The Trump Factor in UK Procurement: Are We Ready for an ‘America First’ Era?

Donald Trump’s recent Republican victory signals a renewed focus on his ‘America First’ policy. The Republican trifecta, a combination of the presidency and control over the two chambers of Congress (House of Representatives and Senate), increases chances of lasting change. While the political dust that is settling may seem a long way across “the pond”, it’s implications on UK trade and the procurement and supply chain activity that underpins such trade may be significant. It is therefore prudent for procurement and supply chain leaders to run their own assessment of how Trump’s second term in office is likely to impact their businesses and plan accordingly from now.

Much like those in other parts of Europe, these UK leaders have already had to overcome significant challenges posed by COVID, the Ukraine/Russia war, government turbulence, and more recently the Middle East conflict. These hard-fought lessons should improve their ability and agility in responding to changes that materialise from the Trump administration as it transitions back from a Biden era.

The election results would suggest a return to policy characteristics reminiscent of Trump’s first term in office. Among these is the potential application of ‘America First’ tariffs that aim to bolster local industry, which may result in initial cost increases within the US and impact international trade relationships, including that of the UK (irrespective of the ‘special relationship’). This, along with other possible measures designed to improve the domestic economy, has unsurprisingly been met with a positive response from indices such as the Dow Jones Industrial Average, which climbed 3.6%, with investors banking on higher corporate profits. However, what are the implications of these tariffs and other potential steps, such as the rolling back of various clean energy initiatives, on UK procurement and supply chain activity?

Let’s first consider the impact if the US decides to materially alter its import tariffs. Currently, the US imposes varying tariff rates on imported goods, depending on the product category and country of origin. These rates are detailed in the Harmonized Tariff Schedule (HTS) of the United States, which sets out the specific duties applied to each type of merchandise imported into the US. Trump’s recent presidential campaign has floated tariffs that include:

• Targeted tariffs on China – Imposing a minimum 60% tariff on Chinese imports
• Universal baseline tariff – Implementing a 10%-20% levy on goods from the rest of the world

These measures would represent a significant shift from current tariff policies and are intended to promote domestic industry, reduce reliance on foreign goods, and address trade imbalances as well as perceived unfair trade practices. However, such increases could lead to higher consumer prices and trade disputes with international partners.

More recently, the US president-elect has said he will sign an executive order that imposes a 25% tariff on all goods coming from Canada and Mexico, and an extra 10% tariff on China (above any additional tariffs), on his first day as president to reduce illegal immigration and drug smuggling into the US.

UK exporters in impacted sectors, such as Automotive, Pharmaceutical, and Machinery & Equipment, could face revenue challenges, as could companies downstream that supply materials or components to exporters. The UK government may need to reevaluate support to affected sectors where procurement strategies could focus on supporting local suppliers that lose US business.

Companies that are dependent on US demand may diversify into new markets or focus more on European and Commonwealth countries where trade remains stable, which in turn could impact supplier choices and procurement needs. Further, UK exporters facing US tariffs may need to absorb some of these costs to remain competitive, putting pressure on profitability and, in turn, procurement teams might look to reduce costs by negotiating better terms with suppliers or switching to lower-cost alternatives.

For goods and services critical to the UK public sector and that are traditionally sourced from the US, such as medical and defence equipment or technology, the UK public sector could shift toward securing local or EU-based sources to counter lost revenues in the US. Government procurement frameworks might also prioritise suppliers that serve growing international markets, adjusting public procurement strategies to ensure a resilient supply base less vulnerable to US tariff impacts.

Taking a more macro view, reduced UK export revenue can have knock-on effects on the broader economy, potentially further constraining public finances. Government procurement teams might adopt more stringent cost controls and efficiency measures to offset the economic impact of reduced tax revenues from affected export sectors.

Despite the UK-US ‘special relationship’, it is unclear whether UK businesses would receive blanket exemptions from these tariffs, as the Trump administration’s stance has historically been firm on tariffs for imports to the US. The UK government and private sector may respond by reducing reliance on US demand and, as such, adjusting procurement practices to favour stable and tariff-free trade zones.

As far as actions that UK procurement managers in both private and public sectors could consider go, here are a handful of options to navigate the challenges posed by potential changes to US import tariffs on UK goods:

• Diversify supplier and market exposure: Evaluate current suppliers and market dependencies, particularly where the US constitutes a major revenue stream
• Enhance cost management and efficiency: Optimise procurement spending by negotiating better terms, leveraging bulk purchasing, and so on
• Strengthen supplier relationships and risk sharing: Engage in proactive supplier relationship management to navigate the potential impacts of the US tariff landscape together
• Explore strategic partnerships and long-term contracts: Establish long-term contracts and strategic partnerships with key suppliers to safeguard against price volatility
• Invest in supply chain resilience and flexibility: Building a more resilient and adaptable supply chain can help mitigate the risks associated with sudden tariff changes

o  Utilise digital tools and analytics to gain real-time visibility into supply chain ops, enabling quicker responses to disruptions

o  Establish alternative sourcing strategies and logistical routes to maintain continuity in the face of tariff-induced challenges

• Monitor and engage in trade policy developments: Keeping abreast of evolving trade policy can provide procurement managers with foresight/influence over potential tariff impacts

o  Keep abreast of trade negotiations and tariff announcements that may affect procurement activities

o  Engage with industry associations and government bodies to gain insights into policy directions

Now, let’s consider the implications of potential rollbacks of various US clean energy initiatives for UK procurement and supply chain activities. Potential rollbacks include:

• Reduction of clean energy funding – The Trump administration may reduce or eliminate subsidies and tax incentives for renewable energy projects, such as those provided by the Inflation Reduction Act
• Relaxation of environmental regulations – There could be a loosening of regulations that currently promote clean energy adoption and limit fossil fuel emissions
• Withdrawal from international climate agreements – The US might exit global accords like the Paris Agreement, which was reinstated by Joe Biden after Trump withdrew while he was first in office, diminishing its commitment to international climate goals

The impacts of such rollbacks on UK procurement and supply chains are varied and could be considerable. For example, a US shift away from clean energy could lead to decreased production of renewable energy components, affecting UK projects reliant on US suppliers. This may result in supply chain disruptions and increased costs for UK procurement managers.

There could also be increased market volatility as changes in US energy policies could influence global energy markets, leading to price fluctuations. For example, if renewable capacity is materially reduced by US decisions it could increase reliance on fossil fuels, affecting global energy prices. UK procurement strategies may need to adapt to manage cost uncertainties, as fluctuations in energy prices can impact the cost of goods and services across various sectors.

With the US potentially reducing its focus on clean energy, the UK might find opportunities to position itself as a leader in renewable technologies, for example in the automotive sector. However, this could also mean increased global competition for renewable energy components (e.g. solar panels, wind turbines, batteries), critical raw materials (e.g. lithium, cobalt), and talent in the clean energy sector. Increased global competition for renewable energy components could drive up costs for UK projects, impacting budgets and timelines.

So, what actions could UK procurement and supply chain leaders consider to mitigate the impact of potential US rollbacks? Here are some:

• Diversify energy supply chains to reduce dependency on US-based suppliers and minimise risks of delays or cost increases – Identify alternative suppliers of renewable energy components outside the US, particularly in Europe or Asia, where clean energy production is less likely to be impacted by US policy shifts
• Train procurement teams in sustainable sourcing and life-cycle cost analysis to prioritise cost-effective and sustainable practices that align with long-term business goals and regulatory requirements
• Build strategic reserves by stockpiling critical renewable energy components and materials ahead of anticipated disruptions to provide a buffer to maintain project timelines and avoid costly delays during supply chain disruptions
• Closely track policy developments, market shifts, and pricing trends in renewable and fossil energy sectors to enable an agile response to emerging risks and opportunities
• Invest in energy efficiency systems, technologies, and practices within operations to reduce overall energy demand, shielding operations from price volatility caused by shifts in global energy markets

To conclude, while it is too early to fully grasp the scope of potential tariffs and other policy shifts under the recently elected Trump administration, UK procurement organisations should start preparing now.

Procurement leaders should consider strategies to diversify suppliers and markets, strengthen cost management, and build supply chain resilience to navigate potential challenges. Whether it involves securing alternative sourcing options, renegotiating contracts, or enhancing supply chain flexibility, these measures will be critical in mitigating the impact of increased costs or disrupted trade flows.

UK businesses must leverage the hard-earned lessons of recent global disruptions to ensure they remain agile and competitive in a rapidly changing landscape.

If you would like to discuss this topic further, reach out to our Supply Chain experts.