There are a few things integrators can do to prepare in case tariffs take hold in 2025.
On November 25, 2024, President-Elect Donald Trump declared his plan to implement an additional 10% tariff on China plus a 25% tariff on Mexico and Canada. Will it actually happen? Is it simply a negotiation tactic? How will these proposed tariffs impact the U.S. economy and businesses if they do take effect?
There are still many questions surrounding Trump’s tariff plan. Until these questions are answered, we’re only guessing. Tariff application, enforcement, and special exclusions are other factors to consider as well. According to a recent ASIS report from Dr. Chris Kuehl, NSCA’s chief economist, and Keith Prather, managing partner and co-founder of Armada Corporate Intelligence, there were 18,200 tariff exclusions granted out of 55,000 requests during the first Trump administration.
Competitive pressures help keep corporate profiteering in check in most industries and product categories. If things spiral out of control, the Trump Administration will likely remove tariff protections and open up further competition. In most cases, they won’t turn a blind eye to industries or products where tariffs make no sense.
What are the possible impacts of tariffs on NSCA members? We asked Kuehl and Prather this question, and here’s a summary of what they had to say …
Talking about tariffs is one thing. Actual implementation of tariffs is another. It’s rarely a blanket approach but instead focuses on specific industries. For example, Trump did threaten broad tariffs, but many were strategically targeted based on industry lobbying and perceived national interests. The key could be lobbying efforts aimed at creating exclusions.
Where Will Tariffs Hit Hard?
Here’s where we anticipate tariffs potentially having an impact.
Technology and Electronics
Given ongoing tension over technology transfer and intellectual property rights, sectors like semiconductors, telecommunications equipment, and consumer electronics are likely targets. (The Biden Administration already imposed tariffs on semiconductors and electric vehicles.)
Manufacturing
To bolster domestic manufacturing, automotive, machinery, and consumer goods industries could see increased tariffs. The Trump Administration may focus on products deemed critical to national security or economic independence.
Apparel, toys, furniture, and household items are also likely targets due to high import volumes from China.
Renewable Energy
Solar panels and batteries have been targets in the past. Given the push for renewable energy, tariffs are a possibility in this sector.
Agriculture
Although agricultural products were first affected by retaliatory tariffs from China, there may be renewed focus in this industry if the Trump Administration wants to balance trade deficits or respond to domestic agricultural lobbying.
How Can Integrators Prepare for Potential Tariffs?
There are a few things integrators can do to prepare in case tariffs do take hold.
Adjust/shorten proposal expiration dates. Consider making proposals valid only for 30 days (or less).
Ensure that payment terms protect you. Move away from progress billing when working directly with the end user. Instead, move to milestone billing. (Progress billingusing percentage of completion will still be required when working through theconstruction channel.)Milestone billing could be, for example, 50/40/10 or 35/35/30, upon authorization of contract, prior to equipmentbeing ordered, upon completion, and commissioning of the project.Track billings by payment terms (AIA, milestone, bill upon completion and others)andeliminate bill-upon-completion terms within your contracts.
Impose surcharges to cover increased freight and vendor product price increases. Integrating this into your pricing model protects against moderate increases without forcing you to go back to your client with a surprise price hike.
Actively review cost basis (labor, cost of goods, re-design, shipping, other logistics). This can be an automated process. Look at the project timeline and price accordingly.
Ensure your sales teams review all the terms and conditions (T&Cs) in proposals and client agreements. This provides an opportunity to communicate the “why” behind your T&Cs.
Ensure that service agreement T&Cs are up to date. Instruct sales teams to proactively work with clients to renegotiate out-of-date service agreement T&Cs that may pose a risk to your company.
Have a defined plan and make sure sales teams share it during discovery. Customers are more likely to feel comfortable working with a company that has a plan to guide them through this storm. You want them to think, “We’re going to have issues with anyone we choose, but at least these guys have a plan and seem to be navigating the waters pretty well.”
Get Updated Reports on Tariffs and More
If you want to get the latest news and updates about tariffs and how they’ll impact you, be sure to subscribe to the Armada Strategic Intelligence System (ASIS) Report, developed in partnership with Dr. Kuehl. The report is tailored specifically to the integration industry. It delivers a running intelligence estimate that monitors critical economic triggers, providing the insights you need to stay ahead of market shifts and make informed decisions.
