The Big Gamble on Tariff Policy

Uncertainty rages about which —  if any —  of President Donald Trump’s threatened tariffs on imports into the U.S. will actually come into effect, and when. Companies that do business in the U.S. are holding off on capex projects, exploring new places for manufacturing and sourcing, and running extensive what-if scenarios, all in order to try to stay ahead of the competition. 

In order to pull away from endless (and expensive) speculation, SupplyChainBrain talked to a range of industry experts to figure out what happened last time Trump introduced punitive tariffs, and how differently things might play out in in his second administration.

“After tariffs went through [in 2018], there was a big shift in production volume outside of China; to Vietnam, Indonesia, Thailand and South and Central America. And that’s been gradually increasing every year,” says Joseph Firrincieli, sales manager at OEC Group New York, a global freight forwarder that specializes in trans-Pacific trade. “Now it’s going to happen even more. At the time, it was just China. Now it’s more widespread, including Mexico and Canada.”

So far, however, those shifts in global trade have not brought manufacturing back into the United States, which has long been Trump’s stated intention. 

“Without having a full picture, it’s hard to say whether tariffs themselves will bring back jobs,” says Steve Austin, CEO of Manufacturing Corporation of America (MCA), which buys and agglomerates legacy manufacturers in the U.S. Austin points to important elements such as funding for research & development, as well as tax breaks that offset investments in manufacturing and other infrastructure, such as under the Tax Cuts and Jobs Act (TCJA), which is already being sunsetted, and will expire at the end of 2025. “It’s the overall economic plan that dictates whether there will be more manufacturing jobs in the U.S.,” he says.

While tariffs have long been a normal instrument of trade, the widespread effects — particularly when those tariffs are sudden and aggressive — have been proven hard to predict and control. 

“Last time [Trump] put tariffs on aluminum and steel to boost U.S. steel and maybe sales worldwide. But what happened was that U.S. companies saw an opportunity to put prices up and close the gap between their own steel and imported steel. And then foreign buyers put their own tariffs on U.S. steel. So half of what you wanted to come true came true, and the other half didn’t go how you wanted it,” explains Simon Geale, Executive Vice President at Proxima, a procurement and supply consulting firm that is part of Bain & Co. “And downstream industries, those using steel, were reported to suffer from increased costs lead…