Board series: Retaliation – The world responds to U.S. Tariffs

Canada strikes back

Canada is the largest supplier of steel and aluminum to the U.S., on Wednesday, March 12, leaders said it will place 25% reciprocal tariffs on steel products and raise taxes on a number of items: tools, computers and servers, display monitors, sports equipment, and cast-iron products.

• This equates to about $20.8 billion of U.S.-made items
• Canada is looking to match the tariffs “dollar for dollar”
• Ontario’s premier announced that effective Monday, March 10, Canada will be charging 25% more for electricity to 1.5 million American homes and businesses (which goes primarily to Minnesota, New York, and Michigan)

The EU follows suit

The EU has announced it will raise tariffs on iconically American exports: beef, poultry, bourbon, and motorcycles, peanut butter, and jeans. European Commission President Ursula von der Leyen has predicted that prices will go up in both Europe and the U.S. and that jobs will be on the line. “We deeply regret this measure. Tariffs are taxes. They are bad for business, and even worse for consumers,” von der Leyen said. A few more considerations on the EU’s approach:

• EU officials have made clear that the tariffs are aimed at products made in Republican-held states, such as beef and poultry from Kansas and Nebraska. However, the tariffs will hit blue states like Illinois, which is the number one producer of soybeans in the U.S.
• Spirits producers are caught in the middle. Prior to the trade war, the EU has been a major destination for U.S. whiskey, with exports surging 60% in the past three years after an earlier set of tariffs was suspended

UK agrees to negotiate, breaks with EU

The U.S. has open discussions with the U.K., which has reaffirmed its commitment to U.S. trade talks even though British exports may be hampered. It has broken with the EU in its openness to negotiate, although Prime Minister Keir Starmer said he was “disappointed” by the U.S. decision to impose 25% levies on foreign metal products without exemptions on Wednesday morning (March 13):

• About 7% of British steel exports went to the U.S. in 2024, although steel is a small part of the UK’s $511 billion export portfolio
• The tariffs come at a challenging time for the UK steel industry, as it battles with high energy costs and depressed domestic demand

China refuses to be bullied

The trade war between the world’s biggest economies continues to escalate. Saying it won’t be “bullied,” Beijing is looking to target specific American goods with retaliatory taxes, among other measures, following a doubling of tariffs to 20% by President Trump. China has responded with:

• Imposing a 15% tariff on select agriculture imports, including chicken, corn, cotton, and wheat
• Adding a 10% levy on U.S. aquatic products, beef, dairy, fruits and vegetables, pork, soybeans, and sorghum imports
• Placing 15 U.S. companies on its Export Control List, which prohibits Chinese firms supplying American companies with dual-use technologies, and 10 American companies to its Unreliable Entity List
• Investigating Google as part of anti-monopoly probe and non-tariff measures
• Establishing an import tax on S. coal and liquefied natural gas (LNG) of 15% and a 10% charge on crude oil

Mexico delays its response, places bet on a future deal

In the first week of March, President Trump imposed 25% tariffs on all imports from Mexico (as well as Canada), then offered a month-long reprieve. Mexican President Sheinbaum said she expects exports under the USMCA to remain exempt from tariffs.

• In contrast to Canada, Mexico is delaying its response to U.S. tariffs on steel and aluminum imports. President Sheinbaum plans to wait until April to “then make our decision on whether or not to impose reciprocal tariffs”
• Around half of Mexican exports to the U.S. are USMCA-compliant and the government aims to boost that to 85%-90%, according to the Economy Minister Marcelo Ebrand
• Mexico’s GDP contracted at a seasonally adjusted rate of 0.6% in Q4 of 2024 as trade tensions loomed
• Elsewhere in Latin America, Brazil has also said it will take a reciprocal approach to new U.S. tariffs on steel and aluminum only after attempting to negotiate an alternative

U.S. companies react and embrace new strategies to stay competitive

• Best Buy has warned of the possibility of higher prices for American shoppers
• Target also warned about price hikes as it depends on fruit and vegetables from Mexico during winter
• General Motors has lobbied the president against tariffs while also making plans to prepare for them by considering moving plants to the U.S.
• Kroger is working with its merchandising and sourcing teams to diversify its supplier base for commodities in its fresh business
• Coca-Cola has announced that if aluminum tariffs hold, the company may place more “emphasis” on plastic bottles
• Costco executives stated that its “treasure hunt structure” allows it to adjust its merchandise mix more easily than others and source products from countries that are not subject to tariffs
• Alcoa has said it will reroute its Canada-made aluminum to Europe to avoid U.S. tariffs and send its Australian output to the U.S.
• Chipotle has shared plans to “absorb” any additional costs that arise from tariffs on Canada and Mexico unless those costs turn into a significant headwind
• HP said the server maker would leverage its global supply chain to mitigate cost pressures
• Honda has decided to locate production of its next-generation Civic hybrid in Indiana, instead of Mexico
• Pfizer has released plans to move overseas manufacturing to its existing plants in the U.S. if required
• Apple has unveiled plans for a $500 billion investment in the U.S., that will include a factory in Texas
• Eli Lilly has also followed suit and announced its plan to spend at least $27 billion to build four new manufacturing plants in the U.S. over the next five years

Actions boards can take:

With so much changing by the minute, it’s pre-emptive to be overly prescriptive with what happens next. For non-core areas of the business, a wait-and-see approach is what large businesses are taking. For tariffs that impact your core business, boards should continue to advance supply chain monitoring and agility measures:

• Assess supply chain risks – operational, financial, political
• Review currency fluctuation risks and mitigants
• Leverage under-utilized domestic manufacturing capacity
• Engage in pre-competitive advocacy
• Monitor pricing strategies and merchandising flexibility
• Optimize operations for agility, multi-sourcing
• Improve supply chain traceability and reporting
• Develop geopolitical scenarios to reroute commodities to reduce exposure to existing and potential tariffs

Questions for the boardroom:

• How are we exposed to U.S. and global tariffs, duties, levies, taxes? How are our suppliers impacted?
• Where should we expect expense and inflationary pressures in our cost structure? How can we adjust our operating model to limit our cost pressures?
• What steps have we taken to identify Chinese export ban exposure on critical resources and minerals? What is our current degree of exposure to shocks in input accessibility?
• How have we accounted for shifts in demand factors within an intensifying environment of trade war escalation?
• What are the criteria for a component and/or final product from China to be considered essential for national security and economic prosperity?
• How can we improve supply chain traceability and reporting automation?
• To what extent do we face exposures to other import tariffs and levies from Canada, Mexico, and BRIC countries?
• How do we reconfigure and improve supply chain agility over the next 12 months? 24? 36? What do we need to solve today vs. in the next 2-3 years?
• What is an appropriate lead time to diversify critical mineral suppliers?

As trade tensions escalate, businesses must proactively adapt to evolving tariff policies and international retaliation measures. Corporate leaders who embrace supply chain agility, financial resilience, and strategic advocacy will be best positioned to navigate this turbulent trade environment.