Trump Renews Tariff Threats: How Should Businesses Prepare?

Within days of winning the 2024 presidential election, Donald Trump began intensifying his plans to impose tariffs in the name of protecting American jobs and manufacturing. The president-electpledgedto impose 25% tariffs on Mexico and Canada on his first day in office, and an additional 10% tariff on goods made in China.

This plan mirrors the aggressive tariff policies of his first term. At that time, during a two-year trade war, Trump imposedmassive tariffson China and levied tariffs on trading partners across Asia, North America, and Europe, including tariffs on steel and aluminum from Mexico and Canada.

Facing a new wave of tariff shocks that Trump has said could begin as early as this month, manufacturers and retailers are preparing their supply chains for a new trade landscape. Here are the adaptation strategies experts say companies are adopting.

Stocking up early is only a short-term solution

Although new tariffs are highly likely, most companies are still avoiding drastic adjustments to their supply chains until more concrete actions are taken at the federal level, said Madhav Durbha, Vice President of the CPG and Manufacturing Group at supply chain technology company Relex Solutions. This certainty is not yet available before Trump officially takes office.

According to Jonathan Todd, Vice Chair of the Transportation and Logistics Practice Group at the law firm Benesch Friedlander Coplan & Aronoff, one of the most common strategies companies are currently using is to import and stockpile inventory ahead of Trump's inauguration. However, this does not solve the long-term impact of tariffs and is far from a one-size-fits-all solution, especially for goods with shorter shelf lives such as food.

Alternative sourcing and supplier relationships

Tariffs imposed by the past two presidential administrations have accelerated companies' trend ofdiversifying sourcingand even completely withdrawing from China. Todd pointed out that the most attractive relocation areas are Southeast Asia, Mexico, and to some extent Canada. Durbha said that Vietnam, India, Turkey, and some European countries such as Poland are also increasingly common sourcing destinations.

However, moving production and sourcing to new countries is no easy task. Todd said it takes at least five years to completely change a company's sourcing structure. In addition to the long lead times, moving to new countries also loses the economies of scale of single-country sourcing and comes with high cost requirements, Durbha added.

"If you set up operations in a new country, you have to consider local regulatory compliance requirements, which are completely different from those in the US or China," he added.

For companies with strong supplier relationships, withdrawing from tariff-affected countries may not be the right choice. Todd suggested that such companies should proactively negotiate with suppliers to adjust expectations on both sides. "Perhaps the increased landed costs from these tariffs should be shared equally between the seller and the buyer, or shared in some balanced way, meaning that foreign producers may partially or fully absorb these costs for a period of time," Todd said.

Improving supply chain visibility

Shippers should thoroughly map their supply chains to understand the sources of all supplies and inputs. A thorough review of input sources is particularly useful, said Evan Chuck, a partner at the law firm Crowell & Moring. "It's like picking up a bill of materials and really digging deep—if it's a mineral, we need to find out which mine it comes from; if it's plastic, which barrel of oil did it come from?" Chuck said.

Companies can also review their product classifications to ensure reasonable expectations about tariff impacts, said Brett Johnson, a partner at the law firm Snell & Wilmer.

"Companies can't have a knee-jerk reaction to every statement, tweet, or Truth Social post."

——Madhav Durbha, Vice President of CPG and Manufacturing at Relex

Producing in foreign trade zones (also known as free trade zones) is another potential tariff haven. Experts say that goods produced in these zones for consumption outside the USare not subject to US Customs and Border Protection jurisdiction。

Domestic sourcing and political maneuvering

Of course, the safest and simplest way to resist tariffs is to rely on domestic production. Trump argues that higher tariffs will attract companies to move manufacturing back to the US, but experts are not entirely convinced by this strategy.

"The challenge with domestic sourcing is that capacity is not what it used to be. Even if you can find domestic suppliers, many inputs still come from abroad, so those inputs will also bear the burden of higher tariffs," Todd said.

If tariffs take effect, exemptions could provide relief for some companies. Any exemptions will depend on the specific provisions of the new tariffs. InPresident Joe Biden's 2024 tariff increases, the Office of the US Trade Representative authorizedexemptions for specific inputs used in domestic manufacturing equipment, setting March 31, 2025 as the deadline for submitting exemption requests.

Chuck said that for any company hoping to obtain an exemption, maintaining close ties with Capitol Hill is crucial.

Despite the many strategies, shippers should ensure their tactics support more rigorous scenario planning to prepare for the various tariffs that may come.

"Companies can't have a knee-jerk reaction to every statement, tweet, or Truth Social post," Durbha said. "I think what they are doing is being more deliberate and saying, 'Okay, the core of the story is that I need to build optionality into my supply chain.'"

Alejandra Carranza contributed to this article.

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