With Donald Trump set to become the next U.S. president, stakeholders for global supply chains are scrambling to figure out what the next four years will mean for freight rates, foreign trade, and the cost of goods.
Over the course of his campaign, Trump vowed to implement tariffs on Chinese imports of between 60% and 100%, in addition to 10-20% tariffs on all other imports. If that comes to pass, overseas manufacturers and U.S. retailers importing a variety of basic goods
would be faced with significantly higher costs, which would get passed on to consumers.
“The impacts would be huge,” says Sebastien Breteau, founder and CEO of consumer product quality control company QIMA. “The U.S. simply can’t replace these imports domestically, and with unemployment at 4% and fewer immigrants, Americans aren’t rushing to factory jobs for products like apparel.”
Breteau notes that retailers will likely try to stock up on inventories in the U.S. before Trump arrives in office, but eventually, companies will either have to pay the price to import their products once their pre-tariff stockpiles run dry, or absorb the added costs themselves and risk a hit to their profit margins. And although some could look to shift production out of China and into countries like Vietnam or Bangladesh, even that “isn’t a perfect fix.”
“Vietnam’s manufacturing is just 10% of China’s capacity, so even a small shift would overwhelm them,” Breteau says.
Freight rates
Broad tariffs would also have a trickle-down impact on the shipping industry, because Trump’s policies are likely to discourage imports, thereby slowing freight volumes at ports, and driving down rates. But in the near-term, rates are likely to spike. According to freight analytics platform Xeneta, ocean container freight rates rose by more than 70% the last time Trump ramped up tariffs on Chinese imports in 2018, thanks in large part to retailers buying safety stock ahead of the change. Another sudden increase in demand before Trump is sworn in could lead to a similar situation headed into 2025, Xeneta chief analyst Peter Sand says.
“Back in 2018, the tariff on Chinese imports was 25% — now it is increasing up to 100%, so the incentive to front-load is even greater,” he adds, warning that added strains on supply chains while disruptions persist in the Red Sea could apply even more pressure on freight rates this time around.
Industry impacts
Tariffs on foreign trade — particularly from China — could create problems for any number of U.S. industries that rely on overseas manufacturing. Ram Ben Tzion, co-founder and CEO of digital vetting platform Publican, says that will be especially true for Apple, as a company that will have to “seriously reconsider” its supply chain. Although Apple has exported more than $6 billion worth of iPhones out of India so far in 2024, the vast majority of its manufacturing for phones, tablets, headphones, and computers is still based in China.
The e-commerce industry wouldn’t be spared either, with Ben Tzion theorizing that Chinese retailer Temu could simply vanish from the U.S. in the near future. “Temu can disappear just as quickly as it appeared,” he says. “Strict enforcement and applied tariffs on Temu products are just going to kill it out of the market.”
That could be a boon to Amazon, Ben Tzion adds, which he says has the advantage of a value proposition, supply mechanism, and presence in the U.S. that isn’t nearly as reliant on China. And should Temu find itself forced out of the U.S. by hefty tariffs and stricter de minimis enforcement, Amazon could recover much of the market share it lost to the Chinese e-commerce competitor over the last year-plus.
This is all assuming that Trump follows through on his campaign promises. Although Ben Tzion is confident that Trump will move forward with tariffs on China, he remains skeptical that the proposed 10% levy on all foreign imports will actually come to pass, citing the difference between campaign promises and reality. Breteau echoes that sentiment, pointing out that many manufacturers outside of China aren’t pushing the panic button quite yet.
“Trump has been known to change his mind, so they’re taking a wait-and-see approach,” he says.
“Another Trump presidency will not be welcomed by U.S. importers and exporters, but they needed a swift and clear result in the election,” concluded Sand. “Uncertainty is toxic for supply chains, so at least the industry now has a clearer understanding of the financial and operational risk, and can execute the plans they will have prepared in the event of another Trump presidency.”