As President Donald Trump starts to enact his tariff plans, the global supply chain is bracing for significant challenges. These tariffs, aimed at reshoring manufacturing jobs and reducing reliance on foreign suppliers, could drive up costs and force shifts in sourcing and production strategies.
Rising Costs and Inflation Risks
Tariffs have historically led to increased supply chain costs. According to Gartner, 40% of organizations reported up to a 10% rise in costs during the 2020 U.S.-China trade disputes, with 25% seeing even higher impacts. “Although a far cry from percentages previously touted, a 10% U.S. tariff on Chinese imports will nonetheless increase electronic component pricing and have a disruptive impact upon the entire electronics supply chain,” said Richard Barnett, Chief Marketing Officer at Supplyframe.
Electronic components, particularly printed circuit boards (PCBs), heavily rely on Chinese production. Barnett explained that China produces over a third of all printed circuit boards (PCBs) and holds a large share of the market for advanced PCBs used in AI and aerospace.
Accelerating Nearshoring Strategies
The proposed tariffs could amplify trends toward nearshoring. Gartner’s data reveals that 30% of companies have already adopted nearshoring strategies, with 96% reducing their reliance on Chinese sub-tier suppliers. Rodolfo Santamaria, a former industry executive and consultant, explained during a recent reporter briefing hosted by the WGU School of Business. “Companies are increasingly diversifying their supply chains by moving production closer to home. Nearshoring efforts focus on regions like Mexico, Canada, and Central America to reduce dependence on Asia.”
Matt Lekstutis, Director at Efficio, added, “Shifting suppliers or manufacturing sites can take months or even years. For many brands, the risk of disrupting their supply chains or harming customer relationships may outweigh potential cost savings.”
Supply Chain Disruptions and Global Trade
According to Gartner, companies reported an average of 32 significant disruptions last year, with 88% affecting critical areas of their operations. Tariffs may worsen these issues, particularly in industries reliant on raw materials like steel, aluminum, and rare earth minerals. Santamaria noted, “We’re likely to see significant disruptions in supply chains, particularly if tariffs target critical inputs like metals and foodstuffs. This could lead to higher consumer prices and reduced product availability.”
Lekstutis emphasized the ripple effect on global trade relations, saying, “Other countries may take a protectionist stance, escalating tensions and potentially leading to retaliatory measures against U.S. goods.”
“In the short term, costs of materials will rise, and companies will pass these costs on to customers. In the long term, we’ll see a push toward resilience, with reduced dependence on global supply chains and greater focus on nearshoring.”
Manufacturing Jobs: A Mixed Outcome
While the tariffs aim to bring manufacturing jobs back to the United States, Santamaria emphasized that automation may offset job growth: “Domestic production will increase, but the reliance on automation means fewer manual jobs. Companies are focusing on upskilling workers to meet technological demands.”
Lekstutis added, “Tariffs may encourage some job growth in the U.S., but companies are also likely to automate more processes to remain competitive. This shift could limit the overall employment impact.”
Automation and Long-Term Solutions
The tariffs could push companies to invest in automation. Santamaria highlighted the role of technology: “Companies are looking to robotics and advanced technologies to optimize inventory and streamline operations, especially in response to rising costs and labor shortages. Investments in AI and IoT are becoming essential.”
A Dual Impact on Global Trade
The proposed tariffs are likely to have both short- and long-term effects. “In the short term, costs of materials will rise, and companies will pass these costs on to customers,” said Santamaria. “In the long term, we’ll see a push toward resilience, with reduced dependence on global supply chains and greater focus on nearshoring.”
Lekstutis concluded, “While tariffs may spur immediate changes, companies need to consider the broader implications on their supply chain strategies, including long-term resilience and customer satisfaction.”
As the global trade landscape adapts to these proposed changes, companies will need to navigate rising costs, evolving supplier relationships, and the pressures of automation to remain competitive.