Initial perspective on the impact of Trump’s second presidency on Swedish companies’ US supply chains

The 2024 US presidential race had many twists and turns. The initial contest between President Biden and former President Trump focused heavily on character and record, sidelining many policy issues. After Vice President Kamala Harris was nominated, the final three months saw a slight shift toward policy debates, though character and record still dominated. 

Note #1: This point-of-view does not aim to encompass all potential effects on supply chains impacting US consumers. Geopolitical risks, including those related to Ukraine, the Middle East, and Taiwan, could all upend global trade. This PoV focuses strictly on the consequences of domestic policy for supply chains.  

Note #2: The next 100 days are expected to provide greater clarity through cabinet appointments and Trump’s inauguration address on 20 January. This PoV is based on incomplete information and is intended to initiate a discussion on the potential impacts of a second Trump presidency on supply chains.  

Supply Chain Effects 

Sweden’s economy and exports have evolved from focusing solely on products to incorporating a mix of products and services. While services could become subject to tariffs down the line, this discussion focuses on the USD 18 billion or 60% of Sweden’s US exports based on products.

Independent trends 

When assessing the impact of the presidential election, it’s important to recognise ongoing trends:  

• The US manufacturing sector has maintained approximately 12.5 million jobs¹ over the last 15 years, with brief dips during the Great Recession and the covid-19 pandemic. Despite these disruptions, long-term efforts to reshore manufacturing jobs have had limited overall impact. However, some industries, like automotive, have seen expansion, while others, such as electronics and textiles, have contracted significantly. Efforts to onshore or reshore US manufacturing jobs will continue under the Trump administration. 

• Trade tensions with China will likely persist due to political and economic drivers. 

• The consensus among economists² is that inflationary tendencies in both candidates’ campaign proposals (tariffs, child tax credits, new business tax deductions, etc.) will likely reignite US inflation, leading to continued price increases for purchased materials, energy, utilities, and labour. 

Policy overview 

President-elect Trump’s campaign highlighted several recurring themes likely to impact supply chains: 

• Tariffs: Trump has repeatedly stated, “To me the most beautiful word in the dictionary is tariff. It’s my favourite word.”³ , signalling potential increases in trade barriers.  

• Energy policy: “Drill baby, drill”⁴ signals a continued push for domestic extraction and consumption of fossil fuels, likely paired with a scaleback of funding for green energy and the broader green transition.  

• Labour market: “Mass deportation” plans, if executed, could tighten the labour supply and drive up wages. 

• Corporate taxes: Keeping corporate taxes at 21% or lower may encourage local investments.  

Swedish export sectors 

As Sweden’s largest trading partner outside the EU, nearly 10% of Swedish exports go to the US. Between 20-40% of global revenue for many major Swedish companies comes from the US, making this market critical. 

Each major sector operates with its own dynamics and will be influenced by factors beyond the policies of a new US administration.  

Personal and commercial vehicles  

They are a core Swedish export and as such, critical to understand. The finished products are undergoing significant transformation with increased electrification, vehicle autonomy, and connectivity. Swedish OEMs have a long history of engaging with the US market and are well-positioned to manage these shifts. 

A key segment that may feel a greater impact is the classic Tier 1 and Tier 2 suppliers to the automotive industry. Many of these suppliers lack local manufacturing or assembly facilities in the US/USMCA region, which they will likely need to address swiftly. In 2024, several localisation strategies and pre-studies for US supply have already been undertaken by Swedish companies in this sector. These projects are expected to continue — and likely increase — in the coming years. 

Machinery  

Another hallmark of Swedish exports, machinery and equipment for manufacturing, processing, energy, and other uses, is deeply tied to Sweden’s tradition of engineering and innovation. 

As additional manufacturing is brought onshore and labour rates continue to rise, the demand for more efficient equipment and systems is expected to grow. Automation and process efficiency, long-standing Swedish strengths, are well-positioned to perform strongly in the coming years. 

While tariffs may make exports to the US more challenging, local demand will likely increase with the onshoring trend. For equipment providers with local manufacturing or assembly capabilities, this shift could present a significant expansion opportunity. 

Pharmaceuticals  

In 2023, Sweden exported pharmaceutical and related products worth USD 3 billion to the United States, making the US Sweden’s largest market for pharmaceuticals and accounting for nearly 13% of total pharmaceutical exports. 

While AstraZeneca plays a dominant role in this trade, smaller Swedish pharmaceutical companies also contribute significantly to exports. AstraZeneca’s manufacturing footprint within the US positions it to better navigate potential tariff increases or policy changes. However, smaller firms, which often rely on Sweden-based production, are more vulnerable to coming disruptions. 

The pharmaceutical sector’s intricate supply chains, spanning everything from raw materials to finished goods, mean that even small policy shifts could have wide-ranging impacts. Should tariffs or regulatory barriers increase under the second Trump administration, Swedish pharmaceutical exports may face challenges. Initially, this may lead to an overall decline in export volumes. Longer-term actions – ranging from R&D and patents to production relocation – may come into play.

Tariffs, tariffs, tariffs, and onshoring 

President-elect Trump has consistently vocalised his intent to implement tariffs, citing their importance in supporting “working class Americans” by reducing income taxes. While this aligns with traditional Republican principles of small government, the exact mechanisms to implement these tariffs remain unclear.  

It’s important to note that while many policy changes require legislative support (primarily from the House), the Constitution explicitly assigns “Taxes, Duties, Imposts, and Excises” to the House’s remit. However, over recent administrations, the House has largely ceded tariff authority to the Executive Branch, leaving these decisions mainly at the discretion of the President. 

For Swedish companies, this situation can evolve along several paths: 

• If you are already manufacturing in the US or within USMCA territory, this may work to your advantage, depending on your competitive position.  

• If you rely heavily on imports for your product costs – whether finished goods or components – expect the tariffs to increase, potentially putting you at a disadvantage compared to US-based competitors.  

• In some cases, additional categories of imports may face extreme tariffs, such as the 100% tariff on Chinese-made EVs imposed by the Biden administration in 2024. 

US trade restrictions with China will likely expand, ranging from broad tariffs to severe measures targeting critical technologies. This would mark a departure from the Biden administration’s “small yard, high fence” approach. Swedish products incorporating Chinese-origin technology or partial Chinese ownership may be especially affected.  

That said, it’s worth remembering that supply chains do not shift overnight. In the short term, tariffs may result in higher consumer prices or pressure on manufacturers’ margins. Over time, however, they will likely drive more Tier 1 and Tier 2 suppliers to relocate to the US or USMCA region. For Swedish manufacturers, this underscores the importance of understanding where your suppliers are moving and how price-sensitive your customers are. Finally, it’s essential to ask: what steps are you taking to adapt? 

Input materials  

Each company has its own profile for COGS, so the exact impact can only be determined on a case-by-case basis. However, some general input categories affect many manufacturers, making it worth examining a few key areas:  

• The US is a major producer and net exporter of crude oil. While oil remains the largest import category, a price hike from tariffs is unlikely due to abundant domestic supply. In fact, there is some expectation that a Trump administration could lead to lower oil and gas prices, with spillover effects to other energy sources. Oil futures showed minimal movement (0.3%) following the election, suggesting that Trump’s policies are not seen as significant disrupters. The balance between domestic production and Trump’s tougher stance on Iran and Venezuela is expected to largely offset any major changes. 

• The US imports over 20 million tons of rolled steel annually, accounting for roughly 20% of domestic consumption. With insufficient local iron ore to support higher domestic production, tariffs on steel imports are likely to directly impact prices.  

• Rare earth minerals represent another area of concern, as the US remains far from self-sufficient. Tariffs on this category could hit particularly hard, given the high percentage of these materials sourced from China. 

• Trump’s promises of mass deportation could be challenging to implement, both legally and logistically. However, with the US workforce close to fully occupied unemployment at less than 4%, any reduction in the workforce could tighten labour availability and drive up costs, particularly for entry-level jobs in agriculture, services, and manufacturing.  

• Lastly, an expected continued strengthening of the US dollar will likely increase onshore costs. However, this may create opportunities for imported goods purchased in weaker currencies. 

While tariffs may take a broader hold, Trump has also proposed policies to support investment, such as allowing manufacturers to “write off” 100% of heavy machinery and equipment costs. Coupled with the expectation that corporate taxes will remain at 21% or lower, this could make it easier for manufacturers to secure investment funding and expand their US footprint. 

Each business will be impacted differently, so scenario planning remains essential. This will help companies prepare for short-term adjustments, such as pricing strategies, and more strategic long-term options, like increased localisation or alternative cost-modelling approaches. 

North American dynamics and USMCA  

During his first term, President Trump signed the USMCA trade agreement, replacing NAFTA. Initially, he celebrated the deal as a significant victory. However, in the past six months, his stance has shifted. This change in tone stems partly from border control challenges and partly from Mexico’s emergence as a low-cost manufacturing hub in the US’ backyard. 

As a result, Mexico has now become the US’ largest trading partner. Swedish companies have also established extensive manufacturing operations in Mexico to serve the broader North American market. On the eve of the presidential election, Trump even threatened to impose a blanket 25% tariff on all Mexican imports, contingent on stricter border control measures and a reduction in illegal immigration. 

While the alignment of such a tariff with the USMCA agreement remains unclear, the threat to Mexican manufacturing and the USMCA itself is significant. At a minimum, the 2026 USMCA “review” is expected to evolve into a broader renegotiation, particularly targeting product categories perceived as either Chinese or strategically sensitive. 

In the short term, the US could implement directed tariffs on Chinese-owned entities operating in Mexico. The Regional Value Calculation (RVC) – the minimum value content requirement per Harmonised Tariff Schedule (HTS) code – is currently self-certified by importers. A pragmatic approach to curbing undesired imports might involve demanding detailed evidence to substantiate RVC compliance and imposing punitive tariffs on those unable to do so. This could also affect businesses involving Chinese content or partial origins.   

While the USMCA is likely to endure, albeit in a modified form, understanding the associated risks and opportunities will be critical for continued imports from Mexico to the US. 

Potential interim effects 

In addition to some long-term impacts, there may be intermediate effects on supply chains.  

The most immediate effect is the significant restructuring and downsizing of government agencies promised by the President-elect. Compounding this is the expected wave of new leadership appointments within these agencies, which is likely to temporarily reduce their effectiveness and subsequently reset policy direction. 

Us-China tensions and supply chain resilience

The US and China appear poised for another trade war, particularly with the potential appointment of China hawk Marco Rubio as Secretary of State. While the specifics remain uncertain, such escalations could disrupt global trade flows.  

However, beyond that, it is unlikely that a second Trump administration will dramatically impact supply chains. Trade barriers and efforts to onshore or re-shore manufacturing in the US have been ongoing for over 20 years, and that trend is expected to continue. Intermediate effects on supply availability, prices, and currencies are also likely.  

While each company is unique and must act independently, there appears to be a strong case for continued scenario planning and increased localisation within the US or the broader USMCA region.  

Footnotes:
[1] U.S. Bureau of Labor Statistics
[2] Oxford Economics, Yale Insight
[3] President-elect at Chicago Economic Club
[4] Repeated campaign slogan
[5] Trading Economics (UN COMTRADE)