President-Elect Donald Trump said Monday, Nov. 25 that he will impose tariffs of 25% on imports coming from Mexico and Canada, as well as an additional 10% duty on already-levied goods entering the U.S. from China, as soon as he steps into the Oval Office in January.

The levies, if enacted, would have potentially significant consequences for the North American promotional products industry, possibly impacting everything from cross-border merch projects distributors orchestrate for clients to increasing supply chain costs associated with manufacturing America-bound product in Canada, Mexico and China.

China, Mexico and Canada are the United States’ three largest trade partners. The majority of promotional products sold in the United States are made in China, and Mexico is emerging as a more significant sourcing destination for the swag space – making the potential tariffs an issue of prime importance to the merch market.

On Monday, Trump said the planned tariffs are in response to what he characterized as Mexico, Canada and China failing to stem the flow of illicit drugs into the United States. He also slammed the U.S.’ immediate geographic neighbors for allowing illegal immigration from their lands into America to go unchecked.

“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” Trump wrote in a post on Truth Social, his social media site. “Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!”

The “T” word – #tariffs – is abuzz again in the #promoproducts industry. https://t.co/RZy6tCLK5P

— Chris Ruvo (@ChrisR_ASI) November 20, 2024

Will Trump Follow Through?

It's unclear if Trump will actually move forward with his plans. Some analysts think the tariff pledge is a negotiating tactic – a kind of brandishing of a big sword used to gain his administration an upper hand in anticipated hardball talks on trade and other international relations.

“A lot of people expect Trump to be a negotiator, so I think this is a beginning of discussions or beginning of negotiations,” Michael Hart, the president of the American Chamber of Commerce in China, told The Wall Street Journal.

It’s a perspective shared by some print and promotional products professionals. “This is highly likely a political move, the tactic being to shock them, then negotiate something lower,” said an executive at a leading promo products supplier firm who wished to remain anonymous. “As a business, we need to react to policy, final rules, facts.”

Chris Anderson, CEO of Counselor Top 40 supplier HPG (asi/61966) and a member of Counselor’s Power 50 list of promo’s most influential people, expressed a similar view.

“Trump is a deal maker, and the threat of 25% tariffs is an opening salvo in, what is likely to be, a good-faith negotiation between the USA and two of its largest trading partners,” Anderson told ASI Media.

Nearshoring or Far Away? Exploring the Future of Mexican Manufacturing https://t.co/nDMtgDp1UB

— Chris Ruvo (@ChrisR_ASI) November 26, 2024

Other analysts aren’t so sure Trump is bluffing, given his past propensity to follow through on tariffs. During his first term in the White House, Trump enacted import levies on goods inbound from China, a move that contributed to price increases on promotional products domestically.

“Trump’s statement leaves little doubt that the U.S. stands at the threshold of a new era of trade protectionism,” Eswar Prasad, professor of economics and trade policy at Cornell University, and a former head of the International Monetary Fund’s China division, told the Journal. “Trump’s clear determination to use tariffs as a tool of international diplomacy will have significant disruptive effects on U.S. and global trade.”

Analysts noted that the threatened tariffs on Mexico and Canada would rock the foundations of the United States-Mexico-Canada Agreement (USMCA), which went into effect in 2020. USMCA enables goods to pass borders of the three nations duty-free.

“Obviously, unilaterally imposing a 25 percent tariff on all trade blows up the agreement,” John Veroneau, a partner at Covington & Burling in Washington and former trade negotiator under President George W. Bush, told The Washington Post.

Analysts noted that the scrambling of USMCA could be especially problematic for the automotive industry’s supply chain – a potential problem for promo pros that do extensive business with that market. Tariffs on Mexico and Canada in particular could also cause the price of steel and aluminum to increase in the U.S.

“Immediate tariffs on Canadian goods could disrupt established supply chains and partnerships, like ours with Redwood Classics, and impose potential price increases on imported apparel.”Rob Watson, Vantage Apparel (asi/93390; Canada, 93391)

Promo Reacts

During his campaign, Trump talked about imposing potential duties of 10% to 20% on all imports into the United States. For goods coming from China, Trump vowed a possible tariff rate of 60% or more and floated the idea of a 25% levy on Mexico-made products and materials.

As such, forward-looking promo pros were already preparing for the potential levies. Still, Trump’s comments this week mark the first time he has given a concrete timeframe for moving forward with particular levies. Promo is taking notice.

“While we understand the new administration’s focus on protecting domestic industries, we believe in the value of a balanced trade policy that supports growth for businesses on both sides of the border,” said Rob Watson, CEO of Counselor Top 40 supplier Vantage Apparel (asi/93390; Canada, 93391) and a Counselor Power 50 member.

Watson continued: “Immediate tariffs on Canadian goods could disrupt established supply chains and partnerships, like ours with Redwood Classics (asi/81627), and impose potential price increases on imported apparel. We’re working closely with our friends at Redwood to seek ways to have minimal impact on our U.S. distributor customers.”

For sure, Canada-based promo firms are keeping a close eye on how things unfold.

“If tariffs on Canadian goods entering the U.S. were implemented, it might not directly impact our business on the surface, since most of our suppliers source their products from China and sell to us free-on-board (FOB) in Toronto,” shared Sergio Munoz, vice president of sales and marketing at Ontario-based distributor Add Impact.

“However,” he continued, “there’s a bigger-picture concern. Canada’s major exports to the U.S., such as crude oil, vehicles and raw materials like lumber and concrete are key to the overall economy. If these industries are hit with tariffs, it could trigger a ripple effect.”

Munoz worries that if Canadian exports become more expensive in the U.S., American buyers may purchase less, which could lead to reduced revenues for Canadian industries. Over time, this could possibly shrink the budgets affected Canadian firms have for marketing and branded merchandise. “That’s where the trickle-down effect comes into play, eventually impacting companies like ours,” Munoz said.

Other Canadian promo pros are more worried about the possible tariffs on China, rather than levies on their nation.

“If we’re buying for a US company, the vast majority of the time we’re buying from a U.S. supplier,” said Mitch Freed, a Counselor Power 50 member and CEO of Counselor Top 40 distributor Genumark (asi/204588). “I honestly think we’re in the same boat as any U.S. distributor who will have a broader concern on duties on goods from China.” 

Despite the concerns, some promo pros, like Watson, said that “it’s too early to tell” what will ultimately result over the next couple months ahead of Trump’s inauguration, a sentiment echoed by others in the industry.

“My initial reaction is that, as we can see, the tariff situation remains fluid and constantly evolving,” Joseph Shusterman, CEO/co-founder of BlueMark (asi/142002), told ASI Media.

“The key is maintaining options and diversifying to adapt as circumstances change.” Joseph Shusterman, BlueMark (asi/142002)

Anticipating heavier levies on China-made products during a second Trump term, Shusterman has been working to form partnerships with overseas vendors from which he can source directly in various nations. Mexico has been a primary destination for BlueMark’s geographic sourcing diversification.

The potential 25% tariffs on Mexico don’t take the south-of-the-border sourcing off the table for BlueMark, but they do emphasize the importance of the firm’s broader supply line strategy, Shusterman said.

“The key is maintaining options and diversifying to adapt as circumstances change,” the BlueMark CEO said. “We’ve been building a strong network in China, Vietnam, and other Asian countries to ensure flexibility. Mexico is just one of the regions we’ve looked at and we will continue to explore it as long as it makes sense.”

BlueMark has exhibited sourcing dexterity before – and believes all promo firms may have to if intensified tariffs come into play. “When anti-dumping fees were added to printed paper bags from China, for instance, we quickly expanded our supply chain to include other regions excluded from these fees,” Shusterman shared. “This adaptability has been critical to managing sudden shifts.”

Anderson, of HPG, thinks that the discussed tariffs, if put on the books, pose a legitimate risk of economic disruption to promo, but also believes the levies are a “solvable problem.”

“HPG’s policy is to look internally for opportunities to reduce or eliminate the impact of tariffs,” Anderson told ASI Media. “For instance, HPG has a global supply chain, with North American production sites spanning every time zone in the USA, along with Canada and Mexico as part of that. We could redistribute production/supply to non-tariff impacted regions, along with continued investments in efficiency-driving equipment and technology. It is only after such opportunities have been exhausted that HPG would look to pass along the impact of increased tariffs to our distributor partners.”

The impacts being passed along that Anderson references pertain to potential prices increases on products suppliers sell. To wit, 6AM Sourcing (asi/46173), an exports and logistics company specializing in sourcing promo from Mexico, sees price hikes ahead if Trump implements tariffs there.

“We have lengthy production runs on orders for glassware and packaging that will be shipping after Trump takes office,” said Scott Pearson, 6AM Sourcing co-founder. “We're beginning soft but direct conversations with clients on open orders and how to handle the 25% increase, as we are not in a position to absorb such cost impacts.”

Even before Trump’s latest tariff announcements, promo leaders said that new levies the president-elect had discussed during his campaign would, if followed through upon, likely drive up prices on promotional products sold in the United States.

“We have largely absorbed other inflationary and non-inflationary increases over the past 24 months, so upward tariff adjustments would likely force us to pass them through in our pricing,” an executive at a top supplier firm who wished to remain anonymous told ASI Media. “Obviously, we work as hard as possible to minimize price increases, but at the levels they are talking, it will be difficult for most suppliers to completely hold back.”

“If new tariffs are introduced, we will need to adjust our prices accordingly to maintain margins,” Yuhling Lu, CEO/co-owner of Counselor Top 40 supplier Ariel Premium Supply (asi/36730) and a Counselor Power 50 member, told ASI Media. “The degree of adjustment will depend on the specific tariffs and any additional costs we incur along the supply chain. However, we’re committed to finding ways to minimize the impact on our customers.”

If prices do spike, some promo pros believe that could lead end-buyers to seek out lower-cost alternatives to higher-value products. End-clients could also simply buy less, they said.

“End-user marketing/advertising budgets will not extend as deep in needed quantities or value of items due to the forced increase on cost of goods sold,” said Pearson.

Executives have also said that import levies could prompt more promo manufacturing to move to countries beyond China. An import tariff on Mexico could make that nation less attractive for sourcing, despite its proximity to the United States.

Still, that could open up opportunity for more production of certain goods, apparel in particular, to be transferred to nations in Southeast Asia and possibly the Americas – nations not, at least as of yet, saddled with additional import levies. For hard goods production, China is likely to remain promo’s primary sourcing destination for the foreseeable future, executives have said.

“The proposed tariffs could significantly impact the promo industry, creating inflationary pressures that directly affect U.S. businesses and consumers,” Liz Haesler, global chief merchandising officer at Counselor Top 40 supplier PCNA (asi/66887), told ASI Media. “With most promotional products sourced globally, we face challenges that can’t be solved overnight. At PCNA, we’re focused on building supply chain resilience and collaborating with our partners to navigate these challenges while continuing to deliver value.”