What Will Trump’s Tariffs Mean for Businesses?

Donald Trump’s victory in the 2024 presidential election has put tariffs back in the spotlight. Throughout his campaign, Trump vowed to aggressively impose tariffs on imports from countries such as China, emphasizing that again in his victory speech early Wednesday, saying “promises made, promises kept.”

That could have dramatic impacts on both consumers and businesses in the coming year, if he is uncompromising as he has threatened to be—and many companies are already scrambling to find workarounds to them. Here’s a look at how tariffs will be reflected in day-to-day life.

What countries is Trump targeting with the tariffs?

Trump has proposed a tariff on goods from China ranging from 60 percent to 100 percent—and a tariff of up to 20 percent on everything else the United States imports. In September, he raised the stakes even higher, though, when John Deere announced plans to move some production to Mexico. Trump vowed to tax anything the company attempted to bring back into the U.S. at a rate of 200 percent. He also threatened a 100 percent tariff on Mexican-made goods, which could endanger the trade deal he made with the country in his first term.

The China tariffs alone could be significant. According to the Office of the U.S. Trade Representative, imports from China totaled $536.3 billion in 2022, up 6.3 percent ($32 billion) from 2021, and up 26 percent from 2012. 

U.S. exports to China account for 7.5 percent of overall U.S. exports in 2022.

What could tariffs look like?

Import tariffs, like Trump has proposed, impose additional taxes on products that are brought into the country. They’ve been around since 1789, but tariffs typically account for just about 2 percent of government income. 

Tariffs can often lead to higher prices for consumers and businesses. And while Trump, at a September rally in Flint, Michigan, said “Tariffs are the greatest thing ever invented,” economists have warned they could put U.S. companies at as much of a disadvantage as foreign businesses.

“Tariffs may reduce the competitiveness of domestic firms through the impact on intermediate goods prices,” UBS wrote in an examination of Trump’s proposals. “A tax on imported intermediate goods (components like microchips) will increase production costs for domestic producers. That puts those manufacturers at a competitive disadvantage relative to foreign competitors. Countries targeted by the tariffs may also impose import tariffs of their own, which could further impact U.S. businesses that sell their goods overseas.”

A new report from the National Retail Federation, meanwhile, writes, “A growing body of economic research has attempted to assess the impacts of the proposed tariffs on the U.S. economy. In nearly every case, the conclusion has been the same: a net negative impact on the United States with results ranging up to $7,600 in additional costs annually per household.” 

What industries are most likely to be affected?

Manufacturing is likely to be heavily impacted by tariffs, and everything from automakers to consumer electronic companies rely heavily on global supply chains, which makes them more vulnerable. China is a big exporter of electronic components and aluminum, so companies that depend on those goods could see notable price hikes. 

Many retailers who sell items like apparel, toys, furniture, household appliances, footwear. and travel goods will also be impacted, according to the NRF, which estimates Trump’s proposals could have a $78 billion cumulative impact on consumer spending power. “Retailers rely heavily on imported products and manufacturing components so that they can offer their customers a variety of products at affordable prices,” said Jonathan Gold, the NRF’s vice president of supply chain and customs policy.

Agriculture is also at risk—not from the import tariffs, but due to the high likelihood that other countries will respond to Trump’s tariffs with penalties on U.S. imports. That could impact exported goods including soybeans, dairy, and pork, by reducing global demand. Farmers have been trying to export as much as they can in advance of Trump taking the oath of office, shipping record levels of soybeans, nearly 2.5 million metric tons in one week, to stash away cash before the tariffs are potentially enacted.

What were some of the tariffs Trump imposed in his first administration?

Trump largely focused on tariffs against China in his first time in the Oval Office. His “America First” economic policy led to tariffs on solar panels and washing machines in 2018, which ranged from 30 percent to 50 percent. Later that year, he imposed a 25 percent tariff on steel and a 10 percent tariff on aluminum from a wide number of regions including China, the European Union, Canada, and Mexico.

CNBC called the policy “one of the largest tax increases in decades.”

President Joe Biden has kept most of those tariffs in place–and even added new ones on certain goods, such as electric vehicles. But the new round Trump is suggesting has alarmed financial experts. 

Earlier this year, 16 Nobel Prize-winning economists signed a letter expressing fear that Trump’s 2024 proposals would “reignite’’ inflation, writing “We believe that a second Trump term would have a negative impact on the U.S.’s economic standing in the world and a destabilizing effect on the U.S.’s domestic economy.”

How could tariffs affect supply chains?

There’s a ripple effect from tariffs that can make it harder for companies to get the products they need. To avoid tariffs, goods from China could be rerouted to different countries before hitting U.S. shores. That might sidestep the extra tax, but it slows down the delivery of products, which raises the potential of shortages.

That’s why many industries are front-loading shipments to and from other countries before Trump takes the oath of office. Getting products imported and exported before tariffs increase could help businesses keep prices steady for a period before they’re impacted by any potential changes.

How are companies prepping for these tariffs?

A lot of that depends on the companies. Apple, for instance, has seen its main supplier—Taiwan based Foxconn—moving more of its production out of China into India for the past year. Other companies have moved operations to the U.S. to avoid paying any penalties. And other businesses are building delays into their pipeline, as critical components in the supply chain are rerouted to different countries before making it to the U.S. Logistics companies tell CNBC that retail and manufacturing clients are front-loading imports into the U.S. ahead of schedule to avoid the tariffs. 

“Assuming that he follows through with his proposal to apply a 10 percent (or 20 percent) tariff on all imports from all countries, and that many of those countries retaliate (as they did when he used tariffs in 2018), the effect will be to largely cut the U.S. off from the world trading system, substantially reducing both our imports and our exports,” said Alan Deardorff, the John W. Sweetland professor emeritus of international economics and professor emeritus of public policy at the University of Michigan.