Global Supply Chains on Edge: Preparing for Potential Trump Tariffs in 2025

As U.S. President-elect Donald Trump prepares to take office again in 2025, his promise to introduce new tariffs sends ripples through global markets. Businesses across the world, including those in Africa, are bracing for what could be another wave of disruption to international trade. While the specifics of the tariffs remain unclear, supply chain stakeholders must begin preparing for potential changes that could reshape global trade dynamics.

The Promise of New Tariffs: What’s at Stake?

  • Trump’s Tariff Legacy: During the first term of Trump’s administration, he focused on an “America First” strategy, and his trade policies were marked by high tariffs on Chinese goods, as high as 10%. Key actions included imposing tariffs on $370 billion worth of Chinese imports, leading to a trade war and retaliatory measures from China. However, it is worth noting that these policies disrupted global supply chains, slowed the global economy, and resulted in the diversification of goods away from the U.S. and China. U.S. farmers were also impacted, prompting government subsidies.
  • New Tariff Focus Areas: Trump has announced that he will sign an executive order imposing a 25% tariff on goods from Canada and Mexico, with an additional 10% tariff proposed for China. These are the U.S.’s three biggest trading partners, and while their relationships are currently strong, they could quickly become strained and even contentious. In his November announcement, the president-elect stated that tariffs on Mexican and Canadian goods would remain until the “invasion” of drugs and undocumented migrants was addressed. The term “invasion” refers to the strain caused by illegal immigration, with undocumented migrants filling crucial labour roles in sectors like agriculture, construction, and manufacturing in the U.S. These industries rely heavily on migrant labour for low-wage, labour-intensive jobs, and tightening immigration policies could disrupt supply chains by creating labour shortages. The president-elect’s stance aims to pressure Mexico and Canada on border control and drug issues. Still, it risks exacerbating supply chain bottlenecks in the U.S., potentially shifting labour demand to other countries, including African markets.

What impact will it have on global supply chains?

  • Predicted price hikes for businesses dependent on U.S. imports and exports, such as China, Mexico, Canada, and several European countries.
  • Increased shipping and operational expenses due to longer supply routes or alternative sourcing.
  • Multinational companies might seek to diversify their supply bases away from tariffed regions. These discussions are already taking place within the committee of global trade partners.
  • Emerging markets, including parts of Africa, may see increased interest as alternative suppliers, presenting an opportunity to improve efficiency, technology, and infrastructure.
  • Businesses delaying procurement and investment decisions due to tariff uncertainty. This will come to fruition when the Trump administration begins.
  • Supply chain disruptions from partners shifting priorities or halting trade with the U.S.

Opportunities and Risks for Africa

  • This is an opportunity for the manufacturing industries as trade partners begin looking for low-cost alternatives to traditional hubs. With lower production costs, abundant raw materials, and strategic trade agreements like AGOA, Africa can attract global businesses seeking low-cost alternatives.
  • There is potential supply chain disruption for African exporters indirectly tied to U.S.-bound goods, as they could face reduced demand, especially in vertical markets such as agriculture, automotive, electronics, or healthcare. A slowdown in these sectors in the U.S. due to high tariffs could lead to a ripple effect, impacting African suppliers who provide raw materials, intermediate goods, or finished products to these industries. For example, the DRC exports most of its cobalt to China for processing, which is then shipped to the U.S. Countries like Mali, Burkina Faso, and Benin, which export cotton to the U.S. and Europe, will be deeply affected.
  • The African Continental Free Trade Area (AfCFTA) could help mitigate reliance on U.S. trade by fostering stronger intra-African supply chains.

 

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