The risks of President Trump’s trade policies

President Donald Trump’s inauguration speech and subsequent executive orders have provided further insights into his proposed trade policies. 

His emphasis on protectionism, territorial expansion, and the establishment of an “External Revenue Service” marks a significant shift in the approach to international trade, raising concerns among stakeholders in global supply chains.

While intended to prioritise domestic economic growth, these policies could have far-reaching consequences for international trade, supply chains, and geopolitical stability.

In his inauguration speech, President Trump stated a commitment to reversing what he views as exploitative trade practices. Key elements of his vision include:

Tariffs and Revenue Generation: Trump announced the establishment of an “External Revenue Service” to manage tariffs, duties, and revenues, asserting that this would generate “massive amounts of money pouring into our treasury coming from foreign sources.” He also hinted at potential tariffs of 25% on imports from Mexico and Canada, with implementation possibly starting as early as February.

Territorial Expansion and Strategic Assets: In a surprising claim, Trump indicated intentions to “take back” the Panama Canal, erroneously stating that China operates it. He further noted ambitions to expand US territory, with implications for regions like Panama, Greenland, and Canada. These statements have added to geopolitical uncertainties.

Inflation Concerns: Despite his stated goal of reducing inflation, Trump’s emphasis on tariffs directly contradicts this aim. As economic experts have pointed out, tariffs tend to increase costs for businesses and consumers, creating inflationary pressures.

Implications for Global Trade and Supply Chains

Tariffs and Retaliation
The proposed tariffs, including the suggested 25% levies on Mexico and Canada, pose a risk of retaliation from trading partners. Such measures could disrupt the smooth flow of goods, increase trade barriers, and lead to a cycle of reciprocal tariffs. Industries like automotive, manufacturing, and electronics, which rely heavily on global supply chains, would be particularly affected.

These policies also threaten to undermine trade relationships between the US and its partners, creating uncertainty for businesses dependent on predictable supply chain operations.

Inflationary Impact
Trump’s claim that tariffs would enrich the US by taxing foreign countries misrepresents how tariffs function. In reality, these costs are borne by importers and ultimately passed on to consumers in the form of higher prices. This would likely lead to inflation, contradicting the administration’s stated goal of reducing costs and combating record inflation.

Geopolitical Tensions
Trump’s assertion regarding the Panama Canal and broader territorial ambitions increases geopolitical uncertainties. Control of key trade corridors like the Panama Canal is crucial for global shipping routes, and such rhetoric risks destabilising international relations. The suggestion of US territorial expansion further complicates trade dynamics, with potential repercussions for trade routes and global commerce.

Impacts on the UK and Europe
For the UK, the indirect effects of Trump’s policies are concerning. Europe, a key trading partner for the UK, may face economic disruptions due to strained US-EU trade relations. The UK’s automotive, machinery, and chemicals sectors, which rely on seamless integration with European supply chains, could experience higher costs, delays, and reduced demand.

Additionally, retaliatory measures by China and other US trading partners may flood global markets with cheaper goods, increasing competition for European industries and indirectly affecting UK exporters.

At Metro, we leverage award-winning services and deep market expertise to help businesses navigate the challenges posed by new tariffs, rising trade barriers, and supply chain disruptions. Whether it’s mitigating the impact of rising trade barriers, reconfiguring supply chains to address changing energy policies, or responding to broader global and UK economic developments, Metro provides tailored insights and solutions to ensure your success.

In times of uncertainty, preparation is key. With Metro as your trusted partner, you can adapt and thrive in this evolving landscape.

Contact Managing Director Andy Smith today to explore how we can safeguard your supply chain and help you navigate the complexities of 2025.