As we look ahead to President-elect Donald Trump’s second term, tariffs will continue to play a central role in shaping global trade policies. For those of us in procurement, this brings both challenges and potential opportunities to rethink our strategies and adapt to the changing landscape.
During his first term, Trump’s tariffs touched various industries, and now, with his proposed tariff agenda for the second term, we are likely to see a more expansive approach—targeting everything from universal tariffs to retaliatory measures against China. While these policies can create challenges, they also present an opportunity for procurement teams to innovate and rethink how we manage supply chains and sourcing. In this blog, we will explore how procurement professionals can effectively navigate these changes, identify the sectors most likely to be impacted, and leverage the evolving trade environment to drive strategic advantage.
Trump’s second-term tariff proposals promise to impact multiple sectors, with the potential for both wider-reaching changes and sector-specific disruptions. Here’s a quick rundown of the key proposals:
- Universal Tariffs: A potential 10% tax on imports from all countries.
- Retaliatory Tariffs on China: Increased tariffs, especially on Chinese imports, particularly those related to electric vehicles (EVs), semiconductors, and high-tech goods.
- Reciprocal Tariffs: Imposing tariffs based on the difference in tariff rates between the U.S. and its trading partners.
- Sector-Specific Tariffs: Targeting industries such as automotive manufacturing, with attention to car exports from Mexico.
For procurement teams, these proposed changes will undoubtedly impact global supply chains. But rather than seeing these changes as obstacles, we can approach them with a mindset of resilience and opportunity.
Sectors Likely to Be Affected—and the Opportunities Ahead
1. Automotive Industry
The automotive sector is perhaps the most vulnerable to these changes. With increased tariffs on imported vehicles, we could see higher prices, reduced demand, and supply chain disruptions. This means procurement professionals will need to think critically about how we can source more effectively. It might be time to explore new partnerships or re-focus on domestic suppliers to minimize dependency on markets that are heavily impacted by tariffs.
Opportunity: While challenging, this could be a chance to innovate and diversify suppliers or explore alternative markets as well as domestic suppliers to secure more stable and cost-effective options.
2. Electric Vehicles (EVs)
The push for EVs has gained significant momentum in recent years, and with tariffs on European-made EVs possibly rising, the growth of this market could face new hurdles. For procurement teams, this means a reevaluation of supply chains could be in order. By collaborating with US-based manufacturers or looking into newer technologies that reduce reliance on foreign parts, there’s a real opportunity to support domestic production and secure a competitive edge.
Opportunity: We could drive innovation by exploring new technologies in the EV space or focusing on increasing local production, which would bypass tariff barriers and help reduce costs in the long run.
3. Pharmaceuticals
While the pharmaceutical industry might not face the same immediate disruptions as others, tariff increases could still affect supply chains. Procurement professionals may want to consider strengthening relationships with domestic suppliers or exploring ways to diversify sourcing strategies to avoid supply shortages or price hikes.
Opportunity: Moving some production or distribution within the U.S. could provide a hedge against potential tariff impacts while reinforcing the resilience of the supply chain.
4. Steel, Aluminum, and Chemicals
The steel and aluminum industries could see renewed disruptions with tariffs, especially as supply chains adjust to the changing landscape. For procurement professionals in industries relying on these materials, this is a moment to explore new sources and perhaps even more sustainable options.
Opportunity: There’s a chance to innovate within these sectors by sourcing alternative materials or considering local production. Exploring green alternatives could also offer long-term cost savings while supporting sustainability goals.
5. Electronics and Semiconductors
Increased tariffs on imports from China and Taiwan may raise the cost of semiconductors and other electronic components, which could disrupt industries dependent on these critical materials. For procurement teams, this presents a challenge in securing stable sources of supply. However, there’s also the opportunity to forge new supplier relationships outside of the traditional markets, thereby diversifying risk.
Opportunity: Strengthening relationships with Non-Chinese semiconductor producers or investing in local manufacturing could help reduce exposure to rising tariffs.
Legal and Trade Frameworks: An Avenue for Adaptation
While these tariff proposals will certainly be challenged in the courts, it is essential to understand the legal frameworks at play. Key trade laws that may guide tariff imposition include:
- Section 232 of the Trade Expansion Act: Allows tariffs for national security reasons.
- Section 301 of the Trade Act of 1974: Grants the president the power to impose tariffs for violations of trade agreements.
- International Emergency Economic Powers Act (IEEPA): Gives broad authority to regulate imports during national emergencies.
As procurement professionals, we must monitor the ongoing legal developments to stay ahead of changes that could impact our strategies. If legal challenges delay or alter the implementation of tariffs, we may have the flexibility to adjust our procurement tactics in the short term.
Overcoming Challenges and Seizing New Opportunities
Despite the complexities of these new tariff policies, there are several proactive strategies that procurement teams can adopt to turn challenges into opportunities:
- Diversify Your Supply Chain
One of the most effective ways to mitigate the risks of rising tariffs is by diversifying supply chains. By sourcing materials and products from multiple regions, we can avoid relying too heavily on markets that may be impacted by tariff hikes. This provides flexibility, enabling businesses to pivot and reduce risks. - Engage in Strategic Negotiations
Engaging directly with international suppliers and trade partners can help businesses stay nimble. Through discussions and negotiations, we may uncover opportunities to enter new trade agreements or explore alternatives that minimize the impact of tariffs. - Shift to Local Production and Suppliers
As tariffs increase, it may be time to look at local production or explore domestic suppliers who offer competitive pricing. Not only will this reduce exposure to tariffs, but it can also shorten lead times and improve supply chain reliability. - Embrace Technology and Innovation
Implementing new technologies can help streamline procurement processes, reduce costs, and increase efficiency. From data analytics and automation to advanced manufacturing techniques, investing in innovation is key to staying competitive and mitigating the impact of tariffs by getting greater visibility and control over the supply chain. - Stay Informed and Monitor Developments
Keeping a close eye on trade policy developments will give procurement professionals an edge in adapting quickly to changes. Being proactive, rather than reactive, allows us to identify opportunities early on and make strategic decisions that benefit the business in the long run.
Looking Ahead: Turning Challenges into Growth
While Trump’s tariff proposals will certainly bring challenges, they also provide an opportunity for us in procurement to evolve, innovate, and strengthen our supply chains. By diversifying our sourcing strategies, embracing new technologies, and fostering strong partnerships, we can position ourselves to thrive despite these changes.
The global trade environment is shifting, but by staying ahead of the curve and adjusting to new dynamics, we can not only safeguard our businesses from the impact of tariffs but also find new opportunities for growth. As procurement professionals, it’s up to us to turn challenges into opportunities, creating resilient and future-ready supply chains.
In this evolving trade environment, procurement professionals need tools that enable agility and foresight and give the ability to calculate the impact of tariffs and other commercial factors. MeRLIN Sourcing equips teams with the ability to manage supplier relationships, streamline sourcing, and navigate risks, ensuring businesses can not only withstand tariff-related disruptions but thrive in a competitive global landscape.
Let’s embrace this evolving landscape with confidence, knowing that with the right strategies, we can navigate these changes and emerge stronger on the other side.
