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A 90-day reprieve on Donald Trump’s expansive tariff plan is set to lapse on Wednesday, potentially disrupting established U.S. trade relationships globally. The uncertainty of recent months has already compelled numerous companies to fundamentally reassess their supply chains.
Upon learning of Trump’s proposed tariffs on Chinese imports, one Illinois-based toymaker was so alarmed that he initiated a lawsuit against the U.S. government.
“I felt compelled to take action when my company’s survival was genuinely threatened,” stated Rick Woldenberg, CEO of Learning Resources, an educational toy manufacturer.
With a significant portion of his company’s production based in China, the tariffs, which are levied on U.S. importers rather than Chinese exporters, have imposed substantial financial burdens.
He projects that his annual import tax expenses would have surged from approximately $2.5 million in 2024 to over $100 million in 2025, following Trump’s temporary tariff increase on Chinese imports to 145% in April. This, he says, would have “devastated” the company.
“The potential impact on my business is almost incomprehensible,” he remarked.
Even with current U.S. tariffs on Chinese imports at 30%, the cost remains prohibitive for many American businesses, including Learning Resources.
In addition to pursuing legal recourse, the company is restructuring its global supply chain, shifting production from China to Vietnam and India.
These countries, like most others, face general 10% U.S. tariffs, significantly lower than those imposed on China. While these 10% tariffs are scheduled to expire on Wednesday, July 9, uncertainty persists regarding potential replacements.
Meanwhile, many Canadian companies, often engaged in trade within both Canada and the U.S., are experiencing a dual impact on their supply chains.
This includes the 25% tariffs imposed by Trump on numerous Canadian imports, coupled with reciprocal measures of equal magnitude enacted by Canada on a range of American exports.
Furthermore, businesses worldwide are contemplating reduced exports to the U.S., as their American import partners are compelled to raise prices to offset tariff costs, rendering their products more expensive for U.S. consumers.
At Learning Resources, Mr. Woldenberg has relocated approximately 16% of manufacturing to Vietnam and India. “We have completed the process of vetting new factories, providing necessary training, ensuring smooth operations, and cultivating strong relationships.”
However, he acknowledges existing uncertainties: “We are unsure if they can accommodate our business volume, let alone the influx of global demand occurring simultaneously.”
He also emphasizes the significant expense associated with transitioning production to another country.
Meanwhile, his legal challenge against the U.S. tariffs, titled “Learning Resources et al v Donald Trump et al,” continues through the U.S. court system.
In May, a judge at the U.S. District Court in Washington D.C. ruled that the tariffs were unlawful. However, the U.S. government immediately filed an appeal, and Learning Resources remains obligated to pay the tariffs in the interim.
Consequently, the firm is persisting in its efforts to shift production away from China.
Global supply chain expert Les Brand highlights the expense and complexity associated with companies relocating manufacturing to different countries.
“Sourcing new suppliers for critical components is a research-intensive undertaking,” says Mr. Brand, CEO of Supply Chain Logistics, an advisory firm.
“Thorough quality testing is essential to ensure proper execution. This process requires a significant time investment, diverting attention from core business operations.”
He adds, “Knowledge transfer for training an entirely new workforce in the production of your product demands substantial time and resources, further impacting the already narrow profit margins faced by businesses today.”
For Canadian fried chicken chain Cluck Clucks, Canada’s retaliatory tariffs on U.S. imports have significantly impacted its supply chain, particularly regarding specialized catering refrigerators and pressure fryers imported from the U.S., while its chicken is sourced domestically.
While the refrigerators are considered indispensable, the company has opted to discontinue further purchases of the fryers. With no Canadian alternatives available, Cluck Clucks is limiting its menu offerings at new locations.
The pressure fryers are essential for cooking bone-in chicken pieces, and the new stores will instead only offer boneless chicken, which is prepared differently.
“This was a significant decision for us, but we believe it’s the right strategic move,” says Raza Hashim, CEO of Cluck Clucks.
“It’s important to note that we do plan to retain the necessary kitchen space in new locations to reintroduce these fryers should the tariff uncertainty be completely resolved in the future.”
He also cautions that the increased cost of U.S. refrigerators may necessitate price increases for consumers. “There is a certain amount of costs we cannot absorb as brands, and we may have to pass those on to consumers. And that is not something we want to do.”
Mr. Hashim adds that the business is continuing with its US expansion plans, and it has set up local supply chains to source American chicken. It currently has one US outlet, in Houston, Texas.
In Spain, olive oil producer Oro del Desierto currently exports 8% of its production to the U.S. It says that the U.S. tariffs on European imports, presently 10%, are having to be passed on to American shoppers. “These tariffs will directly impact the end consumer [in the US],” says Rafael Alonso Barrau, the firm’s export manager.
The company also says it is looking at potentially reducing the volume it sends to the US, if the tariffs make trading there less profitable, and exporting more to other countries instead.
“We do have other markets where we can sell the product,” says Mr Barrau. “We sell in another 33 markets, and with all of them, and our local market, we could cushion US losses.”
Mr. Brand says that firms around the world would have been less impacted if Trump had moved more slowly with his tariffs. “The speed and velocity of these decisions are really making everything worse. President Trump should have gone slower and been more meaningful about these tariffs.”
Back in Illinois, Mr. Woldenberg is also concerned about where Trump will go next in his trade battles.
“We just have to make the best decision we can, based on the information we have, and then see what happens,” he says.
“I don’t want to say ‘hope for the best’, because I don’t believe that hope is a strategy.”
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