Trump winning White House likely to lead to significant implications for tariffs

Why is it relevant?

President-elect Trump has proposed a series of sweeping tariffs aimed at reshaping trade relations and promoting US-based manufacturing. His suggested measures include a 10% to 20% tariff on all imports and a potential 60% tariff specifically targeting imports from China. Notably, he has also proposed substantial tariffs, ranging from 100% to 200%, on vehicles originating from Mexico. This move could significantly affect businesses dependent on Mexican Maquiladora operations. In the final days of his campaign, Trump emphasized his intent to impose a 25% tariff on all Mexican exports to the United States immediately upon assuming office. 

Observation: Potential tariffs should be modeled based on location of current sourcing countries to calculate what may be a material additional expense to the business. This also should be evaluated alongside President-elect Trump’s tax proposals. He has championed a lower corporate tax rate to encourage domestic production, proposing that revenue from increased tariffs could help offset some tax reform costs. While the president holds authority to impose tariffs under certain conditions (e.g., in response to unfair trade practices) without needing Congressional approval, legislative action generally could be required to officially count tariff-generated revenue as an offset in a reconciliation bill. Consequently, the composition of the House and the broader congressional legislative environment also will play a crucial role in determining the outlook for these proposals.