How Trump Tariffs Could Hit Hospitality Supply Chains

The potential imposition of aggressive tariff policies threatens to fundamentally reshape North American supply chains, with far-reaching implications for procurement strategies, international trade relationships and consumer markets across multiple sectors.

President-elect Donald Trump's proposed 25% tariffs on imports from Canada and Mexico could trigger a seismic disruption in supply chains that currently support nearly US$86bn in annual agricultural trade, with goods such as avocado, strawberries, orange juice, tequila and beef dominating. 

Avocado prices would likely soar given Mexico accounts for 80% of US imports, creating significant vulnerability for procurement professionals.

Procurement experts are warning that these potential trade policy changes could result in an inflationary spiral, with critics arguing that rising costs would disproportionately harm low-income households while simultaneously damaging crucial US trade relationships.

Meanwhile, it seems inevitable that some restaurants will respond by shrinking portion sizes or substituting ingredients to offset rising costs and limited availability.

Strategic sourcing in a volatile trade environment

The hospitality sector stands particularly exposed by these threatened tariffs, with complex international sourcing networks potentially facing substantial reconfiguration.

Alan Benjamin, President of hospitality procurement firm Benjamin West, notes: "If we order today, nothing is going to ship before the inauguration anyway. We've got our holidays, the Chinese New Year and everything else. None of this is going to be in place. It takes time."

Procurement professionals like Neil Flavin, COO for North America at HVS, the hospitality consulting firm, are advising businesses to prepare strategically, securing financing for large purchases to guard against rising interest rates. 

Although tariffs are aimed at boosting US manufacturing, Neil says they could have the unintended consequence of driving up the prices of domestically-produced goods, triggering a chain reaction that raises costs across the entire supply chain.

"They [hospitality businesses] need to plan for the purchasing of goods and, to some extent, services prior to any of these tariffs going into place," he explains.

Domestic manufacturers may also struggle to meet demand as well. Hospitality depends heavily on imported components like drawer glides, desk chair bases and lighting parts, with approximately 90% of these items coming from China.

Vietnam has taken on some of the redirected demand, but its production capacity is nowhere near sufficient to replace China as the primary supplier.

Navigating complex manufacturing landscapes

Procurement and supply chain leaders in the hospitality sector face increasingly complex sourcing challenges as traditional procurement routes become constrained by geopolitical and economic pressures. 

As noted, alternative manufacturing regions present significant scaling limitations, with emerging markets struggling to develop the comprehensive infrastructure required to replace established supply networks.

Southeast Asian markets like Vietnam demonstrate insufficient capacity for large-scale manufacturing expansion, while developing economies such as Cambodia and Latin America continue to build foundational industrial capabilities. One retail manufacturer's plan to invest US$100m in Cambodia underscores the potential for development, yet progress remains frustratingly incremental.

Domestic production offers partial solutions, with certain product categories like solution-dyed nylon carpets and vinyl wall coverings amenable to US manufacturing. However, the hospitality industry's demand for complex designs and the labour-intensive finishes required for high-end furniture means this remains largely unviable. 

“The US lacks the capacity for large-scale production of four- and five-star hotel furnishings," adds Alan. 

Historical trade interventions have already reshaped sourcing strategies. The 2005 anti-dumping tariff on Chinese bedroom furniture compelled the industry to diversify its supply chains, a trend accelerated by subsequent broad tariff policies. Despite these adaptations, many critical components continue to originate in China, with manufacturers developing complex assembly strategies to circumvent direct tariff impacts.

Clearly, the fast-evolving landscape demands sophisticated procurement approaches. Hotel brands must develop agile sourcing strategies that balance cost efficiency, supply chain resilience and product quality. Failure to adapt could precipitate a cascading economic effect, potentially reducing consumer purchasing power and constraining hospitality sector growth.

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