Businesses Prepare for Trump’s Tariff Plans
Some large companies have adopted a wait-and-see approach, others are accelerating imports.
Businesses large and small are preparing to make their final decisions as they position themselves for President-elect Donald Trump’s proposed tariff plans.
Higher prices have been common concerns coming from business executives.
Walmart CFO John David Rainey thinks prices will increase for its shoppers, though most of the goods the company sells are manufactured, assembled, or grown in the United States.
One strategy to mitigate potential side effects from tariffs has been accelerating imports before the new year.
Xeneta, a Norwegian ocean and freight rate data platform, said that businesses are bolstering imports to avoid higher tariffs comparable to what occurred in 2018.
Other well-known brands are either beginning to adapt or adopting a wait-and-see approach.
Ralph Lauren assured investors and analysts that it was not too concerned about tariffs because its global sourcing and supply chain was already diversified. Manufacturer Yeti recently noted that many things regarding tariff policies in Trump’s second term are still up in the air.
For smaller companies, Trump’s potential expansion of tariffs could help level the playing field.
Rocco Malanga, the owner of Cedar Grove Christmas Trees and founder of the Association of Real Christmas Tree Merchants, believes trade levies would redirect demand to domestic growers and support local businesses and farms.
“This shift would bolster the U.S. economy, strengthen local supply chains, and ultimately benefit American families through better pricing and higher-quality trees grown closer to home,” Malanga told The Epoch Times.
But while the fear among businesses and economic observers is that tariffs will result in higher prices, some say that this top worry was not realized during Trump’s first term.
Ravin Gandhi, the former CEO of GMM Nonstick Coatings, one of the world’s largest suppliers of nonstick coatings, says he would appear on CNBC in 2018 and warn that Trump’s tariffs would ignite a trade war and crash the economy.
“Obviously, I was wrong, because they didn’t, and then [President Joe] Biden kept a lot of the tariffs in place,” Gandhi said in an interview with The Epoch Times.
Instead, he observes a growing number of firms in his industry, which is heavily outsourced, considering returning to the United States.
Ultimately, Gandhi noted, he is optimistic about the next few years.
“I’m seeing a tremendous amount of animal spirits out there with the deregulation and all of the pro-business talk that’s happening,” he said. “I think that whatever downsides we may see from an inflationary perspective are going to be more than counterbalanced with just an animal spirit to desire to invest.”
Onshoring and reshoring have been ballooning trends since the coronavirus pandemic. Mary Lovely, a senior fellow at the Peterson Institute for International Economics (PIIE), believes the next development might be a U.S.-only supply chain.
Looking ahead, economists at RSM say retailers could begin to renegotiate contracts, invest in operational efficiency, pull forward purchases, and better prepare for supply chain disruptions.
What the Experts Say
Various economists and think tanks have warned that the president-elect’s plans will revive consumer price pressures on a broad range of products and weigh on economic growth and employment levels.
Oxford Economics, for example, forecasts that higher tariffs would weaken consumer spending “due to a greater inflationary shock and a reduction in real household incomes.”
Trump’s inner circle of billionaire businessmen and Wall Street financiers, from incoming Commerce Secretary Howard Lutnick to nominated Treasury Secretary Scott Bessent, have differed from the many assessments projecting high price inflation and slower growth.
Bessent, Lutnick, and other incoming administration officials have touted the trade tactic’s efficacy, describing it as a negotiating tool, revenue generator, and measure to protect American companies and jobs from unfair foreign competition.
Nazak Nikakhtar, an attorney specializing in international trade and national security, suggested that Trump could impose tariffs of 60 percent or more on Chinese goods starting on day one.
“We have so much flexibility and legal authority, and some of these statutes are so broad that they can absolutely be used to impose 60 percent tariffs on China and even higher,” Nikakhtar told The Epoch Times.
Nikakhtar previously served as Under Secretary and Assistant Secretary at the U.S. Department of Commerce during Trump’s first administration, where she played a key role in shaping the administration’s China trade strategy.
“The Chinese predatory economic practices have distorted the global markets for semiconductors, electronics, autos, critical minerals, the list goes on,” she said.
The trade distortions are so severe that new companies struggle to get into the market, while existing players are quickly losing market share, she said.
In an October interview with NTD TV, economist Peter Morici expressed a similar view, stating that “a 60 percent tariff on Chinese goods would not distort trade, but rather would recalibrate it to where might be if we had free markets.”
Morici, the former director of the Office of Economics at the U.S. International Trade Commission, added that China is engaging in a form of mercantilism, exploiting others for its own benefit.
“It sees the world in zero-sum terms.”
Both Nikakhtar and Morici argue that the impact of tariffs on inflation would be minimal, similar to the first term of Trump’s presidency.
Christopher Tang, an economist and distinguished professor at UCLA, says he has doubts about Trump’s proposed universal tariff “because it would really have a bigger impact on the U.S. economy.” However, he believes Trump will continue introducing more tariffs on Chinese imports to boost domestic payrolls.
Tang notes that U.S. companies have already begun diversifying their supply chains away from China to avoid tariffs and shifting their base to Southeast Asia to try to reduce tariffs.
Additionally, the advantages of outsourcing to China have diminished, says Gandhi.
He managed two plants in China and shut them down because they were too expensive, effectively outsourcing from China to India in 2014.
“A lot of people had no idea how much inflation had occurred in China and how we had employees in my Chinese operations who were making six-figure U.S. dollar salaries,” Gandhi said.
“So, China is not the low-cost provider anymore.”