Where do we stand with imports & exports?

The U.S. broke records with the highest trade deficit (imports – exports) on record in 2024 at $1.2 trillion. Q1’s trade deficit set records at a massive $465 billion, as companies pulled goods in early to mitigate the potential impact of tariffs. When estimating the first half of the year, 2025 remains on track to break records even though the ports were panicked as the tariffs went into effect. The top sectors driving the import surge are quite concerning as they all relate to critical industries – machinery and mechanical appliances, electrical equipment and electronics, automotive and parts, and pharmaceuticals.

As tariffs went into effect, China (controls 60% of production and 85% of the processing) stopped shipping rare earth minerals to the world, highlighting the critical importance of controlling the end-to-end supply chain. These critical minerals and active ingredients are used in everything vital to success – powering artificial intelligence, medical devices, defense, electronics, pharmaceuticals etc. Thus, the trade equation is far weightier than imports vs exports, slowdowns at the ports in Q2 (creating panic in logistics circles) or the impact on the economy (as manufacturing contributes more to the economy as every $1 invested in manufacturing extrapolates into $2.67 for the economy). Executives must pay attention to the full picture to determine the best way to navigate business conditions.

Trade Deals

The U.S. has completed three trade deals thus far with several imminent deals promised shortly. Canada and Mexico have continued with USMCA with the exceptions of fentanyl (discouraging the drug war) and key items such as steel, aluminum, and automobiles. The U.K, China and Vietnam have completed trade deals with the key takeaways including:

• S. market access: Opening markets for U.S. companies and agriculture products is a priority.
• Critical minerals: China agreed to re-start shipments (and thus the U.S. agreed to re-start sending aircraft parts etc.)
• Baseline tariff: There is a baseline tariff to level the playing field (which will also add to U.S. revenue).
• Loopholes: Prior loopholes are being shut off. For example, China cannot send products to Vietnam, add a label or perform a minor process and then send to the U.S. as “Made in Vietnam” to avoid tariffs. Instead, if this type of approach is used, there will be a 40% tariff. Also, the di minimis exception has been a key negotiation to close the small package loophole. On a related note, these types of investments into Mexico dried up as Trump looked likely to win.
• Non-tariff barriers: The deals are negotiating the non-tariff barriers to make open market access more realistic.

Financial experts believe that India is close to a deal as well. Japan has been a bit volatile although the U.S. and Japan put together a win-win deal for Nippon Steel to invest in U.S. Steel, and so something is likely to occur. As trade deals get nailed down, business executives will gain clarity of costs and risks so that they can develop strategies and determine if/how to reconfigure their supply chains.

Opportunities Coming Down the Pike

As legislation provides clarity of tax cuts and other benefits for manufactures, customer orders will start to pick up as they gain confidence. Similarly, as energy supply expands, costs will decline across the board since energy is a key driver in many products and impacts virtually all products. Deregulation will cut the red tape, decreasing costs and complexity. If these strategies are accompanied with favorable trade deals, it is likely demand will soar. Thus, circling back to critical minerals is essential to support growth and separately the dramatic rise in AI.

Manufacturers must pay attention and invest resources NOW if they want to be ready to scale. Those manufacturers that can scale up rapidly to meet business opportunities will thrive as the next few years will separate the winners from the losers like never before in history. Set up apprenticeships, mentorships, and training programs, upgrade processes such as SIOP (Sales Inventory Operations Planning) and advanced planning and scheduling and pursue advanced technologies including artificial intelligence. These types of proactive steps will increase their agility, resilience, and predictive capabilities.

Secure your end-to-end supply chain including critical minerals. Depending on your dependence on these types of items that might be beyond any company’s control as China has dominated with low cost strategies, you must collaborate with your industry including competitors, get involved in advocacy for critical bills from the government, and secure additional sources of supply. As supply chains evolve, what used to be invisible (as companies in China relied on mining and processing companies in China without the company that sells the final product understanding the end-to-end supply chain) will become visible and easily could become a bottleneck.

The logistics industry has largely been better coordinated for advocacy than manufacturers since logistics is reliant on international trade and involves heavy hitters such as ocean carriers, class I railroads, large package carriers such as UPS and FedEx, etc. The systems of systems in logistics pulls the group together. For example, in California, they would have been run over a long time ago if they didn’t band together to advocate for the customer, sustainable success (triple bottom line), end-to-end data and technological solutions, and business results. Manufacturers tend to be local, regional, and industry specific. Yet they must band together as well to thrive in the next decade.

Opportunities will abound. Are you ready to take advantage of what’s coming down the pike?

If you are interested in reading more on this topic:
Advanced Planning Strategies to Optimize Manufacturing Success