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The new tariffs imposed by the US government have created numerous challenges for businesses both domestically and abroad. In Michigan, specifically, the impact could be particularly damaging if companies aren’t prepared to navigate the new landscape. So how can Michigan businesses prepare for the potential impact of new tariffs, and what exactly could the tariffs mean in the first place?
The New Tariffs: Explained
After President Trump reclaimed the White House, one of the first things he did was announce new tariffs that were designed to protect American industries and reduce the trade imbalance with other nations.
These tariffs targeted various foreign imports, particularly those from Canada and Mexico, where 25% tariffs are placed on a range of goods including automotive parts, raw materials, and consumer goods. Because they increase the cost of imported goods, this can ultimately result in higher prices for consumers and businesses alike, which is why – according to some – it is not a particularly positive thing for US organisations.
Where Does Michigan Stand?
The first thing to note is that Michigan has deep economic ties with Canada and Mexico, and these ties are now vulnerable. In 2023, for instance, the state imported $69 billion worth of goods from Mexico and $46 billion from Canada, with a substantial portion related to automotive manufacturing – Michigan’s automotive industry is one of the cornerstones of its economy.
With the new tariffs expected to lead to increased production costs, however, this can result in far higher vehicle prices for consumers, with some estimates suggesting they could add up to $12,200 to the cost of certain car models.
As well as this, the tariffs introduce significant uncertainty when it comes to supply chain planning. Numerous Michigan companies rely on cross-border supply chains, but with the new tariffs coming into effect, they could easily be at risk of supply shortages and longer lead times – to the point where they might need to seek alternative suppliers.
Lastly, the new tariffs could have significant implications for Michigan’s employment landscape. While most successful Michigan companies have been observing best employment practices, the tariffs could easily lead to increased job loss, with an emphasis on downsizing or job cuts due to increased production costs and disrupted supply chains.
How Michigan Businesses Prepare?
This is one of the reasons why insurance has become so important. As we just noted, while businesses in Michigan adapt to the new tariffs, they may face economic pressures that lead to layoffs, restructuring, or changes in workforce dynamics. These shifts can sometimes result in employment-related claims from employees, including wrongful termination, discrimination, or retaliation.
With EPL insurance, specifically, companies can prepare for these outcomes, working to future-proof their business while they put in the necessary steps to adapt to this new climate. As well as insurance, businesses should be looking to diversify their supply chains. Seeking out local suppliers, for instance, can be an effective way to reduce transportation costs and mitigate the risk of tariff hikes, while building up a buffer of inventory from non-tariffed countries might help businesses weather the initial tariff storms.
It’s also likely that many Michigan organisations will look at these new tariffs as a diversification opportunity, rather than an obstacle. For instance, while tariffs can disrupt existing trade relationships and reduce access to key markets, there’s always the possibility of exploring new markets that might end up being more beneficial.
Markets in Europe, Asia, and other parts of Latin America are there to explore, and if this isn’t feasible, smaller businesses can always consider banding together to purchase in bulk from suppliers – increasing their buying power, securing discounts, and making some important local partnerships in the process.
The new tariffs are not exactly a good thing for Michigan companies, there’s no doubt about that. But as ever in the world of business, it’s important to look for the opportunities and make something good out of a bad situation. Michigan businesses have the power to do that, and with the right insurance working to future-proof their operations, there’s nothing stopping them from taking the leap.
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