With Trump’s return to the U.S. presidency in January 2025, UK businesses with interests in the U.S. market may soon face significant challenges in their trade and customs strategies. Trump’s approach to tariffs is well-documented: He frequently views tariffs as a tool to protect U.S. interests, using them in ways that often disregard traditional international commitments. This strategy could introduce an era of heightened costs, regulatory hurdles, and trade deflections for which UK-based finance executives must be prepared.
A Return to High Tariffs and Trade Barriers
In recent statements, Trump has hinted at imposing substantial tariffs, including threats of up to 200% on some imports. While it’s common for him to use hyperbole, even more moderate increases—such as the suggested 10% blanket tariff on all imports or up to 60% on specific sectors like electronics, steel, and pharmaceuticals from China—would likely still breach WTO commitments. His vocal criticism of the WTO indicates he may be willing to overlook or withdraw from these commitments, leaving affected businesses in a difficult position.
Should these policies be enacted, businesses exporting to the U.S. will likely see rising costs to bring their products to market. Moreover, companies could face additional administrative requirements to prove the origin of their goods, adding further complexity and cost.
Impacts Beyond the U.S. Market:
Trade Deflection and Global Ripple Effects
Tariff increases on imports from China are expected to cause trade deflection, diverting Chinese and Rest of World (ROW) exports from the U.S. market to other regions, including the EU and UK. This could trigger protective measures within the UK and EU as they seek to manage the influx of redirected goods, potentially leading to increased competition and pricing pressures on local producers.
Additionally, the overall impact of frequent trade barriers compounds when considering the typical journey of a product through various international stages of production. For finance executives, this poses a risk to the integrity of established supply chains, making it imperative to consider potential contingencies.
Proactive Steps for Finance Executives:
Protecting Profit Margins and Maintaining Stability
To manage these anticipated changes, UK-based finance leaders should consider a multi-step approach to mitigate the impact on their supply chains and operations:
1. Model the Impact and Re-evaluate the Supply Chain
Begin by modelling the likely impact of potential tariffs across your supply chain. Assess the cost implications on imported components, finished goods, and the additional administrative requirements for customs compliance. Understanding this impact on profit margins and pricing will be key in setting priorities and making timely adjustments.
2. Explore New Sourcing and Market Alternatives
Diversifying suppliers and exploring alternative markets outside the U.S. may be prudent to reduce dependency and manage exposure to elevated tariff rates. This approach allows greater resilience in the face of sudden policy shifts and could enable your business to respond more flexibly to future changes.
3. Consider Strategic Inventory Placement
If commercially viable, consider moving stock into the U.S. ahead of anticipated tariff implementations. By positioning stock in advance, you may be able to avoid the full brunt of immediate tariff increases and leverage a buffer period to meet demand.
4. Evaluate Shifting Value-Added Stages to the U.S.
With the possibility of sustained high tariffs on imports, it may make strategic sense to bring certain stages of production into the U.S. itself. This could align with Trump’s stated aim of encouraging local production, potentially allowing your business to mitigate tariff impacts and better serve U.S.-based clients.
Rob Jenkins, CEO and Co-Founder of Barbourne Brook, comments:
“With unpredictable trade policies on the horizon, proactive planning isn’t just an option—it’s a necessity. Finance leaders who take strategic steps now will be better positioned to navigate the challenges and capitalize on opportunities in a shifting U.S. trade landscape.“
Long-term Strategy:
Rethinking Trade Policies as Competitive Advantage
While these steps address short-term disruptions, the broader implications of an unpredictable trade environment offer an opportunity to rethink how customs and tariffs are integrated into business strategy. For companies with established U.S. relationships, a proactive stance—treating trade policy as a dynamic element of competitive strategy—can ultimately drive resilience and stability. By fostering flexibility and maintaining a forward-looking approach, finance executives can ensure that trade and customs strategies not only protect profitability but also adapt as global trade dynamics continue to evolve.
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