
This week saw the U.S. change of power, as Donald Trump was sworn in as the 47th president. In his speech at the inaugural event, the president explained in great detail the plans for the country in the next 4 years and referred to this time as the 'Golden Age' of America.
Though the proclamation may mean different things for different people and businesses across the country, with various governing bodies at the helm of implementing changes delegated by this new administration, the supply chain has kept a steady eye on regulation in spaces like transportation and geopolitical policy like those surrounding impending tariffs.
I've been covering commentary around tariffs for weeks since the election, with many varying opinions on the way those key talking points for Donald Trump's campaign would end up taking shape. Matt Lekstutis, director at Efficio, says with the proposal of sector-specific "universal" tariffs, we can expect an increase in pricing for imported goods which will push companies to look for alternative suppliers and manufacturing sites.
"The sourcing process can vary in complexity based on how resilient a brand the brand is to change. It can be anywhere from a few months to a few years to find alternative manufacturers and get them implemented. Due to the complexity of that, brands may choose to remain with their current manufacturers in order to maintain their reputation with their customers and not disrupt the supply chain," says Lekstutis.
At the start of the year, I covered the news of Canada's Prime Minister resignation. This transitions, and others with U.S. trade relations, could impact the outcome of tariff proposals. Lekstutis explains that, while we don’t have clear insight now into how the transition in Canada will impact them directly, based on the recent 25% tariffs on imported goods from Canada there is a strong possibility that they take a protectionist stance that would increase tensions against the U.S.
There is a lot of talk about how these factors weigh in the future of manufacturing in the U.S. "In simple terms, I do believe the tariffs will bring back manufacturing jobs to the states," says Lekstutis. However, there are a few complexities to consider:
- The increase in taxes will push companies to reevaluate their need to automate their processes and manufacturing roles.
- Changing the supply chain network requires time and investments into resources. If this change is being driven by the 4-year term by President Trump, the companies may not be willing to make that investment.
When we look closer at how tariffs might affect imports like steel, aluminum and other commodities, Lekstutis says based on the industry, there could be a large detrimental impact on a company's operations; if there is an increase in raw materials or a delay in those shipments, as being the first step in materials/supply chain process, there is the possibility of a ripple down effect into the rest of the supply chain operations.
"There will definitely be a short and long-term impact to global trade. In the short term, costs of materials will rise because companies will pass on costs to the customers as well," explains Lekstutis. "In the long term, there will be a reduced dependence on China's manufacturing capabilities, an increase in automation, and new economic policies that will stay in place even following the trump term."
The rollercoaster of fluctuating influence over the U.S. is nothing new and supply chain businesses should be well equipped at this stage to face those. According to Lekstutis, implementing long term contracts, diversifying suppliers and increasing automation in manufacturing sites, packaging centers and distribution centers, are all key elements to maintaining success in the future— especially as the next chapter of American history begins.