How businesses are preparing for the tariffs Trump has promised to impose

Summary

The report examines how businesses are preparing for President-elect Donald Trump’s threatened tariffs, including a proposed 20% tariff on imports broadly and a 60% tariff on goods from China. Companies are trying to limit their exposure, but many of their options carry costs and uncertainty.

How businesses are responding

• Buying ahead: After Trump’s election, a footwear importer ordered 30,000 pairs from China in hopes of receiving them before tariffs take effect. Other businesses are also bringing shipments forward, but doing so ties up capital and risks leaving them with products that may not sell.
• Rerouting or redesigning supply chains: Some companies have shifted production from China to countries including Vietnam, Mexico, Thailand, Malaysia, Cambodia, and India. Others are exploring “tariff engineering”—changing a product’s materials or components so it qualifies for a different tariff category. However, new production locations may also bring tariff or geopolitical risks.
• Considering U.S. production: Two businesses said that moving more production to the United States was not currently practical because of labor costs, limited factory capacity, and shortages of skilled workers. A company with a Mexican manufacturing partner expects the partner to absorb some tariff costs, though some may still reach customers.

Potential effects on prices and businesses

Trade researcher Mary Lovely says research on earlier tariffs found that U.S. importers—not foreign exporters—bore the costs. Tariffs on washing machines also raised prices for domestically made machines and dryers.

The report cites estimates that Trump’s plans could cost the average household at least $2,700 a year, and potentially more than $4,000. Higher prices could prompt consumers to buy less, slowing business growth and potentially affecting jobs.

Potential benefits for domestic manufacturers

A U.S. maker of hats and bags expects tariffs and major upcoming events to help increase demand for American-made goods. The company faces hiring challenges and is investing in automation to reduce labor costs. It also purchased some machinery from Canada early and paused further equipment purchases while awaiting greater clarity.

Conclusion

The effects on companies, consumers, and workers will depend on how quickly tariffs are imposed, how high they are, and how businesses and customers respond.

Presenters and contributors

Catherine Rampell (reporter); Rick (footwear importer, surname not given); Brian Peterson (CEO, as identified in the subtitles); Jenny Goodman (business co-founder); Mary Lovely (trade researcher); and an unnamed U.S. hat-and-bag manufacturer.