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The impact of Trump’s next presidency on supply chain professionals appears to be mixed, with potential upsides for domestic transportation and third-party logistics providers but significant risks and challenges in the international supply chain and trade environment. The degree to which the pros outweigh the cons will depend on how the Trump administration’s policies unfold and how businesses can adapt.

Pros:

1. Support for American Manufacturing and Job Growth

Trump’s policies prioritize domestic manufacturing, focusing on stabilizing and expanding the American industrial base. His administration’s proposed tariffs on foreign goods (up to 60% tariff on Chinese imports, a 10-20% universal tariff on all imported goods regardless of origin, and up to 25% tariff on all imports from Mexico) could incentivize companies to shift manufacturing back to the U.S. or source more from domestic suppliers, (reshoring), reducing reliance on foreign suppliers. This could foster job creation and investment in U.S.-based factories, potentially benefiting sectors such as textiles, trucking, and chemicals.

2. Corporate Tax Stability & Benefits

The continuation of the 21% corporate tax rate, introduced during Trump’s previous term, could benefit retailers by keeping operating costs lower than they were pre-2017. Retailers may use the saved funds to reinvest in continued supply chain improvements, digital transformation, and workforce enhancements, potentially making them more resilient. If Trump’s promises come to fruition, companies manufacturing all their products in the USA could save an additional 5% on their income taxes.

3. Foreign Security Policy

Potential resolution of conflicts in Ukraine and the Middle East could lower global energy costs. Increased defense spending in Europe could support logistics related to defense manufacturers.

4. Incentives for Energy and Manufacturing Industries

Pro-growth tax reform and potential energy-focused policies are anticipated to benefit industries reliant on domestic transportation and energy production, such as trucking and specialty manufacturing, aligning with supply chain needs. For example, increased domestic oil production could lower oil prices to $40-$50 per barrel, nearly half of what it is today, reducing transportation and heating costs.

Cons:

1. Rising Costs for Retailers and Consumers

The potential for increased tariffs on imports, ranging from 10-20% on all imports or up to 60% on goods from China, would significantly increase costs for retailers and consumers. Retailers will likely pass these costs on to consumers, increasing prices and potentially reducing consumer spending. Analysts estimate these tariffs could cost middle-income households an extra $1,700 annually. It could also create a potential strain on transatlantic trade if Europe retaliates with its trade measures.

2. Rising Inflation

The introduction of sweeping tariffs could exacerbate inflation and potentially reduce consumer spending power in an already soft market. Leaders in retail warn about increased costs across essential goods, putting pressure on consumer budgets. This may negatively impact sectors that rely on affordable imported materials, such as apparel and consumer goods.

3. Short-Term Increased Freight Rates and Port Congestion

Anticipation of new tariffs could lead to a short-term surge in U.S. import demand as companies rush to bring in goods before tariffs are implemented, causing a spike in freight rates and port congestion, not to mention port labor issues. During the 2018 tariff hikes, freight rates increased by 70% due to a similar rush (and COVID was worse). A repeat scenario could strain shipping resources and raise logistics and transportation costs, causing importers to fight for spaces on ocean vessels. The rise in COGS means reduced cash flow flexibility. Smaller importers may need to reassess their funding models and pricing strategies to adapt to a higher-cost environment, likely squeezing their profit margins and leading to inventory imbalances and disruptions.

4. Trade Tensions, Retaliatory Tariffs, and Short-Term Instability and Uncertainty

Aggressive trade policies, particularly with China and Mexico, could strain diplomatic and economic relationships, leading to retaliatory tariffs. Such trade tensions could complicate import-export operations and escalate costs for U.S. businesses reliant on global suppliers.

Reigniting a trade war with China, which would further disrupt supply chains and drive up inflation, is a genuine concern. Broad tariffs and stringent trade policies could strain relations with key trading partners, leading to retaliatory tariffs and disrupted trade flows. This could make it challenging for companies to maintain stable international sourcing channels.

Aggressive U.S. trade actions and shifting tax and trade policies may introduce economic uncertainty, market volatility, and business planning challenges, complicating long-term supply chain planning and potentially slowing down investments. Retailers and supply chain executives are concerned that unpredictable changes could disrupt strategic decision-making and provoke retaliatory measures from trading partners, leading to further market volatility and reduced export demand.

5. Climate Change

Lack of support for global carbon emissions reduction agreements could hinder progress on climate change. Eliminating green energy subsidies could make the transition from gas/diesel engine vehicles less achievable. Delays in progress on climate change policies and commitments could negatively impact the transition to sustainable transportation modes like intermodal rail as well as other clean energy and sustainability initiatives.

Summary:

Pro-growth tax reform and potential energy-focused policies are anticipated to benefit industries reliant on domestic transportation and energy production, such as trucking and specialty manufacturing, aligning with supply chain needs. For example, increased domestic oil production could lower oil prices to $40-$50 per barrel, nearly half of what it is today, reducing transportation and heating costs.

The key theme is that the potential expansion of tariffs and trade barriers under a renewed Trump presidency is a significant threat to the retail and supply chain sectors. While some elements like the corporate tax rate and possible reshoring of domestic manufacturing may be favorable, the overriding concern is the negative impact of protectionist trade policies on costs, inflation, and the ability of businesses to source and distribute goods efficiently.

Retail and supply chain professionals should prepare for increased operational complexities and potential market volatility. For businesses reliant on foreign goods, adjusting to the changing landscape will require robust planning, diversified supply chains, and strategic inventory management.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

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