How Tariffs Affect Different Industries

Given the plan to have the steel & aluminum tariffs jump to 50% this week, I wanted to share data on the downstream industries whose cost structures are most impacted by this action. I've done this by using the latest benchmark use table from the input-output accounts (https://lnkd.in/eQdPji9) and calculated each industries' combined use of (i) Iron and steel mills and ferroalloy manufacturing [331110]; (ii) steel product manufacturing from purchased steel [331200]; (iii) Alumina refining and primary aluminum production [331313]; and (iv) Aluminum product manufacturing from purchased aluminum [33131B]. I then summed the use across these four commodities and divided this sum by each industries' total intermediate inputs (which includes all goods, utilities, and services). Below are the top sectors. Thoughts: •For many industries in fabricated metals (starting with NAICS 332), we see steel and aluminum make up more than 40% of the cost structure. If we assume that domestic prices ultimately rise something like 35% from a non-tariff scenario, that would represent a 15% increase in costs. This is a conservative estimate because I'm using all intermediate inputs as the denominator; if I used only goods and utilities, this figure would be much higher. •As expected, we see substantial impacts on transportation equipment (the major impact on military armored vehicles is a bit ironic) and machinery. Transportation equipment and machinery are two sectors where the USA is very globally competitive; these tariffs make us less competitive by raising producers' costs. For example, the last thing John Deere needs is to be paying higher prices for steel and aluminum as it tries to compete with European rivals for business in Australia. •It's worth again stressing these affected downstream industries employ far more people than employed in making steel and aluminum. This is why tariffing upstream industries has been termed "Self-Harming Trade Policy" (see https://lnkd.in/gWgxQjtY). Implication: many industries will be starting this week with the reality that they are looking at their costs rising substantially due to POTUS's steel and aluminum tariff escalation. This is precisely the type of action that makes the FOMC less likely to reduce interest rates anytime soon. #supplychain #economics #shipsandshipping #manufacturing #freight

I have a new first question for every CPG founder I speak to: How are you (or might you be) affected by the tariffs? Unacceptable answers: ❌ "We're not worried about it." → You should be. Tariffs impact pricing, margins, and supply chain risk. If you haven't analyzed them, that's a red flag. ❌ "I don't know yet." → You don't need perfect answers, but you should be able to estimate based on your current materials and supply chain, and you absolutely must have a plan to get them. ❌ "We'll figure it out if/when it happens after the 90 days." → That's reactive. Investors fund proactive founders who get ahead of problems. ❌ "Our manufacturer/distributor/importer/supplier will handle that." → You're responsible for your unit economics. Push for real answers. You can't wave this away. Acceptable answers are: SOURCING MATERIALS: -My raw materials are sourced from [country], and the current tariff is X% and possibly going to Y%. This will change my margins from A% to B% in a worst-case scenario. - I source my materials from an importer/distributor/supplier, and I've asked them for exact figures. Early calculations show a decline in my gross margin from X% to Y%. MANUFACTURING: - We manufacture in the US and aren't directly impacted, but our packaging components are sourced from [country] and will increase costs by $C. - We're currently offshore. We've run models on relocating to a US partner. Costs would rise by $C per unit and delay production by 4–6 weeks. - We manufacture offshore and plan to continue doing so. Our landed cost will increase by $C per unit due to new tariffs. We've modeled this into our margin assumptions and adjusted pricing, sourcing, and volume targets accordingly. EFFECT ON RETAIL PRICE: - We're raising prices to protect margin, and we believe we can hold demand because we are a premium product/were low to begin with/have a sticky customer base. But we're reducing forecasted units by X%, and we'll hit profitability Y months later. - We're holding prices and accepting lower margins. It's going to slow our path to scale by Z months, and I've updated our capital plan accordingly. ALTERNATIVES: - We've researched new suppliers/manufacturers in A, B, and C. Our best options are [A, B, or C] in the short term and [A, B, or C] in the long term. We've implemented a quarterly sourcing review process to avoid surprises and stay proactive. CASH FLOW IMPACT - Tariffs increase our landed cost by X%, which changes our inventory strategy. We now need $Y more in working capital per order cycle. This shortens our runway by Z months and changes our next raise to A. Of course, these aren't the only acceptable answers, but please note what the acceptable answers have vs. the unacceptable: - Detail - Specific Data - Research-Backed Estimates If you haven't done this work, I suggest preparing this before pitching. PS - Reach out if you need a good fractional CFO recommendation to help you with this. I have several.

One stated rationale for the new Trump tariffs on Canadian, Mexican and Chinese goods is to reinvigorate manufacturing in the U.S.... but I don't see it happening for the outdoor industry. Why? 𝟭. 𝗨𝗻𝗽𝗿𝗲𝗱𝗶𝗰𝘁𝗮𝗯𝗶𝗹𝗶𝘁𝘆 Onshoring manufacturing could take years to reestablish expertise, infrastructure and supply chains, but the Trump administration is highly unpredictable and subject to whims. The new 25% tariffs on Canadian and Mexican goods break the United States-Mexico-Canada Agreement (USMCA) negotiated by Trump's own administration in his first term. Companies made major investment decisions based on that agreement. They are unlikely to risk being fooled again. 𝟮. 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹 𝗖𝗼𝘀𝘁𝘀 The new tariffs also apply to the materials needed to produce products in the U.S. For example, the last round of tariffs on aluminum extrusions actually caused one of my clients to OFFSHORE their product assembly because tariff rates were lower on assembled goods. Outdoor apparel brand Youer® onshored sewing only to face a 47% tariff on the Polartec fleece they had to import from China... and that was before the current round of tariffs. 𝟯. 𝗟𝗮𝗯𝗼𝗿 𝗖𝗼𝘀𝘁𝘀 The labor costs that originally drove offshoring manufacturing are still a challenge. That challenge is only going to get worse with tightening on all forms of immigration. We lack skilled labor for cut-and-sew, and what exists is primarily from Asian and Central American immigrant populations. 𝟰. 𝗥𝗲𝘁𝗮𝗹𝗶𝗮𝘁𝗼𝗿𝘆 𝗠𝗼𝘃𝗲𝘀 The countries impacted aren't just going to stand still. Retaliatory tariffs will hurt U.S. manufacturing. In addition, a stronger U.S. Dollar or intentional currency devaluation can offset the cost of increased tariffs, lowering the need for companies to act. 𝟱. 𝗢𝘃𝗲𝗿𝗮𝗹𝗹 𝗣𝗿𝗶𝗰𝗶𝗻𝗴 𝗜𝗺𝗽𝗮𝗰𝘁 While the tariff numbers are attention grabbing, the actual impact will be a lot lower. Many outdoor brands had already diversified away from China in recent years. Also, tariffs impact the FOB price from the factory -- usually 20-25% of the retail price -- so the actual impact is 2-2.5% of the retail price. A small(ish) bump on a portion of a brand's total production won't be enough to drive onshoring production. Follow me for #OutdoorIndustry news and analysis: Eoin Comerford

Most people think "tariffs" only refer to import taxes. But that’s only part of the picture. In highly regulated industries, the true cost of importing goes far beyond the monetary duties paid at the border. There are additional forms of risk and expense that businesses often overlook, including: ⇝ Delays due to inaccurate or incomplete documentation. ⇝ Enforcement actions from agencies like FDA or CBP for product non-compliance. ⇝ Confusion or setbacks caused by overlapping and inconsistent regulatory guidance. These are examples of what I call "non-monetary tariffs" and they can be more damaging to a company’s bottom line than traditional customs duties. Tariffs will extract a percentage of value but FDA, USDA or CBP enforcement at the border will cost 100% loss of the goods, very angry customers, and a bad reputation with the Trump Administration. If you operate in FDA-regulated sectors, you cannot afford to ignore these hidden costs. Understanding and anticipating these regulatory obstacles is critical to protecting your operations, avoiding penalties, and maintaining market access in the U.S. Regulatory strategy is not just a legal formality. It is a business survival skill. Watch the full breakdown here: https://lnkd.in/eeKiZSc4 #FDACompliance #TradeCompliance #RegulatoryRisk #CustomsEnforcement #ImportStrategy #SupplyChainRisk #RiskManagement

How could tariffs impact US drugs and drug pricing? --- In March, Marta E. Wosinska, Ph.D. published a comprehensive look at the impact of #tariffs on US drugs (in the comments). While we can't be too sure if the announced tariffs will stick around or be removed again soon, many companies are crafting their strategy with the assumption that there will be tariffs. --- The article highlights several main takeaways regarding the impact of tariffs on different segments of the #pharmacy supply chain. Brand drugs – Because they are under patent protection and command high margins, brand-name drugs are more likely to absorb or partially pass along any tariff-related cost increases to payers (for instance, by adjusting rebates or list prices). – Tariffs also create a strong financial and political incentive for manufacturers of brand-name drugs to move more of their production to U.S. facilities. Generic drugs – Generics make up over 90% of U.S. prescription drug volume but have very thin profit margins. – Tariffs would squeeze those margins further. As a result, manufacturers might discontinue production of some products or cut corners, risking product quality problems. – Given minimal profits on older, off-patent drugs, tariffs alone are not expected to stimulate significant onshoring of generic manufacturing. Injectable drugs – Off-patent sterile injectable drugs are already experiencing persistent #DrugShortages, and tariffs could add to the risk of more drug shortages. – Cost pressures from tariffs could exacerbate shortages because of limited spare production capacity and stringent manufacturing requirements. --- My personal takeaway--tariffs can heighten the risk of shortages, especially for low-margin generics and injectables. With manufacturers unable or unwilling to absorb significant cost increases, any further production disruptions could quickly strain supply and raise prices, particularly if a drug goes from having several manufacturers to a few or one. Onshoring alone does not necessarily solve shortages if no additional #policy tools are introduced to address quality oversight and low margins for older products, which are the same issues we're facing even without tariffs. #LiberationDay

From bourbon to soybeans to Harley-Davidsons, the EU’s new $28 billion tariffs are designed to hit the heart of America’s economy—and its political battlegrounds. In response to Trump’s steel and aluminum tariffs, the EU decided to target industries in states that could shape the 2026 midterms, applying economic pressure in districts that will be crucial for control of Congress. Kentucky’s bourbon distilleries, already battered by previous tariffs, face another round of European duties that could slash exports. Wisconsin’s Harley-Davidson is back in the crosshairs as motorcycles return to the EU’s target list. Midwestern beef and dairy producers—from Nebraska to Wisconsin—stand to lose a major European market, while Louisiana’s soybean farmers, already squeezed by shifting Chinese demand, now face new disruptions in Europe. And it’s not just food and drink—the EU is going after U.S. industry too. The list includes farm machinery from Iowa, boats and snowmobiles from Michigan and Minnesota, and construction equipment from Texas. Even everyday household products—washing machines, refrigerators, and textiles—are on the list, hitting manufacturers in Tennessee and North Carolina. With tariffs rolling out in two waves starting April 2025, the economic impact will escalate in real time. U.S. agribusiness is already bracing for $1.2 billion in annual losses, and manufacturers warn of price hikes as supply chains absorb the shock. With $1.5 trillion in annual trade at stake, these tariffs risk deepening fractures between two of the world’s largest economies. The immediate impact will be felt in factories, farms, and boardrooms, but the bigger question looms: Will this be a temporary standoff, or the start of a trade rift that reshapes U.S.-EU economic ties and fuels broader geopolitical realignments? #Trade #Tariffs #EU #US #TradeWar

Tariffs & Profits: We are only beginning to see the impact of trade uncertainty on corporate fundamentals. Recently, Marathon led the rescue financing (DIP) of a business affected by such uncertainty, in order to give the company the flexibility and additional capital that it needed to restructure and rebuild their business, and enable them to emerge from bankruptcy with a strong position. There will undoubtably be more situations where capital solutions will be required - many without a formal restructuring process. Marathon Asset Management's exceptional credit team performed an exhaustive study of the BSL & HY market at the issuer level to assess the impact of tariffs on each issuer's operating margins, cash flow and resultant leverage. Whereas Marathon’s analysis is company specific, below are six big conclusions that one should consider. 1. Nearly two-thirds of issuers will see de minimis impact from tariffs. 2. The approximately one-third of issuers affected will see a median impact to net cash flow of ~6%. 3. Middle Market private credit will see less overall impact compared to upper-market issuers as larger companies have the most exposure to international trade and tariffs (the same is applicable for HY issuers compared to larger and more global IG-rated corporates in the public market). 4. Whereas U.S. service companies will see minimal impact, a sub-set of industries in manufacturing, IT hardware, industrial and pharma supply and retailers such as those in apparel and footwear will face margin pressure. 5. U.S. exporters will benefit from a weaker dollar; the reverse is true for importers, adding to currency pressure visible in the FX market in recent quarters. 6. We believe that companies subject to tariff pressure are likely to absorb a portion of the cost burden and also pass on a portion of such costs; the resultant impact can be thought of as a tax on the one-third of issuers sucicptible to tariff risks going forward. It is worth noting that corporate fundamentals entered this period of some margin pressure on solid footing; per JPMorgan, recent EBITDA margins of BSL and HY borrowers as of the recent quarter-end were 15.9% and 14.4%, respectively; off the higher levels of recent quarters, but capable of absorbing some tariff impact. At the country level, as Morgan Stanley reported, heads of state in Asia receiving letters sent from the White House are among those most impacted, as shown below:

- Why Tariffs Won’t Bring Anything Back - Tariffs—taxes on imported goods—are meant to push companies to make products locally. But here’s the catch: most companies won’t move factories back just because of tariffs. Instead, they’ll keep making goods in cheaper countries (like Vietnam or Mexico) where workers earn far less than in the U.S. Tariffs just make those imported goods more expensive for everyone, hurting consumers and businesses that rely on those products. TRADE WARS BACKFIRE If one country slaps tariffs on imports, others retaliate. Imagine the U.S. taxes Chinese goods—China might tax American soybeans or iPhones in response. This tit-for-tat raises costs for *both* sides, leading to job losses in industries like farming or tech. During the 2018 U.S.-China trade war, companies didn’t return to America—they just shifted factories to other low-cost countries like Vietnam. SUPPLY CHAINS ARE COMPLICATED Modern products (like phones or cars) rely on parts from dozens of countries. Every country can also require products be manufactured regional to access its markets. Moving an entire supply chain home isn’t just about building one factory—it’s about rebuilding a whole ecosystem of suppliers, which takes years and costs billions. Even Apple, a trillion-dollar company, can’t easily move its iPhone production to the U.S. because its supply chain spans 43 countries. THE RISW OF REGIONAL COMPANIES If tariffs split the world into trade blocs, global companies (like Coca-Cola or Ford) would struggle to survive everywhere. Instead, smaller regional companies would dominate their own markets. For example, Mexico’s Grupo Bimbo might replace U.S. bread brands in Latin America, while India’s Tata Motors could thrive in Asia. But this fragmentation means higher prices, less innovation, and fewer choices for everyone. IN THE END…… Tariffs don’t fix the real reasons companies leave: high labor costs and global supply chains. Instead, they spark trade wars, raise prices, and fracture the global economy. A better solution? Invest in training workers, new technology, and infrastructure to make *local* industries competitive—without starting a cycle of taxes and retaliation.

If the proposed auto tariffs take effect as announced, effective April 2, 2025, the ripple effects will be felt across every layer of retail automotive, from the showroom to the supply chain. The question is: Who stands to win (and lose) in the Auto Industry? The Winners: ▸ Fixed Ops-Focused Dealerships: With new vehicle prices rising, more customers may choose to repair instead of replace. Dealers who’ve built strong service retention strategies stand to gain. ▸ Parts Retailers like AutoZone & O’Reilly are already seeing investor confidence — a signal of rising DIY and DIFM repair demand. ▸ OEMs Manufacturing in the U.S.: Volvo, VW, and others are reevaluating U.S. expansion. Domestic production could become a serious strategic advantage. ▸ Pre-Owned Focused Dealerships: More on this in my Tariff’s Part 3 post tomorrow. But suffice it to say that ANYONE who still has not committed fully to becoming a master of used car operations will continue to have their outcomes largely tied to circumstances well beyond their control.  The Potential Losers: ▸ New Car Buyers: Price increases of $3,000–$9,000+ could hit demand hard, especially for imported brands. That means more hesitation on the sales floor. ▸ Dealerships Selling Tariff-Impacted Brands: If you’re representing Japanese, Korean, or European automakers, expect more price resistance, longer sales cycles, and the need for sharper value positioning. Sales teams will need new tools and messaging to navigate sticker shock. ▸ U.S. Exporters: Retaliatory tariffs could bite back — impacting Ford, GM, Toyota, Honda, Mercedes, and Tesla export operations. ▸ Suppliers (Big & Small): The cost cascade will be real. OEMs will push down pressure, and small-tier suppliers could be most vulnerable. ▸ Innovation: When budgets tighten, R&D often takes the first hit. This could stall progress just as EVs and tech disruption hit full throttle. What This Means for You: 👉 Dealers may see a shift toward service and pre-owned. Franchises tied to heavily imported models must plan now — pricing strategy, inventory management, and customer education will be critical. 👉 Tech providers should lean into helping clients optimize margins, inventory, and customer retention. OEMs and suppliers will need agility — fast. Solutions that improve workflow efficiencies, ROAS, UC inventory management, UC acquisitions, and fixed ops growth are in THE right place at THE right time. Join the Conversation: ❓ What are you seeing on the ground? ❓ Are your customers already reacting? ❓ How should the industry prepare to adapt? #Tariffs #Dealers #FixedOps #RetailAutomotive #SupplyChain #Leadership

A New ‘China Shock’ Is Destroying Jobs Around the World Introduction A new wave of economic disruption, reminiscent of the original China Shock that upended global manufacturing in the early 2000s, is causing job losses worldwide. As U.S. tariffs under the Trump administration divert more Chinese exports away from the American market, countries like Indonesia and Mexico are struggling to absorb the impact of cheaper Chinese goods flooding their economies. Key Details of the Economic Disruption • The Situation in Indonesia: • In Surakarta, a historic textile hub, numerous garment factories have shut down due to competition from low-cost Chinese imports. • Former factory manager Hariyanto, one of 1,500 furloughed workers, is now fighting for back pay and severance as companies collapse under financial strain. • The broader economic fallout extends beyond factory workers, affecting supply chains and local businesses. • Impact Across Other Countries: • Mexico, a key manufacturing hub for U.S. supply chains, is facing increased pressure as Chinese goods are redirected to its markets. • Similar struggles are playing out in other nations reliant on domestic manufacturing, where local industries are being undercut by lower-cost Chinese exports. • Trump’s Tariffs and Their Consequences: • The tariffs aimed at curbing Chinese imports into the U.S. have instead shifted economic pressure onto emerging markets. • Governments in affected nations are now debating policy responses to mitigate the damage while avoiding economic retaliation from China. Why This Matters This renewed China Shock is a stark reminder of how interconnected global trade policies are. While U.S. tariffs were designed to protect American industries, they have instead created ripple effects, devastating jobs in nations with less economic leverage. As more workers face displacement, governments worldwide will need to balance trade protections with policies that prevent entire industries from collapsing under the weight of redirected Chinese exports.