Preparing for U.S. Policy Shifts

The election of a new U.S. administration usually results in anticipated changes that modestly affect supply chains. This time appears to be a little different.

The news has been filled recently with articles on topics such as “tariffs as trade policy,” “dollar diplomacy,” and “rewriting U.S. foreign policy.” 

Since the information is flying fast, we gathered purchasing leaders from manufacturing companies to discuss what they are doing to prepare for potential U.S. policy shifts. 

Highlights of the roundtable discussion are summarized below. 

• Executive VP of Supply Chain for a glass and glazing manufacturer shared that, because they have a lot of business in Canada, they need to have a strategy for being competitive in that market (not subject to US tariffs). 
  
  They are keeping a close eye on the imports & exports of competitors to understand where they cannot pass on trade-policy-related costs to customers due to competitors not having similar exposure. 

• VP Purchasing for an automotive sunroof manufacturer shared that they are benchmarking suppliers in Mexico for possible mitigation of the increased tariffs.  However, they are finding that they can be subject to Mexican tariffs on European steel. 

• Exec. Director of Purchasing for a steering and driveline supplier shared that they are concerned that Chinese-owned companies operating in other countries might be subject to new trade policies. 
  
  They are currently doing an impact analysis of their supply chain to understand the trade policy risks associated with lower tiers.  They also shared that they had Thai suppliers that were in the process of establishing manufacturing operations in Mexico but have put things on hold until the USMCA is renegotiated. 

• Director of Global Purchasing for a Canadian manufacturer of front end components shared that they have not reduced their Chinese supply base, but have established duel sources in Taiwan, Korea, and Turkey to be able to provide 100% non-Chinese content for customers who require it (and are willing to pay a 15% cost increase). 

They also shared, in response to a question from the group if they consider being a Canadian company as a competitive advantage, that Canadian corporate taxes are higher than the U.S. and labor costs are more expensive, but finding talent is not an issue due to favorable immigration regulations. 

• Sr. Director of Supply Chain for an agriculture and construction equipment manufacturer shared that with 60-70% of sales in North America, their supply chain is very regional.  Their biggest worry is inflation and labor shortages that could affect their customer demand. 

• Chief Procurement Officer of an automotive sensor supplier shared that they are working on scenario planning to anticipate impacts of trade policy shifts.  They are reviewing every product they buy manufactured in Mexico to identify Chinese content (they expect the Chinese content will be subject to tariffs) and are considering the effects if Mexican-produced products are subject to tariffs after USMCA renegotiations.   

• VP of Strategic Sourcing for a manufacturer of automotive control valves shared that they are planning to do a lot more resourcing to get out of China and are establishing their first manufacturing operation in Mexico. 
  
  They are finding that the labor in Mexico is not efficient compared to China, and Chinese companies are struggling with opening manufacturing operations in Mexico. 

Interested in preparing for possible new tariffs while protecting your bottom line?Watch our free webinar “Tariff Readiness 2024”