Trump's tariff plan to test supply chain resiliency
Sarah Cottle
Growth-Focused Executive | GM | Driving Profitability & Operational Excellence in B2B Data, Research, Advisory | M&A Integration | Governance | Digital Transformation | Trusted C-Suite Advisor | Board Member
US President-elect Donald Trump will likely have the authority in January to deliver on his promise to impose sweeping tariffs on all imports from Canada, Mexico and China, with legal and political challenges unlikely to swiftly rein in such action, according to policy and legal experts. The potential impact on domestic industries, energy markets and international relations is significant, requiring the incoming administration to navigate a complex interplay of trade policy considerations.
Trump has threatened to impose a 25% tariff on all products imported from Mexico and Canada and a 10% tariff on all imports from China, in addition to the current tariffs already in place. The three countries accounted for 41.0% of the value of US imports of metals and minerals in 2023, according to an S&P Global Commodity Insights analysis of data from the US International Trade Commission. Key imported products included gold, silver, steel, unwrought aluminum and base metals. Raising the cost of these materials will hurt US manufacturers and could upset US supply chains, making them more dependent on less friendly countries, experts say.
Experts and industry participants warn that the proposed tariffs could result in price increases for US manufacturers in emerging energy transition sectors, such as battery production, and in the defense industry. Hiking prices for raw materials like graphite could also reduce the US' competitiveness in vehicle manufacturing during the ongoing energy transition, as all battery-grade graphite is currently sourced from China, according to Gavin Montgomery, a principal mining analyst at Commodity Insights.
On the other hand, domestic US metal producers are poised to benefit from trade barriers that limit foreign competition. Ali Oktay, a senior analyst covering US ferrous markets at Commodity Insights, expects Trump's planned tariffs to support US steel prices and make domestic producers less likely to idle any domestic capacity. US metals and mining industry groups have expressed support for Trump's proposed policies aimed at protecting US industry, although they prefer targeted tariffs as a more effective strategy.
Trump's trade policies could have significant implications for the energy sector. Tariffs would drive costs higher for US oil refiners, who depend on heavy and medium crudes from Canada and Mexico and would likely pass those costs on to consumers. There are also concerns over the potential impact on utilities, power suppliers and electricity prices, especially considering the interconnected nature of the North American grid and the power sector's heavy reliance on imported equipment.
The tech industry is also bracing for downstream economic consequences for suppliers and consumers as tariffs could lead to higher prices of smartphones, laptops, tablets and video game consoles.
Improvements in supply chain resiliency in recent years and a narrowing trade deficit with China may help mitigate the inflationary risks associated with Trump's proposed universal US import tariffs. Companies are also shifting investments away from China to other regions where international manufacturing still offers cost advantages, thereby diversifying their sourcing options.
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