Not long after President Donald Trump announced earlier this week that that the United States will implement 25% tariffs on U.S.-bound imports from Canada and Mexico, effective February 1, he subsequently said that the nation would also levy a 10% tariff on U.S.-bound imports from China.
A Reuters report indicated that the impetus for the tariffs on China is due to fentanyl is being sent from China to the U.S. via Mexico and Canada.
As reported in LM, in posts made on his Truth Social platform in late November, Trump said that, effective January 20, when he takes office, that he would sign an Executive Order, calling for a 25% tariff on all U.S.-bound imports from Canada and Mexico, as well as an additional 10% tariff on all U.S.-bound imports from China.
Earlier this week, Trump directed federal agencies to study trade relationships with China, Canada, and Mexico, the three largest U.S trading partners, he made it clear he would implement new, or increased, tariffs on, them.
In a memo issued on January 21 to various federal government and cabinet officials, focusing on an America First Trade Policy, including: the Secretaries of State, Treasury, Defense, Commerce, Homeland Security, the director of the Office of Management and Budget, the United States Trade Representative, the Assistant to the President for Economic Policy, and the Senior Counselor for Trade and Manufacturing, Trump said that his in 2017 his administration pursued trade and economic policies that put the American economy, the American worker, and national security first.
“This spurred an American revitalization marked by stable supply chains, massive economic growth, historically low inflation, a substantial increase in real wages and real media household wealth, and a path toward eliminating destructive trade deficits,” the memo stated.
While specifics regarding tariffs are yet to be made available, Matt Muenster, Chief Economist for Green Bay, Wisc.-based Breakthrough, an innovator in transportation management, dedicated to creating transparent and fair strategies for the world’s leading shippers, told LM that, at a high level, these planned tariffs are partially driven by the movement of Chinese goods through Mexico into the U.S.
“I think we’re going to see a lot more policy focused upon those flows, that would probably be an expectation with the new administration that’s coming into keener perspective,” he said. “Not only do we have tariffs with countries directly, particularly Mexico and Canada, and perhaps there’s some USMCA considerations in terms of trade agreements, but also there’s going to be a lot more focus in terms of since tariffs have been in place, largely since 2018 in China, and the ripple effects from that. Or have Chinese goods gone and are there workarounds in the market to get around the tariffs that have been placed on those goods. I think what we’re seeing in some of the policy directed in Mexico, that’s part of the focus is making sure that Chinese goods weren’t simply being passed through Mexico and into the U.S.”
While the stated tariffs on China are below what was previously touted, Suppyframe CMO Richard Barnett said that a 10% U.S. tariff on Chinese imports will nonetheless increase electronic component pricing and have a disruptive impact upon the entire electronics supply chain.
“Consider the printed circuit board, which is used in almost anything that has a plug. The hyper growth of the AI data center segment is reliant on high-layer-count PCBs, and China represents over a third of total production,” said Barnett. “Chinese firms also enjoy around 60% market share for other advanced PCBs used in AI, servers and myriad end markets. While AI gets all the attention, worldwide aerospace & defense demand for PCBs is growing markedly and electronic component sourcing in the space is in China-Zero verses China-Plus-One modes.”
In a recent interview, Chris Rogers, S&P Global Market Intelligence Research Director Chris Rogers said in looking at the first quarter, Rogers said that tariffs are the main theme, for supply chain decision makers, and is the primary reason annual growth is expected across the board in the fourth quarter, while adding that S&P Global Market Intelligence expects total U.S.-bound imports to be down overall in 2025.
“The first quarter looks to be strong, but things could rapidly slow down as the year goes on, with the fourth quarter potentially down 10%-to-12%, as the impact of tariffs starts to make itself felt, both in terms of a reduction in overall trade, but also a reduction to a strong fourth quarter a year earlier,” he said.
On a more positive note, he explained that this is not the first time shippers have been preparing for the unexpected, in a sense, as things were similar in 2018, when tariffs on China were initially rolled out by the Trump administration.
“There is likely to be some front-loading and probably more increasing prices this time than last, last time,” he said. “Maybe the difference this time around is that tariffs could well be much more widespread. If tariffs are widespread, there’s no point in doing anything other than just putting your prices up, because it doesn’t matter where you go, you’re still going to face higher tariffs unless you bring everything back to the US. But if it was cheap to bring everything back to the US, they already would have done so. Tariffs really are the main game in town.”
