How Will the Election Outcome Impact Supply Chains?

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Exactly how the new U.S. presidential administration impacts supply chains is clearly still up in the air, but at least for now it does appear that the winds of change are inevitable. In fact, some of the shifts could begin to surface even before the new president takes office in January. 

The changes may be far-reaching and impact global supply chains, not just domestic ones. In “Europe Braces for More US Trade Tensions With Trump’s Imminent Return,” Bloomberg says European Union (EU) officials are “preparing for a difficult relationship with the U.S.,” including more White House-generated protectionism and a possible tariff war—on top of existing trade tensions with China. 

“The transatlantic list of grievances already includes America’s green subsidies, steel and aluminum levies and a long-running dispute between Boeing and Airbus,” Bloomberg reports. It says the new administration could also serve as a catalyst for the Europeans to “boost their autonomy, through possible measures including bolstering defense preparedness or increasing their joint resources.”

Bloomberg says impending tariffs could also drive importers to accelerate shipments ahead of the January presidential swearing-in ceremony—a trend that could drive up freight rates. 

What’s Coming Next for Supply Chains?

Reuters says specific supply chain impacts may depend on which deputy and cabinet members are put in place, with Tesla CEO Elon Musk potentially being among them. As of right now, the incoming president has proposed a 10% tariff on all U.S. imports and 60% on Chinese-made products, which if enacted would affect the whole economy by pushing consumer prices higher. 

“The Tax Foundation, a non-partisan think tank, calculated Trump tariffs would hike taxes by $524 billion annually, shrink GDP by at least 0.8%, and cut employment by 684,000 full-time equivalent jobs potentially impacting retail workers, the largest private sector employer,” Reuters reports. “He also suggested he might impose a 25% tariff on all imports from Mexico.”

These tariff proposals could significantly reduce American consumers’ spending power, according to the National Retail Federation. Some of the most impacted categories could include apparel, toys, furniture, household appliances and footwear. 

“For all categories examined, total average tariffs would exceed 50% in the extreme tariff scenario, up in most cases from single or low double digits currently,” the NRF says. “Even accounting for alternative sources of supply and potential new U.S. production, the proposed tariffs on these six product categories alone would reduce American consumers’ spending power by $46 billion to $78 billion every year the tariffs are in effect.”

A Mixed Bag for Logistics

In assessing the election outcome’s effect on the logistics industry, Transport Intelligence’s John Manners-Bell’s recent article in The Loadstar discusses the refocus on domestic oil production, proposed tariffs and potential tax reductions and their potential impacts on the sector. For example, he says the focus on domestic oil production could be “positive for shipping, air cargo and international freight forwarding, although this will be countered by Trump’s plans for raising tariffs.” 

Manners-Bell also predicts that the higher tariffs would negatively impact domestic shipping, air cargo and international freight forwarding, but could be positive for U.S. warehousing and European regional logistics. 

Reductions in corporate taxation on domestic manufacturing would be positive for domestic trucking, rail, intermodal, parcel shipping and warehousing, he adds. “The big winner from Trump’s election will be U.S. trucking and other domestic logistics services,” Manners-Bell writes. “The likely losers will be international shipping, air and freight forwarders, although it must be pointed out that if there is strong U.S. economic growth, [it] will act as a growth driver.”