Tariff Turmoil: Taking a long- and short-term view

We’ve talked about how important it was to get ready for change in 2025 – and, boy, were we right! One area of anticipated change that is causing a huge amount of turmoil at the moment is tariffs. While we’re still waiting to see how things will develop, thinking about what these policies could mean in both the short and long term is crucial to help plan your sourcing strategy for the coming months.

Potential benefits in the long term

First, the good news. If we look at the current tariff policies with an eye to the long term, the expected shorter-term inflationary impacts could be outweighed by potential benefits, such as:

1. Increased tariff revenue: A universal 10% import tariff (and higher on certain goods) could generate tens of billions in annual revenue for the U.S. Treasury. This could be reinvested in domestic infrastructure or education, or even be used to reduce deficits.
2. Reshoring of jobs: Tariffs can make offshoring less attractive and help rebuild critical U.S. manufacturing — especially in industries like semiconductors, pharmaceuticals, and electronics. More domestic jobs equals a broader tax base, plus improved economic security.
3. Geopolitical leverage: Reducing dependency on countries like China can give the U.S. more bargaining power in global negotiations and reduce exposure to supply chain shocks.
4. Encouragement of alternative trade partners: Tariffs on specific countries may nudge U.S. businesses to diversify suppliers, benefiting allies or friendly nations and creating more balanced, secure trade ecosystems.
5. Increased domestic investment: Higher prices on imports create room for domestic producers to thrive, increasing investments in automation, sustainability, and workforce development.

Short-term turbulence

And now the not-so-good news: the road to realizing these benefits may be rocky. We anticipate some short-term pain in the form of higher prices and supply chain disruption. In the food and beverage industry, it’s too early to tell what the real impact will be, but we expect that price rises will eventually be passed on to consumers.

In general, we may see supply disruptions from countries that choose to stop exporting to the U.S. instead of tariffing – driving up prices for these goods. Manufacturers that rely on imports could see cost lifts in the 10-15% range.

Companies that already produce domestically will have a leg up. For example, when it comes to automobiles, Ford looks like a winner, since their chassis are essentially U.S. products from end to end. We can expect to see a run on true domestic suppliers – so be prepared. U.S. companies may be ready with supply in a year or two or three, but this will not happen immediately, and the biggest customers will get first access to supply.

The story is, of course, not black and white, as product origins are very layered, with components coming from different countries. Unfortunately, many of the disposables and much of the specialty paper used in the hospitality industry comes from Asia. The same is true for complex Maintenance Repairs and Operations and CapEx equipment.

As you plan your sourcing of imported operating supplies and equipment, disposables, paper, etc. in coming months, we suggest you think of them as occupying three buckets: (1) rigid spec – those things that are brand or proprietary imports and cannot be changed; (2) semi-rigid spec – seemingly hard spec imports you might consider lower-cost alternatives for; and (3) substitutable products that you don’t mind sourcing alternatives for, such as disposables. This will help you strategize around how to ensure you can access the goods you need as the situation continues to develop.

A little more good news

Even if inflation ticks up by 0.5-0.8%, it should still be manageable, especially if it’s a one-time adjustment rather than a sustained spike, it leads to higher real wages and economic stability down the line, and the Fed can offset pressure with policy tweaks if necessary.

And no matter what comes down the line, you can depend on CORE Insights Group to help you through it, with decades of experience in sourcing strategy and programs that can save you money on all the goods and services your business relies on.

Impacts and benefits in a nutshell