Tariffs Are on the Table for U.S. Importers, Whatever the Election Outcome

Until a few years ago, Chinese factories supplied the world with Sharpie retractable pens and Oster blenders.

No more.

Consumer giant Newell Brands now makes those products, and more, at its own plants in the U.S. and Mexico. Many of its other products are made in factories in Vietnam, Indonesia and Thailand.

Chris Peterson , Newell’s chief executive, said the company’s shift reduces its dependence on China at a time when both the Democratic and Republican parties “are getting more protectionist in terms of trade policy.”

Tariffs are becoming an entrenched tool tying together geopolitics and trade , and they are playing a bigger role in long-term manufacturing and sourcing decisions. Nowhere are they hitting harder than in China, where importers and exporters are navigating an increasingly complicated regime of levies on goods ranging from semiconductors to mattresses.

“Tariffs have always existed and they’ve always been regarded as a cost of doing business,” said Simon Geale, executive vice president of procurement at supply-chain consulting firm Proxima. “But they’ve been getting much more teeth in the last five or six years.”

The new era of tariffs kicked off under the Trump administration with duties on imports from a swath of countries and a focus on Chinese products ranging from truck chassis to consumer goods.

The Biden administration kept most of the tariffs in place, and then added further duties on Chinese steel, semiconductors and electric vehicles, citing national security concerns and an industrial policy aimed at reviving American manufacturing .

The two candidates in this year’s presidential election look set to continue the trend, as trade, manufacturing and the tools to tie them together take a prominent role in the campaign.

Former president Donald Trump , the Republican nominee, has said he would roll out new tariffs with a potential 10% across-the-board duty on imported goods and a 60% tariff on goods from China.

Vice President Kamala Harris , the Democratic nominee, so far hasn’t indicated a desire to deviate much from President Biden’s trade policies.

Before becoming vice president, Harris diverged from Biden on Trump’s revised North American Free Trade Agreement, known as the United States-Mexico-Canada-Agreement. As a senator, Harris joined some Democratic lawmakers, saying it didn’t do enough to address climate change, suggesting Harris may have more of a focus on social justice issues when considering trade pacts.

Harris has been in lockstep with the president in the Biden administration.

At an electronics factory in Wisconsin last summer, Harris said she and Biden want to bring manufacturing jobs back to America. At a campaign event in North Carolina on July 18, she said Trump’s proposed universal 10% tariff “would increase the cost of everyday expenses for families.” She didn’t criticise current tariffs on Chinese goods .

Both Trump and Harris opposed the Trans-Pacific Partnership, the expansive multination trade deal that was designed to expand alternatives to trading with China. Trump withdrew the U.S. from the agreement immediately on taking office in 2017.

The trade policies pose a conundrum for companies. Do they continue sourcing from China and risk the potential impact of escalating tariffs? Or do they look outside China, where costs are higher, but duties and other geopolitical risks are lower?

Trump’s threat of universal tariffs has even spooked supporters. Tesla Chief Executive Elon Musk , who has endorsed Trump, said he would delay a decision on a new plant in Mexico until after the election because “it doesn’t make sense” if Trump wins and puts “heavy tariffs” on vehicles produced there.

Shifting supply chains to other countries is complex. Companies must find new suppliers of raw materials and finished goods. Suppliers and sub-suppliers must be vetted to make sure they don’t violate increasingly stringent U.S. rules on issues such as forced labor.

Anne van de Heetkamp , a vice president of product management at supply chain and logistics technology company Descartes , said when trade tensions started ratcheting up five years ago companies weren’t in a hurry to shift supply chains. Now that the duties appear more permanent, Descartes’s customers are mapping out new global supply networks.

Surging exports out of Southeast Asia, India and Mexico suggest Newell isn’t alone in its desire to reduce reliance on China. The shifts are fuelling new logistics investments in factories, warehousing and transportation operations around the world.

DHL Express U.S., a parcel unit of German logistics giant Deutsche Post , added a new direct flight between Vietnam and the U.S. in 2022 to cater to rising exports that used to reach the U.S. via Hong Kong. CEO Greg Hewitt said the unit is also looking at expanding its networks along the U.S. -Mexico border to serve surging demand there.

Hewitt cautioned that China remains the world’s top supplier of manufactured goods and will likely hold that position because of its streamlined supply chains and low costs for raw materials and labour.

Retail industry trade groups and some executives warn some items can’t be produced anywhere else in the world and that escalating tariffs will simply raise consumer prices and fuel inflation. Analysts at Goldman Sachs estimate that every percentage point increase in the overall U.S. tariff rate would increase core consumer prices by just over 0.1%.

“The problem is the best place to make shoes is China,” said Ronnie Robinson, chief supply chain officer at Designer Brands , parent company of footwear retailer DSW.

Robinson said for every dollar the government adds in tariffs, consumers pay an extra $2 to $4 at the checkout. “The reality is that you and I are paying for the tariffs as part of the ticket price when you go into the store and buy,” he said.

Robinson said Designer Brands sources about 70% of its footwear from China, down from 90% several years ago. He said the company aims to reduce its reliance further to about 50%, but China will remain the company’s largest single source of shoes.

Peterson said just 15% of Newell’s goods rely on products made in China today, down from more than 30% several years ago. He expects that by the end of next year the share will fall below 10%.

He said that when the company is searching for new Chinese suppliers one of its first questions is whether they have capacity or plan to add capacity outside the country.

“If a supplier doesn’t have manufacturing capability outside of China, we will not select them as a vendor for us,” he said.

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

Tariffs Are on the Table for U.S. Importers, Whatever the Election Outcome

U.S. companies are pulling away from China as Democrats and Republicans increasingly impose duties on Beijing

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.