An interview with Jackson Wood, Descartes Director of Industry Strategy
While the possibility of tariffs being imposed on U.S. imports during the early days of the second Trump Administration is no surprise – after all, this was one of the most prominent campaign promises during the 2024 election – the uncertainty about the tariffs leaves an open question about U.S. imports in 2025, according to Jackson Wood, Director of Industry Strategy, Global Trade Intelligence for Descartes, a leading provider of international import and export data via Datamyne (see Top 100 US Importers and Top 75 Exporters charts derived from Descartes-Datamyne data).
On February 1, the Trump Administration imposed 25% tariffs on imports from the two largest U.S. trading partners – Mexico and Canada – scheduled to start on February 4. Then, on February 3, President Trump agreed to a 30-day pause on the tariffs for both countries. But it’s anyone’s guess as to whether these tariffs will ultimately materialize. Meanwhile, a 10% additional tariff on China imports went into effect on February 4.
This aligns with Wood’s advice in the June 2024 issue of AJOT to “expect the unexpected” with respect to the global trading environment, which has been experiencing volatility since 2020 caused by a variety of factors including the COVID pandemic, regional conflicts and geopolitical tensions.
A History Lesson
A February 1st White House statement says, “Tariffs are a powerful, proven source of leverage for protecting the national interest.”
Wood explains, “President Trump is trying to compel companies to bring more of their manufacturing back to the United States by challenging the viability of low-cost sourcing options from Mexico, Canada or China.”
But does history show that tariffs accomplish the goal of increasing U.S. domestic manufacturing?
“When the first Trump administration implemented tariffs, it didn’t result in a U.S. manufacturing renaissance,” Wood responds. “Companies didn’t start to build new manufacturing facilities all of a sudden. There was a little bit of that, but mostly it just shifted where products were coming from and where they were going to. So, I think that is the most likely outcome, at least in the short term.”
And S&P Global Ratings economic team echoed the feeling stating, “in our first high level estimates--found the potential effects of the tariffs proposed by the Trump administration are overwhelmingly negative, said a report titled “Macro Effects Of Proposed U.S. Tariffs Are Negative All-Around.” Adding the “potential effects include slower GDP growth, higher unemployment and inflation, and a stronger U.S. dollar. The effects on the U.S. are smaller than for trading partners.”
If You Can’t Beat Them ...
On the other hand, overseas companies may respond to tariffs by opening their own manufacturing facilities in the U.S., which would align with the new administration’s goals. At the World Economic Forum (WEF) in January, President Trump said, “My message to every business in the world is very simple: come make your product in America and we will give you among the lowest taxes of any nation on earth. But if you don’t make your product in America ... you will have to pay a tariff.”
“That’s a pretty direct comment and I think it’s likely that some companies are considering it,” Wood says. “Maybe that approach will be reflected in the types of investment decisions that business leaders around the world make.”
Balancing Act
Because of the uncertainty, Wood sees it as a difficult balancing act, and some companies may just wait it out, thinking, “Do we really want to play whack-a-mole with these tariffs, or do we want to figure out how to either absorb some of the costs or negotiate with customers to share the pain.”
Wood suggests this might be the best option, if it is going to be a continuous game. Are there going to be tariffs or not? Is there going to be a free trade agreement or not? “I think it’s incumbent on business leaders to deal with reality and not on speculation, and admittedly that is getting harder by the day,” he concedes.
“Both Canada and Mexico are realizing that they may be too invested in the trading relationship with the U.S., because of proximity and history, and now the relationship with their number one trading partner is incredibly volatile and uncertain going forward.”
Using his native Canada as an example, Wood poses a scenario where the country could focus on expanding economic relationships with other countries. “While that is easier said than done for any country, the amount of time, energy and attention that is going to be spent trying to divine what’s going to happen next could potentially be better spent by getting organized around diversifying and doing more business with the European Union, Asia and even Africa,” Wood says.
The Long Run
What happens to U.S. imports in the long run?
“If tariffs continue, it’s hard to imagine that imports into the United States won’t decrease,” Wood concludes. “The United States will become less of an import-driven economy. That will take years to change, but the expectation that the volume of U.S. imports will continue to rise, as we’ve seen over the last several years, is a pretty open question at this point.”
Wood continues, “What we thought was going to be true with the U.S., Mexico and Canada changed in a matter of hours on February 3, so I don’t think it’s necessarily accurate to say tariffs are going to be the primary factor going forward. I think uncertainty and volatility in general will continue to be the two predominant forces impacting global trade.”
Wood concludes that the lesson here for the industry is about having supply chain flexibility and responsiveness. “You can no longer be single-threaded with one really important customer or supplier. You need to have all options on the table with respect to how you think about your business from a global perspective.”
