Global manufacturers brace for new trade wars as Trump returns to White House

With Donald Trump back in the White House, global manufacturers are on high alert, anticipating the reimposition of tariffs and possible disruptions to supply chains. Knowing Trump's stance on international trade, executives in the auto, aerospace, steel and chemical industries are bracing for a tumultuous period that could affect operations and consumer prices on a global scale.

A Possible Resurgence of Trade Tensions

In his first term, Trump aggressively used tariffs as leverage in international negotiations, and early signals suggest a return to that strategy. He has already hinted that he could impose tariffs of 60 percent on Chinese imports and tariffs of up to 20 percent on trading partners, including the EU. "Tariff" is, for him, "the most beautiful word in the dictionary" and his plans extend to import duties on autos, steel, chemicals and other strategic sectors.

As the implications of these policies begin to play out, industry experts believe these tariffs will force companies to rethink their supply chains, pricing and possibly manufacturing locations.

Auto Industry: Production Changes and Higher Costs

The auto industry is one of the most vulnerable to the new tariffs proposed by Trump. In anticipation of these, companies are already considering moving production to the US to offset higher import costs. For example, Tesla has announced plans to increase production in the US, with CEO Elon Musk suspending a gigafactory expansion in Mexico, possibly in response to Trump's policies.

However, many companies lack the ability to rapidly scale production in the US, leaving them with few options: either absorb the costs or pass them on to consumers. According to Oxford Economics, if these tariffs are implemented, U.S. vehicle prices could rise by as much as 3.7 percent, further straining an industry already facing high costs for electric vehicle development and pressure from Chinese competition.

German auto giants, which rely heavily on US sales, could be the most affected by Trump's policies. Mexico, a key player in the auto supply chain, produces more than 2.5 million vehicles for the U.S. market annually, and Trump's promise to block auto imports from Mexico could hurt not only Mexican manufacturers but also U.S. brands like GM and Stellantis. "It's hard to see how imposing tariffs helps control inflation," notes Barclays analyst Dan Levy, underscoring the complexity of Trump's approach.

The Aerospace Industry: Increased Costs and Retaliatory Tariffs

The aerospace industry, with its complex global supply chains, is also at risk. For Boeing, the tariffs could further strain an already fragile supply chain still affected by the COVID-19 pandemic. Analysts suggest Airbus, with some production in Alabama, may be in a better position, but the tariffs could trigger reciprocal trade measures, making Boeing's planes less attractive to international buyers.

Although some executives play down the impact, arguing that aircraft orders take years to ship and may not be swayed by short-term political changes, there is a consensus that higher tariffs will likely translate into higher airline ticket prices for consumers. Airbus CEO Guillaume Faury indicated that the firm could pass on the cost of tariffs to customers, similar to the strategy adopted in the 2020 tariff disputes over aircraft subsidies.

Steel and Chemicals: Protecting National Industries

The possible return of steel tariffs during Trump's tenure could deepen existing challenges in a sector already hurt by cheap Chinese steel exports. Global steelmakers, including those in Europe, have expressed concern about rising exports from China, and ArcelorMittal CEO Aditya Mittal recently called for tougher trade measures to protect the market.

The chemical industry, equally exposed, is highly dependent on proximity to customers due to the hazardous nature of some products. German company BASF, a global leader in the field, manufactures most of its products for the American market in the US, thus reducing the potential risks associated with the new tariffs. Still, the US remains a vital market for European chemical exports, and new tariffs could hurt the industry.

The US Society of Chemical Manufacturers proactively welcomed Trump's pro-local manufacturing stance as a boost to critical supply chains within the US.

The Way Forward: Adaptation or Confrontation?

With Trump in charge, the prospect of prolonged trade tensions is increasingly likely. Its position vis-a-vis Mexico, a crucial auto manufacturing hub, could be particularly disruptive, while major industries such as aerospace, steel and chemicals face sector-specific challenges. For many executives, the only certainty lies in preparing for change: restructuring supply chains, managing costs and rethinking operational strategies to navigate what could be a new era of protectionism.

Manufacturers around the world could be faced with a defining choice: adapt or risk losing access to one of the largest consumer markets. As Trump's trade policy takes shape, companies will be watching closely to plan their next steps.

As the tariff battles unfold, consumers and industries alike will feel the impact in various forms—from higher vehicle prices to more expensive airline tickets and price increases in the steel industry. For the global manufacturing industry, Trump's trade tactics could mean either a return to a more resilient, domestic production-oriented approach or a prolonged period of economic pressure.