SYDNEY, AUSTRALIA
With Donald Trump back in the White House as of last week, trade relations between the United States and China are expected to further decline.
Trump has declared that he will impose tariffs on exports from China to the US, a move that will not only affect the Chinese market directly but will also have an impact across the Asia-Pacific (APAC) region, including Australia.
APAC businesses are already preparing for supply chain disruptions due to Trump’s “American-first” foreign trade policy. The Trade in Transition report, published by Economist Impact and DP World, found that 33 per cent of APAC businesses are creating parallel supply chains to avoid disruptions caused by geopolitical risks. Meanwhile, 29 per cent are creating dual supply chains to cater for the Chinese and US markets.
But what might these changes mean for Australian SMEs? Should they be worried – and what can they do to prepare for another Trump era?
Should Aussie SMEs be worried?
Tom Fitz-Walter, Global Executive Director of Supply Chain, at TMX Transform, says that Australian SMEs should be aware of the potential impact of the Trump administration’s trade policies.
"If Trump sticks to his promise of tariffs on exports from China to the U.S., that could have an inflationary impact domestically in Australia," Fitz-Walter said.
These impacts will vary depending on an individual business’s industry and the nature of its supply chain operations, particularly if it intersects with and within the U.S. and China. It could mean an increase in costs.
RSM Australia Economist Devika Shivadekar said that while Australia may avoid direct US tariffs due to its trade deficit with the US, the indirect effects are what it needs to be prepared for.
“If the US goes ahead with imposing strict tariffs on Chinese goods, there is a chance the Australian market could be inundated with cheaper Chinese imports, creating intense competition for local businesses and eroding profit margins for SMEs unable to compete on price,” Shivadekar said.
“At the same time a weaker Australian dollar, driven by trade uncertainties and a strong US dollar, could see import costs increase for SMEs reliant on foreign raw materials, machinery, or technology – further straining already tight margins,” she added.
How SMEs can protect their supply chains
Fitz-Walter reminds businesses to have a strategic roadmap, which considers long-term implications, and a tactical roadmap, which entails the optimisation of the existing supply chain, which businesses with limited resources can pursue immediately.
He also suggests that SMEs evaluate and improve the resilience of its supply chain by testing it with different risks and scenarios.
A business could ‘roleplay’ what it would do if its overseas manufacturer suddenly ceased operation or in response to tariffs, sanctions, inflation, rising labour costs, etc. Ensuring there is a plan in response to disruption is a good place to start.
The principles of risk management, supply chain resilience, and business continuity planning remain the same – it is just a matter of scale. A business of any size that has a supply chain can map out its end-to-end process.
ECommerce businesses should be considering supply chain diversification strategies, according to eCommerce expert Lyn Nguyen.
“Forward-thinking brands are already exploring alternative manufacturing locations to mitigate tariff risks,” said Nguyen. “Vietnam, South Korea and Japan have emerged as particularly attractive options.”
This article was written by Karl Aguilar and originally published by Inside Small Business on January 28, 2025.