The US election outcome could significantly impact global supply chains, and it's essential to consider the different approaches of the candidates. A Trump administration would likely prioritize unilateral action, leveraging tariffs as a tool for negotiation ¹. This could lead to increased tensions with trading partners, particularly China, and result in retaliatory measures.
On the other hand, a Harris administration would likely focus on multilateral cooperation, emphasizing collective action to address trade challenges ¹. This approach might lead to more predictable and stable trade relationships, but could also face opposition from countries like China.
Key Areas of Impact:
Tariffs and Trade Agreements: A Trump administration would likely impose higher tariffs, while a Harris administration might focus on renegotiating existing agreements ¹.
Supply Chain Tracing: Both administrations would emphasize compliance with US trade laws, including the Uyghur Forced Labor Prevention Act ¹.
USMCA Review: The review of the US-Mexico-Canada Agreement would be a critical issue, with a Trump administration potentially seeking significant modifications ¹.
It's indeed a "wait and watch" situation, as the outcome of the election will significantly influence the direction of global supply chains.
The 2024 U.S. election outcome is expected to significantly impact global supply chains, given the interconnectedness of trade and logistics worldwide.
Here are some potential implications: Trade Policy and Tariffs: A Trump administration may favor higher tariffs on imports from major trading partners, particularly China, which could raise costs for raw materials and components. In contrast, a Harris administration is likely to pursue more continuity in trade policies, with a focus on collective action with allies ¹.
Domestic Manufacturing and Reshoring: Policies incentivizing reshoring may be prioritized, encouraging U.S. companies to reduce dependency on foreign suppliers. Investment in infrastructure, such as ports and broadband, could also improve supply chain logistics.
Environmental and Sustainability Regulations: Stricter emissions regulations and policies promoting renewable energy may encourage companies to adopt more sustainable practices, such as investing in electric fleets or cleaner energy sources.
Labor Policies and Workforce Regulations: Changes to minimum wage laws, worker protections, and union regulations could alter labor costs, especially in industries like warehousing and logistics.
Supply Chain Security and Technology Investments: Stricter cybersecurity requirements and government support for digital infrastructure, such as 5G and AI technologies, could impact supply chain budgets and operations.
Geopolitical Relations and Global Supply Chain Stability: The approach toward China and other major economies could impact supply chains reliant on Asia, prompting companies to diversify. trend allied partnerships could also strengthen supply chains through trade agreements with other regions.
Companies should consider diversifying their supply chains, scenario planning to assess China-related risks, and investing in sustainable practices to mitigate potential disruptions ¹.
Let us see some of the share publicly available
The article in Supply Chain Connect states that – this could be profound impact on global supply chains, some early insights into what could be coming next. - - - - - -
Winds of changes are inevitable, some of the shifts could begin to surface even before President takes office in January.
Not US along Europe braces for more US trade Tension with Trump’s imminent Return Ref – Bloomberg Green Summit – European Union Policy makers work up to the realization that the tension with America likely to be painful truth, preparing a difficult relationship with the US including more protectionism coming from the White House and a possible tariff war and the trade tensions with China.
Trump’s return to the White House could serve as a Catalyst for the Europeans to boost their autonomy, a challenge of the most difficult economic moment as per Kiel Institute for the World Economy.’
Reuters says impacts may depend on which deputy and cabinet members are put in place, with Elon Musk among them
Tariff proposals could reduce American consumers spending power as per National Retail Federations.
Recent article in The Loadstar discusses the refocus on domestic oil production, proposed tariffs and potential tax reductions and impact on the sector.
The Covington alert comment during end October with Election impact states
Divergent approaches to US Tariffs – President has broad authority to adjust tariffs and impose other import restrictions doesn’t even require Approval from Congress.
Potential international responses to increased tariffs, may provoke opposition and potential retaliation from US trading partners.
European Commission made public its work to develop a contingency plan - US- China bilateral relationship will continue to be defined by intense strategic competition
Continued focus on supply chain tracing expected and be as part of international operations. Compliance of UFLPA (Uyghur Forced Labor Prevention Act) will remain priority
Council on Energy, Environment and Water – Comments on Nov 5th as
Major preferences of Trump between Oil and Gas, and Clean Energy that impact the drive towards attaining their net zero targets.
The policies focusing on decarbonization, increasing share of renewable energy etc .will have different strategies especially concerning with Paris Agreement and engagement with QUAD.
Trump Presidency could guarantee a stable supply of fossil fuel to India and we could see now the shift in investment flows away from emerging markets and developing economies, towards United States as driven by IRA (Inflation reduction act)
Collaborating on next-gen technologies such as carbon capture, energy storage and exploring alternative markets in Africa and Latin America could strengthen India energy resilience.
QUAD Clean energy supply chain diversification program – Australia is expected AUD $50M project to diversify to Solar, Hydrogen Electrolyser, etc.
Bayes Business School Supply Chain experts’ comments
Cost of many household goods may become dearer in short run with the raise in inflation due to tariff regime
Trade deficit will also figure in Trump 2.0 China $279B, EU $203B and likely to increase with China using Mexico and Vietnam as their base for supplies
NATO Countries may have to spend more on their GDP on defense as well
Chinese and European must look elsewhere for export
National association of Manufacturers (CEO Jay Timmons)
The cost of business continues to increase, looming tax hikes, we are facing headwinds, sector optimism is at its lowest in years
National Retail Federation President (Matthew Shay)
Trade policies will increase America’s competitive advantages and will increasing the standard of living and quality of life of all Americans
Drive inflation and price increases and will result in job losses
Geopolitical Tensions
Trump expressed intentions to resolve Russia-Ukraine conflict by halting aid to Ukraine, already used his rapport with Putin and dialogue is initiated
His strong support to Israel likely favorable policies towards Taiwan suggests a continuation of Military and economic backing for US Allies.
Trump will facilitate an end to prolonged conflicts, global markets may respond positively
Let us also overview impact on Economy
- Economist and investors are expecting a series of seismic and wide ranging impacts from Trump 2.0 term. Financial markets have already seen volatility from currencies to commodities to corporate share prices. -
- Stock Markets– Lower taxes and looser regulations means businesses can boost their profits– possibility has been reflected in major American Businesses.
Goldman Sachs estimates the largest US businesses could see a 4% jump in their earnings if corporate tax rates are cut. Emmanuel Cause from British Bank Barclays has warned that big portion from European companies could be wiped out next year. Stephen Woolcock an expert in international trade at the London school of economics says
– This is quite a complex network of supply chains, and increased tariff by the US, would probably lead to retaliation by other major trading powers, would disrupt those existing supply chains, leads to uncertainty, increased costs, and therefor has a knock of affect on Companies. Climate linked investment
– President elect has repeatedly insisted he will end regulatory restrictions on oil drilling, exploration and coal mining, and would work to limit further expenditures tied to Biden’s inflation reduction act.
Experts feels that the act has not only boosted projects, businesses and technologies designed to help address climate change, but has also helped incentivize vast volumes of private capital to invest in Green Tech, including solar, wind, carbon capture and electric battery storage.
Huge Impacts on Supply Chains Like
Trump Vowed to implement tariffs on Chinese imports between 60%-100%, in addition to 10-20% tariffs on all other imports.
US cant simply replace these imports domestically, and with unemployment at 4%, fewer immigrants, Americans aren’t rushing to factory jobs for products like apparel.
Eventually Companies will either have to pay the price to import their need, absorb the added costs, for sure most of production shift out of China into other Nations.
Freight rates, Trump likely to discourage imports the traffic likely to be soft and driving down rates, but in near term rates likely to spike The tariffs, the cost of many household goods will increase in the short run, and inflation will rise, In the medium term when US increase production to meet the growing demand, require additional labor.
Trade deficits will figure under Trump 2.0, China use the base of Mexico and Vietnam to reach supplies to US to increase deficit. NATO may have to spend more of their GDP on defense as well.
The U.S. election outcome in 2024 will undoubtedly influence global supply chains across multiple dimensions, creating ripple effects for businesses and economies worldwide. Here’s a comprehensive analysis of potential impacts:
Key Election Outcome Scenarios
Trump Administration (Trump 2.0)
Tariff and Trade Policy: Aggressive tariff hikes on Chinese imports (60%-100%) and others (10%-20%) could lead to retaliatory actions, disrupting trade flows and increasing costs for raw materials, components, and finished goods.
Companies will face higher prices, inflation, and likely pass costs to consumers, creating short-term economic turbulence.
Reshoring and Domestic Focus: Strong push for reshoring manufacturing to the U.S. would necessitate significant investment in domestic capacity, creating long-term supply chain shifts but short-term inefficiencies.
Labor shortages and higher costs could pose challenges, especially for industries like apparel and electronics.
Geopolitical and Defense Spending: NATO allies may need to increase defense spending, impacting their budgets for economic development and trade collaboration.
Trade relations with the EU could become more protectionist, leading to potential tariff wars.
Energy and Environmental Policies: Prioritization of fossil fuel industries might delay investments in renewable energy projects globally, disrupting clean energy supply chains.
U.S.-India collaboration on fossil fuels could reshape energy trade,
Trade and Tariffs:
1.Trump Scenario: Tariffs will drive inflation, disrupt established supply chains, and lead to retaliation from key trading partners. This could shift manufacturing from China to Vietnam, Mexico, or other low-cost regions.
Harris Scenario: Lower likelihood of tariff shocks, maintaining trade stability.
2. Logistics and Freight Rates: In the short term, higher tariffs could spike freight demand as companies rush to stockpile goods.
Over the medium term, softer import volumes may lower freight rates, challenging logistics operators' profitability.
3. Compliance and Traceability: Both administrations will intensify enforcement of laws like the Uyghur Forced Labor Prevention Act, increasing compliance costs for global suppliers.
4. Energy and Climate: Trump: Focus on fossil fuels might delay clean energy initiatives globally, affecting carbon neutrality goals.
o Harris: Policies favoring renewable energy could lead to supply chain shifts toward green technologies.
5. Labor Dynamics: Domestic reshoring will increase labor demand, driving up wages and operational costs.
Immigration restrictions under Trump could exacerbate labor shortages, further impacting manufacturing and logistics.
6. Geopolitical Relations: China: Strategic competition with the U.S. will force supply chain diversification.
EU: Increased protectionism might result in reduced transatlantic trade.
Industries Likely to Face Significant Disruptions
1. Manufacturing and Retail: Tariffs will increase the cost of raw materials and finished goods. Industries dependent on low-cost imports (e.g., electronics, apparel) will face profitability challenges.
2. Automotive: Reshoring and tariff policies could increase costs for car manufacturing, impacting global automotive supply chains.
3. Technology: Cybersecurity requirements and digital infrastructure investments will reshape IT supply chains, increasing costs but enhancing resilience.
4. Energy: Shifts in energy policy will either delay or accelerate clean energy adoption globally.
Recommendations for Businesses
1. Diversify Supply Chains: Reduce dependency on single-source suppliers (e.g., China) and explore alternative regions such as Southeast Asia, Africa, and Latin America.
2. Scenario Planning: Prepare for tariff-induced cost increases, labor shortages, and supply chain reconfigurations. Use predictive analytics for risk mitigation.
3. Invest in Sustainability: Align supply chains with green initiatives to leverage potential benefits under sustainability-focused policies.
4. Build Resilience: Enhance inventory buffers, invest in digital traceability, and strengthen compliance mechanisms.
5. Monitor Geopolitical Trends: Stay informed about evolving U.S.-China relations, NATO policies, and trade agreements.
Supply Chain Implications of War and Conflict
1. Energy Supply and Prices:
Russia-Ukraine Conflict: Prolonged conflict will maintain high energy prices due to restricted natural gas and oil supplies.
European industries, already grappling with energy shortages, may see further disruptions, impacting global manufacturers reliant on European exports.
o Middle East Tensions: Any disruption in the Middle East could severely impact oil supply, leading to higher fuel costs for logistics and manufacturing.
2. Semiconductor Supply Chains: A conflict over Taiwan would significantly disrupt global semiconductor production, given Taiwan’s dominance in advanced chip manufacturing.
Companies would face severe shortages, driving increased costs and delays in industries like electronics, automotive, and defense.
3. Food Supply Chains: Conflicts in Ukraine, a major exporter of grains and fertilizers, could exacerbate food shortages and price increases worldwide.
Disruptions in fertilizer supply would affect agricultural output, particularly in developing nations.
4. Shipping and Logistics: Escalating geopolitical tensions may lead to blockades, restrictions, or attacks on key shipping routes (e.g., Strait of Hormuz, South China Sea).
Insurance costs for maritime shipments could rise, further straining supply chains.
5. Defense Supply Chains: NATO’s increased defense spending under a Trump administration could drive demand for military equipment, impacting supply chains for raw materials like steel and rare earth elements.
Geopolitical Strategies and Supply Chain Diversification
1. Accelerated Decoupling from China: Both administrations will likely continue efforts to reduce dependence on China, particularly for strategic goods like semiconductors, rare earth elements, and pharmaceuticals.
Companies will explore alternative production hubs in Southeast Asia, India, and Latin America.
2. Strengthened Alliances: A Harris administration may foster greater collaboration with NATO, QUAD, and other allied groups, creating stable trade agreements and reducing supply chain risks.
A Trump administration, while potentially less predictable, could push allies to bolster their own defense and energy supply chains.
3. Localized Production: Prolonged conflicts may accelerate reshoring efforts, with companies investing in domestic or regional manufacturing to mitigate risks from geopolitical instability.
Conclusion
The 2024 U.S. election will act as a catalyst for changes in global supply chains. While a Trump administration would create short-term disruptions and drive protectionism, a Harris administration could promote stability and sustainability. The stakes are high, making it a "wait and watch" scenario for businesses worldwide. Companies must prepare now to adapt to potential shocks and opportunities arising from the election's outcome.
The intersection of war and geopolitics with the 2024 US, election play a key role in shaping global supply chains. With Trump 2.0 could aim to resolve conflicts with assertive diplomacy, it risk inflaming tensions in other regions. Businesses must proactively prepare for these scenarios, focusing on diversification, resilience and sustainability to navigate the uncertain global landscape.
