Last week, Donald Trump defied the odds and was elected to a second term in the White House. After sparking a trade war with China and renegotiating NAFTA in his first term, a second Trump term may likewise generate significant impact on manufacturing.
Already, industry in the US and around the world is leaning in to learn how the incoming administration will act on international trade and manufacturing. A second Trump term is expected to be similar in some ways to the first term, but perhaps bolder and more aggressive. And certainly, signals from the Trump people have confirmed these expectations.
Donald Trump promised on the campaign trail to raise tariffs, bring manufacturing back to the United States, and renegotiate his trade deal, the USMCA. His brand of protectionism stands in stark contrast to the globalism of previous decades, and it has manufacturing sitting up and paying attention.
But just what are Trump’s plans for industry and international trade? How will this incoming Trump term impact manufacturing?
In his first term, Donald Trump implemented a 25% tariff on $200 billion USD in goods imported from China. Later he threatened to apply these high tariffs to another $325 billion of China’s exported goods. When he also placed a 10% tariff on steel and aluminum, China responded by raising tariffs on $3 billion of US steel and aluminum exports. But, before Trump’s additional 25% tariffs went into effect, China’s government negotiated an agreement with the Trump administration to delay the hikes indefinitely.
If Trump’s first trade war with China is any indication, a second Trump term will likely see more tariffs on Chinese goods, resulting in less trade with the country. Already, Mexico has surpassed both China and Canada as the top US trading partner. Due to tariffs that targeted China in response to what Trump said was an unacceptable trade deficit, trade with China has become more expensive. And manufacturers have begun looking elsewhere, considering nearshoring options like Mexico, instead.
But it’s not just China that will potentially see higher tariffs. When Trump takes office in January, he is expected to make protectionist tariffs a priority. He has long promised to bring manufacturing back to the states by raising tariffs on internationally manufactured goods, and it seems high up on his list of priorities.
He has promised 10% tariffs on all imported goods across the board. He has discussed even higher tariffs on China and Mexico, but details here are fuzzy. Currently, goods manufactured in Mexico for export to the US are duty-free by international treaty. And China has already begun to respond to the shifting trend, setting up factories in Mexico for export to the US. This loophole is likely to be addressed during Trump’s second term.
A key supporter of Donald Trump’s second campaign was Elon Musk, founder and owner of Tesla, the leading US EV manufacturer. Musk is poised to invest significantly in further US-based automotive manufacturing, and Trump’s focus on bringing this industry back to the US may be bolstered by this partnership.
In all likelihood, the next four years will probably see more automotive manufacturing in the United States due to tariffs overall, but also due to targeted tariffs likely to be placed on automobiles manufactured abroad. Automotive manufacturing states like Michigan were crucial in bringing about a second Trump term, and President Trump is expected to revitalize these clusters in the US. He is also expected to reverse the Biden Administration’s light-duty vehicle emissions standards, sometimes referred to as the EV mandate.
In this push for reshoring manufacturing to the US, North America at large will likely see a rise in manufacturing. Mexico, Canada, and the US already form a tightly-knit, cohesive and dynamic manufacturing unit. This unit competes, not among member countries, but with other global regions.
This phenomenon is sometimes called regionalism and stands in contrast to globalism. Once the dominant trend, globalization is being replaced. Regionalism stands out as a more resilient and sustainable model for international manufacturing. And this second Trump administration may view this trend as a good thing for the America-first cause.
While NAFTA set off a wave of free trade and globalism, Trump renegotiated the landmark free trade agreement in his first term and renamed it, the USMCA. One of the main differences between NAFTA and the USMCA was a provision requiring review and amendment every six years. The treaty is due for review in 2026, during Trump’s second term.
Trump has already stated that he wants to exercise this renegotiation clause to make a better deal, especially regarding the China-in-Mexico loophole and the automotive industry. The goal is to bring more manufacturing to the US without losing Mexico as a valuable trade partner. But allowing China to piggyback on this deal is a concern for an incoming Trump administration.
There are two months remaining before Trump’s second term begins. But already, there are supply-chain concerns in the manufacturing industry that new tariffs on inputs will increase the cost of manufacturing in the US. Many manufacturers are frontloading shipments in order to get them into the country prior to Trump’s inauguration in January of 2025. While this urgency may prove to be uncalled for, shipping stocks have already begun to decline on fears that trans-oceanic trade will diminish long-term.
Whatever policies this second Trump term actually produces, manufacturers in the US are watching for another round of international negotiations, a possible trade war, long-term growth in North America, and maybe a surprise or two along the way.
