reliant on factory production will face higher capital expenditure costs when purchasing or maintaining machinery. Manufacturers may need to increase product prices to offset rising machinery costs or delay factory upgrades, affecting production efficiency and competitiveness.
“We will likely see higher pricing in consumer goods as a direct result of the increase in raw materials. Increase in these costs could potentially lead to loss of jobs, closures of manufacturing sites, and increased offshoring, mainly to APAC. We’ll likely seeing an increase in the inflation rate.
“There is a potential for the countries that are affected by the tariffs could retaliate with counter tariffs, further straining relations with global allies.”
Darcy MacClaren, Chief Revenue Officer, SAP Digital Supply Chain: “As tariffs dominate discussions amongst global political leaders, businesses are facing increased uncertainty in their supply chains. Tariff hikes add another layer of complexity to an already volatile trade environment.
“Technology can play a key role in mitigating these impacts by providing real-time visibility. In the short term, leveraging predictive algorithms to reduce uncertainty will better position all industries for potential market instability.
“In the mid to long term, businesses may seek alternate suppliers and will find it increasingly beneficial to invest in supply chain solutions that connect logistics data and suppliers on a global scale, creating a more cohesive and agile network. As policy shifts continue, leveraging technology to track compliance and support sustainability claims will be crucial.”
Phil Gulley, Co-Founder and Chief Strategy Officer, Cofactr: “The newly imposed tariffs—and the uncertainty of what’s next—have forced U.S. manufacturers into a complicated position.
“In the short term, U.S. manufacturers that have spent years streamlining their operations and working with vetted suppliers to distribute back-office processes and sourcing challenges, are now forced to prioritize optionality and push for visibility into tiered supply chains to understand their exposure to foreign markets.
“When possible, they’re diversifying their suppliers, evaluating tariff mitigation strategies, and strengthening relationships with existing vendors to counteract price changes, and are being forced to quickly build up their supply chain resilience so they can derisk manufacturing interruption. Many manufacturers have also had an immediate reaction to stockpile resources, which has created a problematic cycle of supply and demand.
“In the long-term, many manufacturers are looking to onshoring, but making that transition across all manufacturing categories and material sourcing is neither quick nor realistic considering the deep reliance on the global supply chain. The reality is that moving and scaling manufacturing in new regions, even in the U.S., can take decades.
“For industries like medical technology, consumer electronics and automotive, certain suppliers can’t be replaced, leaving businesses with no choice but to absorb higher costs or pass them on to consumers. These complex challenges could lead to existential challenges and threats for some product lines.”
Kerrie Jordan, Group Vice President, Product Management at Epicor: “Distributors that are going to be able to weather the potential impact of planned tariffs will need to be flexible and adaptable in their approach to supply chain disruption. Part of this approach involves leveraging technologies that provide greater predictability and visibility within their organizations.
“Distributors further along on their cloud journeys and AI adoption will be able to adapt more quickly to potential disruptions. Over the past two to three years, more distributors have taken on some light manufacturing to provide better service to customers. Those that have, are ahead of the game, and this could help bring added resilience to their supply chain.
“If higher tariffs go into effect, imported goods will cost more. Companies must assess the impact of higher prices and create resilient strategies to absorb, offset, or reduce the impact of higher costs. Companies that manufacture locally may need to increase output if they experience higher demand in local markets. Since they already manufacture in-country, they may have a leg up competitively, but they must continue to invest to increase throughput, empower their employees, drive efficiencies and unlock insights for continuous improvement.”