Trump’s Second Term: What It Means for SME Exporters

Donald Trump’s return as U.S. President in 2025 could change international trade significantly. SME exporters already face many challenges, and it’s important to understand what these changes could mean and how to prepare. Although his exact policies are not clear yet, we can expect certain trends based on his past actions and the current global situation.

The Current Problems for SME Exporters

Before the U.S. elections, SME exporters were already struggling with several problems:

1. Supply Chain Issues: COVID-19 and the Russia-Ukraine war caused big delays and raised supply chain costs.
2. Higher Costs: Inflation has made raw materials, logistics, and energy more expensive, reducing profits for small exporters.
3. Global Tensions: Conflicts between the U.S., EU, and China, including tariffs, have made trade more uncertain.

What Trump’s Policies Could Mean for SME Exporters

1. Aggressive Tariffs and Protectionism: Tariffs of 10%-20% globally and up to 60% on Chinese goods could reshape trade flows. Countries with favorable trade agreements (e.g., USMCA partners) may gain an advantage, while non-partner countries could face steep barriers.
2. Shift from Global to Regional Trade: With global supply chains under scrutiny, there's a move towards regionalization or near-shoring, reducing dependency on far-flung suppliers like China, which might no longer be the "world's factory" as it once was. sMEs could benefit from exporting to neighboring countries within regional trade agreements, such as the European Union or ASEAN..
3. Impact on E-commerce and Drop-shipping: Changes in tariff structures and border policies might increase the cost and time for international shipments, affecting small-scale e-commerce exporters who rely on fast, cost-effective delivery.
4. Environmental Policy Relaxation: Trump's potential rollback on environmental regulations could reduce compliance costs for SMEs, giving them a competitive edge over larger entities with more resources for green certifications.
5. Energy and Logistics Costs: An increase in domestic oil production could lead to lower energy costs, indirectly benefiting SMEs through cheaper logistics, potentially offsetting some inflation-driven price increases.
6. Interest Rates and Trade Finance: Lower interest rates suggested by Trump's policies could make trade finance more accessible, reducing the cost of capital for SMEs looking to expand or sustain their export activities.

How SMEs Can Get Ready

To handle these changes, SME exporters should consider these steps:

1. Expand Markets and Suppliers: Don’t depend too much on one market. Look for new opportunities in regions with trade agreements. Work with local and regional suppliers to avoid supply chain problems.
2. Use Trade Agreements: Focus on countries with trade agreements to avoid high tariffs and simplify trade
3. Adapt Market Expansion Strategies: Small exporters should consider diversifying their market presence by exploring new regions or countries where trade agreements might offer lower tariffs or better market access. This could mean looking into markets within regional trade blocs that might be less affected by international tariff tensions.
4. Invest in Digital Transformation: o become more agile and less costly, SMEs should invest in digital transformation. This includes adopting technologies for e-commerce, digital marketing, and streamlining operations througth automation. Automation can lead to significant savings in labor and error reduction, while digital platforms can open new sales channels, making businesses less dependent on traditional, potentially disrupted supply chains.
5. Simplify Products: Focus on fewer products that are in high demand and bring better profits

For small exporters, the scenario under a Trump administration could be both better and worse, depending on several factors:

Worse:

• Increased Costs from Tariffs: The threat of higher tariffs, especially if broadly applied, could significantly increase the cost of importing raw materials or finished goods, squeezing profit margins for small exporters who might not have the scale to absorb these costs.
• Market Access Challenges: If trade wars intensify, particularly with major markets like China, Europe, or even neighbors like Canada and Mexico, small exporters could face barriers or increased costs in accessing these markets, especially if they lack the resources or connections to navigate complex trade negotiations or exemptions.
• Supply Chain Disruptions: A shift towards protectionism might disrupt established supply chains, requiring SMEs to find new, potentially less efficient or more costly suppliers in different regions.
• Uncertainty: Political and economic uncertainty could lead to hesitancy among buyers, which might slow down orders or lead to cancellations, impacting small exporters' cash flow and planning.

Better:

• Regional Opportunities: If global trade becomes more regionalized, small exporters in countries with strong regional trade agreements might find new opportunities in nearby markets, potentially less affected by global tariff wars.
• Lower Compliance Costs: Reduced environmental regulations could lower the compliance burden for SMEs, allowing them to compete more effectively with larger companies on cost if they choose to leverage this aspect.
• Cheaper Logistics: Increased oil production could lead to lower energy costs, which might reduce logistics expenses, helping offset some of the inflationary pressures.
• Better Financing Conditions: If interest rates are lowered, SMEs could benefit from cheaper financing for their operations, potentially making it easier to manage cash flow or expand operations.