"Prepare for Trump's Tariff Storm!" - Survival Strategies in the Age of America First

 With the return of the Trump administration looming, we must prepare for increased tariffs on Chinese goods and broader tariff hikes. Especially from a procurement perspective, companies sourcing parts from China need to consider localization strategies or alternative sourcing from countries with lower tariff burdens. In this blog, we will explore specific strategies and actionable plans to prepare for Trump 2.0 in an engaging way.

1. "The Tariff Storm is Coming" - Preparing for Increased Tariffs on China

Trump's plan to increase tariffs on Chinese goods includes a potential tariff rate of up to 60%. Calling it a 'tariff storm' is no exaggeration. So, what actions should companies taking parts from China take in this scenario? Here are some suggestions:

  • Localization Strategy: "Make it in America or lose!" Companies must increase production in the U.S. or source locally to minimize tariff burdens. Local production is not just about reducing tariffs; it also plays a crucial role in building customer trust and enhancing delivery speed and quality responsiveness, thus securing a competitive advantage.

  • Exploring Alternative Sourcing Countries: "Plan B is always necessary!" Actively consider sourcing parts from countries other than China. For example, countries like South Korea, India, and Mexico, which already have developed automotive industries, could be good alternatives. Particularly, South Korea benefits from an FTA with the U.S., meaning no tariffs, and it has an established network of suppliers for Hyundai and Kia, making it a reliable sourcing option. India also offers a growing automotive industry and low labor costs, making it suitable for parts sourcing. Securing supply chains from these countries can effectively reduce tariff burdens.



2. "Quota Shock" - Preparing for Raw Material Tariffs and Quotas

We vividly remember the first Trump term when the Steel Trade Protection Act was implemented, imposing high tariffs and quotas on steel and aluminum. A similar situation is highly likely to occur again. Here's how we can prepare:

  • Localization of Raw Materials and Exclusion Preparation: To avoid tariffs on raw materials like steel, we must strengthen localization strategies. Increasing the proportion of local sourcing through partnerships with U.S.-based steel producers is crucial. Moreover, applying for exclusions on specific raw materials in advance can reduce tariff burdens. This requires close collaboration with the government and careful preparation, supported by relevant data and analysis to increase the likelihood of obtaining exemptions.

  • Securing Diverse Sources of Raw Materials: "Don’t put all your eggs in one basket!" To flexibly respond to changes in tariffs or quotas, we must secure multiple sources of raw materials rather than relying on one country or supplier. For instance, for steel, establishing supply agreements with major producing countries like Brazil or Australia can help diversify the supply chain. This reduces supply chain risks and improves our ability to respond to price fluctuations.


3. "Localize or Perish!" - Considering Investment in U.S. Subsidiaries

Investing in U.S. subsidiaries or setting up local production is an important strategy for avoiding tariffs and ensuring smooth market entry. Increasing local production helps minimize tariff burdens and improves access to U.S. consumers.

  • Setting Up Local Subsidiaries & M&A: "Plant roots in the U.S.!" Consider setting up a subsidiary in the U.S. or acquiring a local company to secure direct production capabilities. Having a direct production base in the U.S. not only helps avoid tariffs but also enhances reliability and brand recognition in the local market.

  • Supply Chain Localization: Localizing key components and raw materials strengthens the value chain within the U.S., aligning with the America First policy of the Trump administration. Localization reduces production lead times and improves quick quality response, ultimately increasing customer satisfaction.


4. "Turn Sanctions into Opportunities!" - Mitigating Sanctions and Expanding Investments

The Trump administration is likely to push for enhanced tariffs and sanctions while promoting investment within the U.S. under the America First policy. So how can companies prepare for this?

  • Monitoring Tariffs and Sanctions: It’s essential to keep an eye on tariff-related regulations and sanction trends to be able to respond quickly. Identifying potential new tariffs or sanctions on key components or raw materials in advance and preparing for them is crucial. Setting up a dedicated team and collaborating with international trade consultants can help quickly acquire the latest information and develop response strategies.

  • Leveraging Investment Incentives: The Trump administration may offer various incentives for investing within the U.S. Actively utilizing these incentives to expand production and employment can be an effective strategy for minimizing tariff burdens. For instance, tax breaks or infrastructure support provided for investments in specific regions should be fully utilized to reduce costs and enhance competitiveness in the local market.


Conclusion: "Fail to Prepare, Prepare to Fail!"

To prepare for increased tariffs and the America First policies under Trump 2.0, thorough preparation and quick response are essential. Especially from a procurement perspective, it's crucial to reduce dependence on specific countries like China and reconfigure the supply chain to increase the proportion of production in the U.S. By adopting diverse supply chain strategies and expanding local investments, we can minimize the risks of tariffs and sanctions and build a stable business environment.

Start preparing now to effectively respond to changes in Trump’s policies! In the next blog, we will dive into specific incentives and tax benefits to consider during this preparation process. Stay tuned!

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