Globally, companies aren’t waiting until Jan. 20, the date of the presidential inauguration, to anticipate which countries, products or tariff rates will be affected by Trump’s announced trade wars. The threat of these blanket tariffs alone has already sparked a race to avoid the impacts, leaving the global trading system exposed to bottlenecks, higher costs and risks of disruption if an economic shock occurs. “We’re in a period of panic,” warns Robert Krieger, president of Krieger Worldwide, a logistics and customs consultancy based in Los Angeles. “There’s a huge pressure on the supply chain coming,” he adds.
At JLab, a California-based company, CEO Win Cramer had already moved his supply chain out of China to dodge tariffs imposed during Trump’s first term. In addition to implementing a hiring freeze through June due to election uncertainty, his next move would be to raise prices on headphones and wireless products if a universal tariff is applied this time.
To get ahead of the competition, some companies are placing advance orders, while others are looking for new suppliers or, if this is not feasible, renegotiating terms with current ones. All these approaches have one thing in common: increased tension means higher costs, such as larger inventories, urgent shipments with high prices or the uncertainty of switching to suppliers with unproven reliability. In the end, it will be consumers who bear these additional costs.
The problem is that, despite the preventive actions taken, there is no guarantee that the strategies that helped some companies cope with Trump’s first trade war will be effective this time. This time, the focus is on both allies and adversaries. A clear example of this was his threat in late November to impose additional tariffs of 10% on products from China and 25% on all products from Mexico and Canada, his main trading partners.
Zipfox, an online platform that connects American companies with factories, mostly in Mexico, has reported a 30% increase in requests since the election, according to its founder and chief executive, Raine Mahdi. The surge intensified after Trump threatened to impose 100% tariffs on emerging countries in the BRICS bloc. Most of these requests come from importers who traditionally sourced products made in China. Mahdi stresses the importance of acting quickly: “Delaying can mean facing a hasty transition and less favorable conditions.”
In China, ports have seen double-digit growth in container traffic in the two weeks leading up to the election, a pace that accelerated to a near 30% increase in the second week of December. International air cargo flights have also seen a weekly increase of at least a third since mid-October, and economists expect this trend to continue as customers rush to place their orders early.
Madness in the ports
At the other end of the Pacific, the twin ports of Los Angeles and Long Beach, which form the main gateway for containers in the United States, are experiencing a notable increase in the arrival of goods, similar to the increase registered during Trump’s first tariff measures against China seven years ago. These ports have surpassed the record levels reached during the pandemic in the third quarter and high volumes of activity are expected to continue until next year.
Early shipments, which began before the US elections, are now arriving at the docks. At the port of Los Angeles, container traffic in November showed a 19% increase compared to the same month of the previous year. Meanwhile, Long Beach is on track to close 2024 as its busiest year on record.
Mario Cordero, executive director of the port of Long Beach, indicated in December that “the increase in imports at the national level could extend until the spring of 2025.” He also recalled that in 2018, tariffs imposed during the first Trump administration caused a 20% reduction in imports from China and a 45% drop in exports to that country due to retaliatory measures.
Tariffs are not the only factor driving the advance of orders. Added to this is the usual preparation for the Lunar New Year holidays in China, which begin at the end of January, and the attempt to anticipate possible port strikes in the United States. In this context, Robert Sockin, global economist at Citigroup, warns of the stress that international trade will face in the event of any minimal interruption of the system. “An increase in advance orders could generate bottlenecks at American ports, intensifying tensions in the supply chain,” he said. The probability of a new port workers’ strike close to Trump’s inauguration only fuels these concerns.
The year 2025 has just begun and could already have its key end. Since the November election, the Federal Reserve has detected growing concerns about future trade tariffs. In its latest Beige Book, a business survey by the central bank, the term “tariff” appeared 11 times, the most since 2020. And a Bloomberg analysis of quarterly earnings filings by S&P 500 companies shows that mentions of “tariffs” in November hit their highest level since late 2019.
Avalanche of queries
Industrial companies, especially machinery companies and their suppliers, are the most concerned about trade barriers. While multinationals have more flexibility, small and medium-sized companies face greater difficulties. The experience of Lynlee Brown, global business partner at EY, reflects this clearly: in the first hours after the US election alone, she received more than 400 emails with questions. Concerns came from all over the world, from US companies importing raw materials to an Australian apparel company. “Companies have a lot of questions,” says Brown.
Among those looking for solutions are Kim Osgood and Mike Roach, owners of Paloma Clothing, a women’s clothing store in Portland, Oregon. Their business, which includes jewelry, accessories and clothing such as sweaters, scarves and raincoats, has already started placing additional orders with overseas suppliers. “The thing you hate most as a business owner is uncertainty,” says Roach. “But there’s not much we can do.”
Fear seems to be the main driver of this paralysis. According to an Oxford Economics survey of 156 US companies conducted in the two weeks leading up to December 10, 65% of respondents see a global trade war as the biggest risk to the world economy over the next two years. By comparison, only 38% identified a confrontation between Russia and NATO as the main danger, while 14% cited the potential impact of a conflict between China and Taiwan.
In China’s major industrial hubs, companies are looking for strategies to maintain their exports despite the adverse context. For example, in Hangzhou, 90% of Hangzhou Skytech Outdoor’s products are destined for the United States, making it especially vulnerable to the 25%-plus tariffs imposed during the first trade war in 2018-2019. Given this situation, the company is considering offering its US customers prices that include both tariffs and freight, although this would imply an increase of between 10% and 15%, Hu explains, depending on the new level of tariffs. Meanwhile, the company plans to push forward shipments of half of projected demand to 2025 before Trump takes office.
Margins at the limit
Evelyn Suarez, a lawyer specializing in customs issues in Washington, warns that many companies that managed to adapt to Trump’s initial tariffs would face great difficulties in the event of a new increase. According to Suarez, these companies are already operating at the limits of what they can bear in terms of taxes, and an additional 60% increase would prove unsustainable. “My clients are preparing to face higher costs, but this represents a significant challenge, as it will inevitably lead to a price increase,” she explained.
On the other hand, in Riesling, Arnold had to assume around 80% of the additional tariffs imposed during the first Trump administration to avoid losing customers who might opt for cheaper wines from other regions. Now, both Arnold and its American importer are looking to maintain competitive prices for consumers, but it is not yet clear how they will divide the financial impact of the new levies.
Arnold, who exports about 10,000 bottles of wine a year to the United States, representing 5% of his total production, is confident he can weather a new round of tariffs. However, he finds it increasingly attractive to direct his exports to higher-margin markets such as Scandinavia if the tariffs remain in place for the long term. For some German wine producers who rely on the United States for 40% of their sales, the outlook is much more complicated. “These new tariffs could be implemented quickly and extend for longer than the previous ones,” Arnold warned.