Since inauguration day – or rather, since election night in 2024 – tariff talk has been buzzing. President Donald Trump’s plan to bring manufacturing and sourcing back to the U.S. includes blanket 25% tariffs on Mexico and Canada, which took effect on Tuesday, March 4th. Energy-related items coming from Canada won’t face the 25% tariff, but instead are subject to a 10% tax.

The action is an effort to force America’s top trading partners to abide by what Trump believes are fair trade and import practices, but economists warn these tariffs will weaken the North American economy. American consumers are already under significant stress due to years of inflation, and they are wondering how these tariffs will impact the prices of the billions of dollars’ worth of goods imported from Canada and Mexico each year.

As the new administration was taking over, Economist Impact published the fifth edition of Trade in Transition, warning that global trade was heading for its most turbulent time since the 1930s. The report states that in order to prepare for this new trade era, 40% of businesses plan to increase US sourcing and 33% are aiming to cut internal costs to counter the impacts of trade barriers.

Also in the report, economists predicted that targeted countries could retaliate, sparking a wave of new trade restrictions. This prediction came to fruition as China and Canada immediately fought back with tariff spikes on popular goods.

According to CNN Business, “Beijing retaliated on Tuesday by announcing 15% tariffs on chicken, wheat, corn, and cotton imports from the US, according to a statement from the State Council Tariff Commission. Additionally, a 10% tariff on “sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products.

Separately, China’s Ministry of Commerce said it added 15 American companies, including drone maker Skydio, to its export control list, which would bar Chinese companies from exporting dual-use equipment to them.

China’s retaliatory tariffs followed a ‘restrained, targeted approach aimed at causing pain to those industries that matter the most to the supporters of the Trump administration,’ said Alfredo Montufar-Helu, head of the China Center for the Conference Board. He noted China’s tariffs give it room for negotiations to potentially avoid even more damaging tariffs down the road.”

According to Economist Impact, 40% of businesses plan to increase US sourcing and 33% are aiming to cut internal costs to counter the impacts of trade barriers.

Experts anticipate Canada will be the next to retaliate against the Trump Administration’s tariff plan.

Distributors react: Senseless or part of a long-term benefit?

Much like the country, PHCP-PVF industry response to the tariff situation is all over the map. Some believe in the long-term goal of safety and fair trade the Trump Administration is after, while others think the tariffs will only negatively impact the economy. In a recent anonymous report about tariffs, distributors told the American Supply Association (ASA) that only time will tell how the tariffs will impact business, and many believe that the long-term goal will be worth the potential short-term price hikes.

“It will take time to determine the effectiveness of these tariffs; I am willing to give this administration the time it takes to affect positive and lasting change,” one distributor member says.

Anther notes that tariffs are a tool being used to negotiate better long-term trade deals that will ultimately improve the U.S. economy and jobs market. “It will take time for this to develop, onshoring production cannot happen overnight. The consumer will experience some short-term pain as costs rise due to tariffs on goods currently being imported, however, I believe that overseas producers will respond with lower cost of goods that will offset some of the effects that tariffs will have.”

That same distributor says that their company is analyzing opportunities to purchase some commodity products that have been dominantly imported from domestic manufacturers. “One of the issues here is the capacity those manufacturers have at the current time. Higher demand will cause domestic prices to rise, compounding the rise in cost of goods across the board. Price increases are a short-term opportunity for distribution as the value of current inventories rise with price increases,” they add.

On the other hand, some distributors believe the tariffs are “senseless” and have only negative impacts on business.

“Everything about tariffs is bad from my perspective. I don’t see any upside, or even neutral impact,” one respondent notes.

Another distributor says the tariffs will cause a trade war and that both the short and long-term effects are negative for the economy and the PHCP supply chain.

Tariffs will certainly raise the price of goods, and some distributors don’t appreciate the way that will affect customer buying habits.

“Tariffs are forcing my customers to go search for better prices when those customers may not have been shopping around before,” one distributor explains. “They are increasing my costs, therefore increasing the prices I must charge my customers. They are creating database management work as different tariffs are being passed in different ways from my manufacturers to me. For example, some are increasing the cost of specific items, while others are placing a tariff ‘surcharge’ at the bottom of an invoice. All of these changes require updates to product lines and, in some cases, changes to business processes.”

Regardless of how you feel about the tariffs and their impact on the economy, distributors agree keeping a close eye and increased communication with vendors is key.

“We are absolutely monitoring the tariff situation. It would be nearly impossible not to, with the rapid-fire increases which are coming steadily, due to them. Of course, we are raising our prices accordingly,” one distributor says. “Higher prices don’t scare us, initially, and there’s more profit on bigger numbers, which is good to a point. If those tariffs continue, it will eventually have an effect on upcoming projects. While we have a lot started for now, we are waiting to see how future projects will be affected. My guess is, some of those future jobs will be put on hold, and business will slow down.”

Another respondent says they will deal with each vendors price adjustments individually. “The impacts on pricing and profitability will be determined from that work. We will keep a close eye on what our competition is doing and their reactions as well.”

Some distributors believe prices won’t come back down, even after tariffs settle. “Historically, vendors never give up all the increases, once tariffs abate and the markets settle. So, the net result of all this will likely be sustained increases and elevated prices going forward, regardless of eliminating tariff.”

One distributor, who is support of reciprocal tariffs, reminds peers to look at the whole picture.

“Tariffs are just a piece of the overall changes the new administration is making. You have to add in the impact to costs of deregulation proposals, tax cuts, the cutting of waste, fraud and abuse and much more. You can't single out one part of an overall plan and ask the impact as there are many additional factors that will affect pricing and cost of doing business,” they say. “All that being said, I am in 100% support of reciprocal tariffs. I am also in support of using tariffs as a negotiating tool in order to make our country safer. Many suppliers are announcing increases in order to protect their margins in the short term. Over time, I believe some of the increases will be reined in and reduced.”

While we don’t know for certain the longevity and impact of the new trade policies, consumer spending shows buyers are proceeding with caution. A recent Bureau of Economic Analysis report showed consumer spending fell unexpectedly in January, and inflation continues to grow at a stubbornly high pace. Consumer spending makes up roughly two-thirds of the U.S. economic activity.

Recent conversations throughout the PHCP-PVF tradeshow season at AHR/ASHRAE, KBIS/IBS and WWETT prove that manufacturers and industry pros are weary of the supply chain impact and are preparing for a recession and/or higher inflation, lower consumer spending, and supply chain delays. No one has a crystal ball, but thankfully members of the PHCP-PVF industry, are working toward the same goal – providing contractors and end users with cost-effective, timely and innovative solutions, and I have no doubt we will continue to find ways to achieve that goal, even through turbulent times.