How Could Trump Tariffs Impact Hospitality Manufacturers?

President-elect Donald Trump's proposed tariffs could lead to significant changes in consumer and business expenses, impacting manufacturers.

A notable 25% tariff on imports from Canada and Mexico is set to increase grocery prices dramatically in the US and could result in shortages of essential products.

Canada and Mexico are critical suppliers to the US, annually providing around US$86bn worth of agricultural goods.

This includes 90% of the avocados Americans consume.

These nations also supply strawberries, orange juice, tequila and beef. Should these tariffs come into effect, the cost of avocados could skyrocket, considering Mexico supplies 80% of the avocados in the US.

Additionally, spirits such as tequila and mezcal, which are crucial for popular drinks like margaritas, could see price increases.

In 2023, the US imported spirits valued at US$4.66bn from these regions.

Manufacturers in the food & beverage industry will need to adapt, with many preparing to increase costs, reduce portion sizes or substitute ingredients to manage the growing costs and scarcity of supplies.

Procurement experts are warning that these shifts could trigger an inflationary spiral.

Critics of the tariff plan argue that the heightened costs would likely hurt low-income families the most and could undermine US trade relationships.

With the US-Mexico-Canada Agreement (USMCA) set for renegotiation in 2026, these issues could further complicate diplomatic and trade negotiations.

Expected supply chain challenges

The hospitality industry is bracing for significant supply chain disruptions, particularly in acquiring furniture, fixtures, and equipment.

Trump’s proposed tariff policy includes a 25% rate on goods from Canada and Mexico and an additional 10% on imports from China— a key provider of hotel furnishings.

Procurement professionals like Neil Flavin from HVS suggest that hoteliers prepare by securing financing for large purchases before inflation pushes interest rates higher.

Tariffs, while intended to boost US manufacturing, are predicted to backfire by inflating the prices of American-made goods, thus escalating costs across the supply chain.

Domestic manufacturers are also challenged by their limited capacity to meet demand.

The hospitality industry heavily depends on imported components such as drawer glides, desk chair bases, and lighting parts—around 90% of these are sourced from China.

Despite Vietnam taking on some of the demand, it lacks the production capacity to replace China as the primary supplier.

With the busy festive season, manufacturers also lack the ability to truly prepare for the impact of the tariffs.

"If we order today, nothing is going to ship before the inauguration anyway," says Alan Benjamin, President of hospitality procurement firm Benjamin West.

"We’ve got our holidays, the Chinese New Year and everything else. None of this is going to be in place. It takes time.

"Meanwhile the US lacks the capacity for large-scale production of four- and five-star hotel furnishings.”

Neil Flavin, Chief Operations Officer for North America at HVS agrees, adding that manufacturers have a lot of planning ahead.

“They do need to plan for the purchasing of goods and, to some extent, services prior to any of these tariffs going into place," he says.

Exploring alternatives and preparing for change

Dodging tariffs by sourcing products from other countries is not an easy fix either. Vietnam for example, lacks the necessary space and expertise to scale up production significantly.

Other regions like Cambodia and Latin America have potential, yet lack adequate infrastructure to support large-scale manufacturing.

A retail manufacturer's plans to invest up to US$100m in Cambodia showcases the possibilities, but progress is slow.

Some items, like solution-dyed nylon carpets and vinyl wall coverings, are available domestically, but the US production of high-end, labour-intensive furniture remains prohibitively expensive.

The anti-dumping tariff on Chinese bedroom furniture imposed in 2005 forced the industry to diversify its sourcing strategies.

Trump's broader tariffs during his first term accelerated this trend. Many components still originate from China but are often assembled elsewhere to circumvent direct tariffs.

Hotel brands must navigate these challenges successfully; otherwise, escalated costs might compel both hotel owners and guests to economise, reducing disposable income and potentially impacting the hospitality and manufacturing sector extensively.

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