Companies need to assess the potential impact of the tariffs many expect the incoming presidential administration to levy, including examining changes to supply chains and cost structures, PricewaterhouseCoopers partners said during a panel discussion round about post-election economic impacts this week.
As PwC assesses how fees might affect client companies, “often the fee increases are larger than the company’s current annual profits,” said Brett Cayot, director of U.S. transformation operations for the Big Four company. “These findings are raising a lot of questions like, ‘How can I change my supply base?’ Can I move manufacturing?’”
In November, President-elect Donald Trump pledged to enact tariffs on Mexico, Canada and China, imposing a 25% tax on all goods entering the country from Canada and Mexico, and an additional 10% tariff on goods from China.
In response to these developments, companies are expected to shift their supply chain footprint, such as when they moved from China to Mexico in 2018, Cayot said.
In PwC’s most recent executive Dust survey as of October, before the election, 75% of respondents said they agreed or strongly agreed that a universal 10% tariff on imports would significantly hinder growth.
If alternative proposals are considered, including those imposing a 60% tariff on goods from China and a 25% tariff on goods from Mexico or Canada, the impact increases substantially, with tariff increases of up to 800,000 million dollars annually according to PwC projections. Cayot said during the round table. (This estimate does not take into account rights reduction processes.)
As a result, companies should conduct their own analysis of how the tariffs might affect them, said Rohit Kumar, leader of PwC’s US National Inland Revenue office.
“These rates are here. They are coming. They are here to stay,” Kumar said.
Leveraging technology to improve supply chain efficiency
PwC experts said early adopters of “next-generation technology” will be in a better position to adapt to disruptions.
“They’re finding new ways to create value,” Cayot said. Companies should “know what your potential impact is and be able to really identify your areas of highest exposure, and then extend that to a true digital twin of the supply chain,” he added, noting that this could be a good use case. for AI and machine learning. In turn, companies can consider alternative lines of the supply chain when necessary.
Companies should also consider new business models and how to improve supply chain operations, Cayot said.
Companies should “start implementing zero-cost opportunities across the business,” noting that leaner companies will be better prepared to navigate and maintain a competitive edge, he said. “When there’s a disruption, you have to ask yourself, where could it be disrupted or where could it disrupt the market?”
But until the new rules are implemented, uncertainty about the application of tariffs will continue to worry companies.
“At the moment, companies are really challenged. They know they have to do something. They just don’t know what, because of all the uncertainty and open questions,” Cayot said.
Editor’s note: This article has been corrected because state tariffs could increase by as much as $800 billion annually. The article previously said rates could rise by $1.2 trillion.
