Maintenance Mindset: Manufacturers prepare for impact of new U.S. tariff policy
Welcome to Maintenance Mindset, our editors’ takes on things going on in the worlds of manufacturing and asset management that deserve some extra attention. This will appear regularly in the Member’s Only section of the site.
The second Trump administration is under way, and changes in economic policy are already taking shape. In the manufacturing sector all eyes are on the scope and type of tariffs that were central to Donald Trump's campaign platform, and several details are already taking shape.
The first of these is a planned 25% tariff on imports from Canada and Mexico to be put in place by Feb. 1. During a post-inauguration Oval Office signing ceremony, the President commented that "we’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people” into the U.S.
The second detail is that the administration is hedging on wider implementation of what they term a "universal tariff," or 10% to 20% on imports from all nations, with the President saying, "we may, but we’re not ready for that just yet." There also has been no comment or conrete action taken on additional tariffs on China, which the President has said could be set as high as 60%.
Warren Browne, a contributing analyst for IndustryWeek, sees the planned combination of tariffs, emissions rollbacks, and incentive reductions in the President's first-day executive orders as adding "turmoil and instability to the automotive environment at a time when the electric transformation is accelerating." Browne predicts that first-quarter tariff increases will lead to a reduction in U.S. production as early as the second half of 2025, arguing that "it would take sustained tariffs over a 10-year window to get General Motors to move Mexico production to Fairfax and Orion, or to get Ford to move Mexico and Canada production back to Flat Rock or Blue Oval.
So, are manufacturers ready for these changes in U.S. tariff policy? Endeavor Business Media polled 100 industry professionals on this question last December, to assess how B2B vertical market leaders are preparing for potential changes. The survey focused on organizational preparedness, supply chain strategies, and anticipated financial impacts.
Some of the key results:
- Nearly half of respondents are bracing for significant operational cost increases, with 22% of respondents bracing for increases above 20%.
- Almost 70% of respondents said they expected to quickly implement significant strategic adjustments, with 30% saying changes would be in place within 30 days.
- A quarter of respondents admitted to having no specific strategic plans in place, either due to uncertainly over planned tariffs or taking a wait-and-see attitude until January 20.
When it comes to the type of strategic actions that manufacturers are prepared to take, the responses indicated a willingness to largely pass any cost increases to the consumer:
- 71% would implement price adjustment strategies.
- 45% would explore domestic manufacturing or sourcing alternatives.
- 45% would diversify their international supplier base.
- 30% would restructure their existing international procurement contracts.
- 19% would absorb potential cost increases internally.
It's too soon to say to what degree the planned tariffs on Canada and Mexico are a barganing position designed to extract other concessions. The new Executive Orders do include provisions for the secretaries of Commerce and Treasury and the United States Trade Representative to investigate the causes of America’s trade deficits with foreign nations and to review existing trade agreements for potential improvements.
However, those longer-term plans will need to exist within the space provided by the faster actions that the Trump administration is willing to take.
