President Donald Trump is imposing new tariffs on imports from Canada, Mexico and China, a move that could increase prices on promotional products, propel some further shifts in where certain industry products are manufactured and potentially limit end-buyers’ ability to invest in merch as they contend with higher costs.

Trump announced the new tariffs on Saturday, Feb. 1. He indicated that the levies will become effective Tuesday, Feb. 4. The president is imposing a 25% tariff on imports from Canada and Mexico, a 10% tariff on energy products (like crude oil) from Canada, and a 10% tariff on China-made goods that’s in addition to levies already in place on that nation.

The administration said there will be no exemptions, despite weeks of lobbying from key sectors like the automotive industry, which said broad tariffs will spike prices and cause North America-wide supply chain disruption. In all, the U.S. does about $1.6 trillion in annual business with the three countries.

Authorities in Canada, Mexico and China have indicated that countermeasures, including tariffs on U.S. exports to their nations, are coming, igniting what appears to be a trade war between the United States and its largest trading partners. To wit, Canada is looking to implement a 25% tariff on $155 billion (Canadian dollars) worth of U.S. goods.

pic.twitter.com/SWZtSm6NMX

— Donald J. Trump (@realDonaldTrump) February 1, 2025

Trump’s order on the new tariffs includes a clause that intensifies penalties for retaliatory tactics. The president said he has the authority to institute the levies under the International Emergency Economic Powers Act. He’s doing so, he said, to protect Americans, saying the levies are intended to get Canada, Mexico and China to step up efforts to prevent illegal drugs and illegal aliens from entering the United States.

“This was done,” Trump said in part, “because of the major threat of illegal aliens and deadly drugs killing our citizens, including fentanyl. We need to protect Americans, and it is my duty as President to ensure the safety of all.”

Promo Price Hikes A ‘Certainty’

U.S.-based companies that import products from abroad pay the tariffs, not foreign governments or overseas providers of products and materials.

Economists have said the new levies, if left in place, are likely to spur inflation in the United States, increasing the cost of everything from vehicles and groceries, to energy. Capital Economics, an analysis firm, has said that the 25% tariff on Canada and Mexico alone will keep the U.S. annual inflation rate around 3.2%, above the Federal Reserve’s target of 2%.

$1.6 Trillion
Annual business the U.S. does with China, Canada and Mexico.(CNBC)

The upward price pressure will play out in the promotional products industry too, if the levies stay on the books. Suppliers may not hike prices overnight; it’s possible they’ll sell through inventory brought stateside before the new tariffs at current pricing levels. But once that stock is gone, many suppliers will have to increase what they charge for products they pay more to import under the new tariffs.

Suppliers source the vast majority of promotional products sold in both the U.S. and Canada from manufacturers overseas, particularly in Asia, with China being the main production hub, especially for popular hard good categories like drinkware and technology items.

Meanwhile, Mexico has emerged as a popular spot for production of some promo categories, and China-based companies have even used Mexico as a backdoor for bringing products to the United States to avoid previously-in-place import tariffs.

Suppliers will now have to pay an additional 10% tariff on products they’re importing from China and an extra 25% on imports from Mexico (and Canada too, of course). At least some of that expense is going to get passed along to distributors and, ultimately, merch end-buyers.

“Price increases are an absolute certainty,” said Yuhling Lu, CEO/co-owner of Counselor Top 40 supplier Ariel Premium Supply (asi/36730) and a member of Counselor’s Power 50 list of promo’s most influential people. “No supplier is in a position to fully absorb these tariffs. The result is that some or all of the increase will be passed on. More expensive products within various categories will be the most affected, such as higher-ticket drinkware, bags, electronics and gifts.”

Tim Behling, vice president of supply chain and sustainability at Counselor Top 40 supplier Gemline (asi/56070), said that he anticipates pricing to rise on average by 5% or greater across promo.

“Price increases are an absolute certainty.” Yuhling Lu, Ariel Premium Supply (asi/36730)

Keep in mind, Behling said, the tariffs will probably produce a ripple effect: Promo suppliers and others will likely move at least some of the production that they can out of China to nations currently not slapped with tariffs, perhaps Vietnam or Indonesia.

Still, “as demand increases in countries not directly affected by tariffs, those countries will likely adjust their cost base upwards to take advantage of new/excess demand,” Behling said. “This means that while any new tariffs might target one nation, the price increases will likely spread regionally as supply and demand dynamics shift, and opportunities for profit gains tempt overseas manufacturers.”

In general, suppliers said they expect hard good products to see steeper price increases, particularly because many such goods continue to be made in China, whereas supply chain industry pros have spread production of apparel around more in recent years to other countries in Asia and even sub-Saharan Africa. They note that when it comes to hard goods, including tech products and drinkware, there are not many viable nations from which to source beyond China.

“If there are broad, across the board tariffs, it’s hard to imagine prices not going up,” said Pat Noonan, chief product officer at Counselor Top 40 supplier SanMar (asi/84863). “My assessment is also that it would likely be harder on the hard goods side of our industry. Those supply chains remain much more dependent on China than apparel and it will be more difficult for hard goods importers to find solutions outside of China.”

As products become more expensive, some industry leaders worry that end-buyers will decide against investing in merch or seek lower-priced goods, running against the trend of recent years in which higher-end products had become increasingly sought out, at least by some end-clients.

Executives also envision scenarios in which end-buyers could pull back on promo spending regardless of what happens with promo product pricing, simply because they are dealing with more burdensome operating costs as a result of tariffs.

“Tariffs are bad for our industry,” said Counselor Power 50 member Craig Nadel, president/CEO of Counselor Top 40 distributor Nadel (asi/279600). “They make our advertising medium more expensive. If products get expensive enough, some clients could switch to other things, like gift cards.”

Sourcing Shifts

Still, suppliers say they’ve been preparing for the tariffs and are trying to mitigate impacts on pricing and service.

“Suppliers across the industry may need to make pricing adjustments, but the extent will vary based on individual supply chain structures and sourcing flexibility,” said Samantha Kates, president of Canada-based Counselor Top 40 supplier Spector & Co. (asi/88660). “We are focused on exploring every avenue to minimize cost increases for our customers.”

For Spector and others, the effort includes prioritizing supply chain resilience – being able to move production, at least in instances, of products from a nation affected by tariffs to another geographic locale not subjected to levies. The effort was already underway for years in promo. It began intensifying again in the lead-up to the new tariffs, and will continue now that the new levies are in place.

“We have already started moving some products to countries other than China, namely southeast Asia,” said Lu. “Several of our current China factories have already opened production facilities in these countries.”

Behling said Gemline ensures the majority of its product volume, both for house brands and retail partners, can be manufactured in multiple countries and factories, not just China. “It’s our intent to continue to work on our supply chain resilience to mitigate risk wherever possible,” Behling said.

Overall, SanMar feels well-positioned to navigate tariffs, Noonan said. “We’ve built a robust global supply chain and are able to move production fairly quickly to respond to the shifting trade environment,” he said. “That certainly doesn’t mean that we won’t be impacted at all, but our belief is that we will be able to minimize the worst effects.”

“Tariffs are bad for our industry – if products get expensive enough, some clients could switch to other things, like gift cards.” Craig Nadel, Nadel (asi/279600)

Inflationary price pressures could be especially heavy on promo products made in Canada and sold into the U.S., or sourced from overseas and imported to Canada, then sold into the U.S. That’s because they’re subject to the 25% rate and because Trump has suspended the “de minimis” loophole for Canada, which allows shipments valued under $800 to enter the country duty-free.

Some Canada-based suppliers, including Spector & Co., have been trying to establish production alternatives where possible.

“In terms of product categories,” said Kates, “our Canadian-made journals could see the most immediate impact. To address this, we’ve already been working on alternative manufacturing solutions, including leveraging our U.S. facility in New York and diversifying sourcing strategies. We’ve been proactively preparing for tariff changes with a dedicated task force that has been meeting regularly—now daily—to assess all possible scenarios. We’ve mapped out various contingencies to ensure business continuity with minimal disruption to our customers.”

“Tariffs could accelerate multiple current trends, including domestic production, manufacturing automation, and shifts on promo spend by product category – i.e., if one category goes up in pricing and others don’t, buyers might shift their spend there.” Jose Gomez, Edwards garment (asi/51752)

Supplier executives believe diversifying sourcing to more countries could accelerate if the tariffs stay in place, but note that for industry companies already not engaged in such practices, the shift isn’t going to happen overnight. “It’s a multi-year process,” said Power 50 member Jose Gomez, president/CEO of Counselor Top 40 supplier Edwards Garment (asi/51752).

Edwards Garment has been focused on near-shoring production – manufacturing more products in Western Hemisphere nations close to the U.S. market. Executives said the tariffs could compel more suppliers to do so, while potentially influencing other developments.

Said Gomez: “Tariffs could accelerate multiple current trends, including domestic production, manufacturing automation, and shifts on promo spend by product category – i.e., if one category goes up in pricing and others don’t, buyers might shift their spend there.”

Meanwhile, some suppliers that have limited or no supply chain ties to China, Canada or Mexico were already highlighting that fact in communications with distributor customers, positioning themselves as a source of consistent, competitive pricing on products. For instance, Counselor Top 40 supplier Blue Generation (asi/40653) conveyed that its production is based in Egypt. “With highly minimal exposure to tariff fluctuations, our pricing remains transparent and competitive,” said Matt Rubin, director strategy at Blue Generation.

More Tariffs To Come? A Made-in-the-USA Revival?

Even as suppliers explore sourcing diversification or market that their supply lines already route to non-tariffed countries, the possibility of more levies on additional nations could stymie or at least limit efforts to lessen negative impacts to promo – and could likely exacerbate pricing impacts and sourcing challenges.

Trump has previously floated the idea of universal import tariffs, and mentioned on Friday that he wants to impose tariffs on computer chips, pharmaceuticals, steel, aluminum, copper, oil and gas imports as soon as mid-February. The president also said he’s keen to hit the European Union with tariffs.

“Beyond pricing impacts, prolonged trade uncertainty could introduce volatility in lead times and supply chain efficiency,” said Kates. “Long-term, while reshoring production to North America is an option some may explore, potential retaliatory tariffs and cost factors make it a complex solution rather than a definitive one.”

Are ‘Made-in-USA’ Promo Sales About to Surge? https://t.co/nzwEChAejy

— Chris Ruvo (@ChrisR_ASI) February 2, 2025

Trump has stated that one of his aims with tariffs is to compel companies to reshore manufacturing to the United States. And, some promo suppliers and distributors that specialize in Made-in-the-USA products have said the tariffs present an opportunity to help them gain market share, particularly because the levies will help close the cost gap between cheaper foreign products and their goods.

Industry executives said the tariffs, if they remain, could drive certain promo suppliers to reshore some production but they don’t believe a massive return to Made-in-the-USA is in the cards for the merch market. The steep costs of producing stateside, logistics of overhauling global supply chains to become domestic, and need for fleets of workers make large-scale reshoring of promo production an unrealistic prospect, they said.

“Tariffs could nudge some production back to the U.S., but a full-scale reshoring is unlikely due to significant cost and capacity challenges,” said Behling. “While some niche or highly specialized promo items might see reshoring, broad-based movement is unlikely unless tariffs become drastically higher, or other significant incentives are offered to domestic manufacturers. Even then, cost competitiveness would be a major hurdle.”

Gomez offered a similar view. “Tariffs could spark more domestic production, but the key question is if this will be significant,” he said. “The volume of promo product imported is gigantic. It would take hundreds of factories employing hundreds of people each, with many companies investing tens of millions in each factory, to take a significant portion of promo production back to the United States.”

Lu said there are limited opportunities for what she described as more simplistic products, like paper and certain plastic items, to be produced stateside in greater abundance. Still, “more complicated and labor-intensive products like electronics, vacuum-insulated drinkware and stress relievers will not move to the U.S.,” Lu said. “The infrastructure needed for production and environmental regulations alone would be prohibitive.”