When Donald Trump first announced his potential tariffs, he claimed that one of the main benefits would be building up American businesses and that companies that make products in America would benefit greatly. It will take some time to determine whether that is true.
Making Things in America is Very Expensive
One of the main issues for companies that make and source materials in the United States is the cost. You have to pay workers a higher wage than overseas workers, and companies you may be sourcing from are doing the same.
Some Companies Pride Themselves on Doing So
The cost has stopped many companies from making their wares in America, but not all of them. Husqvarna, a Swedish company, manufactures high-end outdoor power products in South Carolina and Arkansas. American Giant makes super durable hoodies in California, and All-Clad cookware is made in Pennsylvania.
Those Businesses are Likely to Benefit
Companies that have set themselves up to source and make their products in America could be among the biggest beneficiaries of a tariff war. A large percentage of Americans already try to buy American products as much as possible, and that number should grow over time.
Will Companies Try to Transition?
While some companies can source their raw materials domestically, that is not true for all. Some products just aren’t available in the United States due to geography or cost. There is a possibility that new businesses will sprout up when possible.
Some Businesses Will Fail
Projections say that if Donald Trump really does implement his tariffs on a long-term basis, many American businesses will be forced to close their doors. Companies, especially small ones, run on razor-thin margins and may be unable to get what they need within the United States.
The Current Situation is Unpredictable
Companies that feel the need to move their production or sourcing to the United States have to deal with Trump’s unpredictable tariffs. Just weeks after announcing them, Trump put a complete pause on them, and there are few clues as to what may happen from one day to the next.
The Impact of Social Media
Companies that sell their Made in America products online will use social media as a special tool to get their message out. Savvy businesses will use Instagram, TikTok, and other platforms to promote their American-made products and highlight potential savings.
American Companies Should Look Into Incentive Programs
There are several government incentives for companies making their products in America, including grants and tax credits, and companies making their goods in America should look into them. It also remains to be seen if the Trump administration will increase these programs during a tariff war.
Supply Chain Issues Are Likely
Some companies manufacture their products in the United States but source the materials for them from foreign countries. These businesses will be especially disrupted by the tariffs and won’t be able to produce their products at the same profit margins.
The Impact of Supply Chain Interruption was Seen During COVID-19
The potential tariffs could create the second massive supply chain interruption in the last decade. The COVID-19 pandemic also led to significant supply chain disruptions, resulting in empty shelves and higher prices. Economists predict something similar could happen.
Will Companies React by Building New Manufacturing Plants?
Donald Trump has argued that his tariffs will lead companies to build new factories in the United States. Whether these companies will do so remains to be seen, and certain factors may make it difficult for them to.
Factories Are Expensive to Build
There are several reasons why American companies would want to manufacture their goods overseas rather than building them in-house, and cost is a significant factor. American real estate is much more expensive than in other areas of the world.
Staffing Those Factories is Also Expensive
In addition to the higher real estate prices in the U.S., it also costs more to staff those factories in the United States. Labor laws are more lenient in other countries, and American businesses have demonstrated a willingness to take advantage of this leniency.
It Takes A Long Time to Build Plants
Even if a company were willing to relocate all of its manufacturing to the United States, it would take years to build, stock, and staff the factories. By the time a company was able to do this, the trade war would likely be long over.
What Products Can Thrive
There are some products that just cannot be made in America due to the raw materials needed, but items in other sectors could thrive. Food and beverage products can do well in this environment. Construction materials should also do well in a tariff war environment. This includes things like windows, doors, engineered lumber, and drywall.
It Could Be Nearly Impossible to Make Certain Electronics
Most homes around the country are filled with appliances and pieces of technology. Companies will likely not be able to make these items in the United States. Even if an attempt was made to do so, the consumer cost would be prohibitively high.
Consumers Haven’t Shown a Large-Scale Willingness to Buy American
Most consumers would say that they would prefer to buy American, but they have not proven this with their wallets in the past. So many products are made overseas for a reason: so that companies can offer consumers their most competitive prices.
This Should Be an Excellent Test
While consumers haven’t been willing to pay higher prices for American products on a mass level, that doesn’t mean that will always be true. Donald Trump has shown strong influence on his followers and may be able to convince them to pay higher prices for goods made in the United States.
Conclusion
Businesses operate to make money, and American consumers typically seek the lowest price they can afford. American-made companies could see a boost in sales. The question is, how big will that boost be?
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