The possible impact of tariffs and migration policies planned by the incoming Trump administration in the US have ignited much speculation, debate, and concern across industries. Economists and experts agree: these tariffs and policies will have a wide-ranging effect and will reverberate through key sectors such as manufacturing, pharmaceuticals, consumer goods, electronics, automotive, and aerospace. 

Direct purchases of key materials such as steel, aluminium, electronic components, and finished consumer goods from China are expected to be significantly affected. Compounding this uncertainty is the real risk of retaliation from affected nations, which are impossible to accurately predict. Furthermore, the potential for the new administration to extend tariffs to the EU adds an additional layer of complexity. However, much remains unclear – the pace of the implementation and the precise scope of these tariffs are still subjects of speculation, as some experts are talking about trade exclusions and other such agreements.

The Indirect Procurement Lens

Temporary Labour: The Human Element at Risk

At CASME’s December 2024 CASME Temporary Labour North America RoundTable, procurement leaders and temporary labour category experts across various industries shared consensus: the significant risks of industrial, manual and service labour shortages arising from tariffs and tighter migration policies. These acute shortages will likely affect US or US-based companies with considerable spend in labour-intensive facilities management categories, such as warehouse operatives, engineers, maintenance staff, catering, and services labour within hotels, as well as temporary labour within construction.

IT and Electronics: The Domino Effect

If tariffs are implemented on Chinese sub-products and finished goods, it will also significantly affect the IT hardware and electronics industry. According to recent estimates, up to 90% of IT hardware spend could be impacted, with potential cost increases of 10-30%. Interestingly, IT outsourcing deals or offshore call centres may not be affected as much, if the location is in countries such as India or the Philippines. (It is worth noting that the proposal of universal tariffs may affect imports from all geographies). However, watch closely if the location of your remote IT or call centre provider is in Mexico or Canada. Once a prudent nearshoring strategy, these countries are expecting new US-imposed trade barriers and may enforce their own ‘reciprocity’ fees.

Transportation and Logistics: A Shifting Landscape

Logistics, the backbone of global supply chains, is another sector bracing for potential disruption. Labour shortages, higher ocean shipping rates, and increased trucking spot rates are expected. Established trade routes may face significant changes, forcing companies to reassess their supply chain strategies. Imagine shelves running empty because goods are stranded at ports or rerouted through costlier, less efficient pathways.

Short-Term Strategies for Procurement Resilience

What action can procurement professionals take now to ensure continuity of supply and minimise the cost impact associated with tariff and migration policies? Here are some immediate steps to consider:

1. Map Your Supply Chain Vulnerabilities: Identify your major suppliers and conduct a comprehensive supply chain vulnerability risk assessment, including second-tier suppliers
2. Engage Early with Suppliers: Open an early dialogue with suppliers to understand the risks and shortages they face in supplying your organisation with the goods and services targeted by the Trump Administration’s economic policies. Ask about how they plan to handle potential shortages or cost increases, listen to their mitigation strategies and suggestions 
3. Diversify Supply Sources: It is imperative through this dialogue to evaluate and choose your core preferred suppliers and to avoid single sourcing for a category, if possible, as supply shortages may create a seller’s market 
4. Collaborate Internally: Establish cross-functional teams with business stakeholders to chart a cohesive plan of action, and seek the support of legal experts to check the validity of pricing, force majeure, and review and potentially revise tariff-related clauses and immigration policy changes
5. Develop Cost Sharing Models and Contingency Plans: For certain categories, such as temporary labour, you may wish to secure critical roles, flip select roles to permanent, and implement flexible working arrangements or softer service level agreements (SLAs) for non-core workers. For IT, you may wish to prebuy or explore leasing options for hardware or electronics
6. Leverage Technology: Use AI tools to forecast alternative logistics routes to avoid tariffs, optimise inventory management practices, and mitigate disruptions 
7. Set Up a War Room: Create a lean centralised team, and processes, to monitor announcements, disseminate accurate information, prepare for action, and respond quickly to policy changes.

The Long Game: Future-Proofing Procurement

While short-term, tactical interventions are critical, long-term strategies will define success and ensure future competitiveness. 

Forward-thinking teams should explore:

• Technology and Automation: Invest in virtual reality (VR) training for skilled temporary workers, robotics for labour-intensive roles, and predictive analytics for logistics
• Product Redesign: Reduce reliance on tariffed components by innovating in product design, especially technology/electronics
• Data Collaboration: Use big data analytics for transportation and logistics to build resilient, insight-driven supply chains.

Imagine a future where automation offsets labour shortages, AI ensures supply chain agility, and redesigned products entirely circumvent the impact of tariffs. This is the vision that procurement leaders must strive towards.

Adapt, Collaborate, and Thrive

In the face of volatility, the strength of procurement lies in adaptability, collaboration, and foresight. The Trump administration’s policies may bring challenges, but they also present opportunities to rethink strategies, build stronger supplier relationships, and embrace innovation.

Much remains unknown, so keeping a close eye on the economic policies of the new administration and collaborating with industry bodies, suppliers, and procurement peers is crucial during these uncertain times.

CASME runs over 200 events a year which are open to organisations with a corporate membership. Highlights in Q1 2025 include “Optimising Outsourced IT Professional and Support Services” a RoundTable for the EMEA region on 28 January. The same event will also run in North America on 25 February.  “BPO Strategies and Trends,” a RoundTable for EMEA/North America members will take place on 26 February. Complimentary access to a CASME event may be granted to non-members as part of a Test Drive. Enquire here.