Donald Trump has described the word “tariff” as “the most beautiful word in the dictionary.” In the run-up to taking office, the President-elect has spoken frequently about his plans to increase tariffs on imports as a method of protecting the U.S. economy, while also raising tax revenue and safeguarding American jobs.

The U.S., however, is a major global player, and many businesses are reliant on international manufacturing and supplier networks to operate successfully. As such, the potential impact of proposed tariffs will be felt by businesses both within the States and on an international scale.

Trump has proposed a 10% to 20% tariff on all international imports, as well as an especially high levy of 60% to 100% on goods from China. To put this into context, China accounts for an estimated 31.6% of the total global manufacturing output.

Since his election, Trump has expanded his tariff policy to include Mexico and Canada, citing concerns over illegal immigration and drug trafficking from these countries. If implemented, these tariffs could reshape the global supply chain landscape, creating opportunities for some while raising concerns for others.

Despite the protectionist reasoning behind the tariffs, the internal impacts on the U.S. economy could be seismic. Businesses that rely on materials from overseas could see their costs drastically increase, trade flows disrupted, and production delayed. This, ultimately, will impact the consumer, with rising costs likely to lead to cost-push inflation — meaning the consumer pays more for goods and services — dampening purchasing power and investment prospects in turn. 

It also pays to look at trade policies in the context of wider proposals. Trump’s plans to expel millions of undocumented immigrants could create significant labor shortages, especially in sectors such as agriculture, construction and hospitality, leading to further cost increases and production delays. Both an increase in trade tariffs and more stringent immigration enforcement could disrupt U.S. supply chains in critical sectors such as food production, agriculture, and manufacturing.

The proposed tariffs also contain significant ramifications for international trade. It seems that markets are already anticipating this; in the immediate aftermath of Trump’s election victory, major European automakers experienced a sharp decline in their stock values, with Porsche, BMW, Mercedes and Volkswagen seeing share price drops of 5%-7%.

There is a high potential for the tariffs to lead to a full-blown global trade war. Already, the Chinese embassy has responded that “no one will win a trade war,” and Mexico’s economic minister, Marcelo Ebrard, has stated that Mexico too will respond with retaliatory tariffs on the US.

 What’s to come for U.K. businesses remains somewhat unclear. The U.S. is the U.K.’s largest trading partner, and the potential universal tariff could increase costs for U.K. businesses significantly. However, with major exporters like China seeking new markets, U.K. businesses may well stand to benefit in this respect.

It’s worth noting that the U.K.'s position differs from that of China or the EU, as the U.K.-U.S. trade relationship focuses more on services, which are less likely to be impacted by new tariffs. This dynamic, coupled with the "special relationship" between the two nations, could potentially enable the U.K. to negotiate favorable trade terms, with the possibility of a free trade deal on the horizon. 

Overall, while challenges exist, the U.K. may be well-positioned to navigate and potentially benefit from the shifting global trade landscape under Trump's policies. Elsewhere, however, the global trade market is on track for a turbulent period as the U.S. transitions from Democratic to Republican leadership. 

Chris Clowes is executive director at global supply chain and logistics consultancy SCALA.