Preparing for Trump’s Tariffs: Strategies to Protect Your Business in a Shifting Trade Landscape

Preparing for Trump’s Tariffs: Strategies to Protect Your Business in a Shifting Trade Landscape

With his plan to impose sweeping tariffs on imports—including a steep 60% levy on Chinese goods—President-elect Trump has set his sights on drastically reshaping US trade policy. As companies brace for potential price hikes, supply chain disruptions, and market shifts, business leaders around the globe are wondering what they can do to protect their bottom line. From diversifying suppliers to reevaluating market strategies, here’s a breakdown of proactive steps to keep your business resilient in a turbulent trade landscape.

Throughout his 2024 election campaign, President-elect Donald Trump made universal tariffs a core tenet of his economic platform. He promised to impose a blanket tariff of 10% – 20% on imports from all countries including allies such as the UK and Australia, and a 60% tariff for Chinese goods. Post-election, his transition team has doubled down on the president-elect’s campaign promises, with spokeswoman Karoline Leavitt telling CNBC that

“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail. He will deliver.”

This hyper-protectionist approach to trade sends chills up the spines of economists, Wall Street analysts and industry leaders.They warn that Trump’s tariff plans would push US import duty rates back up to 1930s-era levels, raise domestic prices, stoke inflation, collapse US-China trade, draw retaliation and drastically reorder supply chains.

Trump’s intentions are clear … but, how quickly can he move?

Trump is on the tariff war path, but business owners and executives across the globe are wondering whether the President-elect has the authority to implement the types of across-the-board tariffs he has proposed. The US Constitution clearly gives Congress – not the President – the power to impose tariffs. Nonetheless, Congress has delegated extensive authorities that allow the president to impose tariffs if certain statutory conditions are met.

While some analysts have tried to reassure investors and markets by asserting that Trump would lack the legal authority to implement his tariffs plans, the Center for Strategic and International Studies says that this reflects an overly optimistic view of the limits of presidential tariff authority. Moreover, we shouldn’t forget that Trump has already been down this road before, imposing a series of blistering tariff hikes on China in 2018, in a short space of time.

The reality is that Trump can rely on multiple legal authorities to justify increased tariffs, including many that he drew on during his first term in office. These include provisions which do not require approval by the US Congress such as:

  • Section 232 of the Trade Expansion Act of 1962
  • Section 301(b) of the Trade Act of 1974

While Section 232 requires an investigation by the Department of Commerce and Section 301 requires an investigation and determination by the Office of the US Trade Representative (USTR), Nazak Nikakhtar, a trade and national security lawyer at Wiley Rein who was an assistant secretary at the Commerce Department during the Trump administration, says that

“A new investigation is not a heavy lift and can rely on well-documented evidence of unjustified Chinese export practices. So you can complete one pretty quickly.”

In other words, officials could tick the boxes required to put higher tariffs in motion quickly. The result? Trump may be able to act within months to impose tariffs, using these provisions and others including:

  • The International Emergency Economic Powers Act (IEEPA),
  • Section 122 Balance-of-Payments Authority, and
  • Section 338 of the Tariff Act of 1930.

If tariff hikes become reality, what can we do?

While no-one knows exactly how far Trump will go in enacting his tariff plans, it never hurts to be prepared in case steep new tariffs become a reality. If you’re a business owner selling to the US there are a range of pre-emptive steps you can take to protect your company’s bottom line. Here’s a breakdown of strategies you may like to consider:

Bring supply close to the market and avoid tariffs

Depending on your industry, it may make sense to onshore your production to the US, to bring supply closer to the market and avoid tariffs altogether. There are a number of US states that make great investment destinations and stand out due to factors like infrastructure, labor availability, incentives, cost of doing business, and proximity to key markets.

Target Different Markets

For many businesses, selling to the US is the ultimate goal. Nonetheless, if tariffs significantly impact the US market, you might want to explore growing sales elsewhere. European Union countries, Southeast Asia and markets like Australia and the UAE all hold significant potential.

Diversify Your Supply Chain

If you’re manufacturing in China, one of the most direct ways to mitigate the impact of tariffs is to diversify your production. If you’re not ready to set up in the US, consider shifting some of your manufacturing to countries with favourable trade terms with the US, such as Vietnam, Mexico, or India. Your best bets will be countries where labour costs are competitive and production quality is on par with China, but without the tariff burden.

Strategic Stockpiling

If your budget will allow it, investigate increasing inventory levels for products made in China before tariffs are imposed. This could provide a buffer period to adjust your supply chain.

Reevaluate Your Product Pricing Strategy

If higher tariffs become a reality and you’re not able to manufacture in the US, you may need to consider passing on some of the cost to the consumer by raising your prices. Depending on the willingness of your customer base to tolerate price increases, think about whether it makes sense to use smaller incremental price hikes over time to soften the impact. Another tactic is to focus on products with higher value or unique features that may allow for higher margins or the ability to absorb a larger cost increase without losing customers.

Deploy Tariff Mitigation Strategies

Depending on your sector, tariff engineering – which involves redesigning your products or altering their composition so that they fall under different tariff classifications- may also provide some relief from the effect of tariffs If you manufacture in China, tariff engineering could potentially avoid some of the 60% tariff or reduce the overall cost impact. For example, you might be able to reduce the proportion of Chinese-made components and increase sourcing from countries with lower tariffs.

Using Foreign-Trade Zones (FTZs) – of which there are more than 290 in the United States – may also help you defer or reduce tariff costs. Goods entering an FTZ aren’t subject to customs duties until they enter the US domestic market, and in some cases, duties can be reduced or waived.

Also keep an eye on any opportunities to apply for tariff exemptions or product reclassifications under US trade law. Some companies can successfully petition the US Trade Representative for exclusions from specific tariffs.

Review Contracts and Terms with US Customers

If you have long-term agreements with customers, review them to ensure there are clauses that provide flexibility in the event of changes in government policy, such as tariffs. Some contracts can be renegotiated to reflect the new costs or to provide options for alternative supply chain arrangements.

Work Closely with a Trade Specialist or Customs Broker

Tariff regulations can be complex and subject to change, so staying in close communication with a trade lawyer or customs broker is crucial. They can help you stay on top of any new legislation, tariff adjustments, or opportunities for exemptions, and also help guide you through potential legal strategies to minimise your tariff exposure.

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