The biggest enemy of businesses is ‘uncertainty’

“Uncertainty is the biggest threat to supply chain efficiency, and the latest tariff developments underscore why,” says Matt Lekstutis at global procurement and supply chain consultancy Efficio.

Lekstutis was speaking to AgFunderNews as the Trump administration paused plans to institute a 25% tariff on goods from Mexico and Canada hours before they were due to take effect after securing commitments from both trading partners to increase border security.

A 10% tariff on goods coming into the US from China has gone into effect, meanwhile, prompting immediate retaliatory measures from China on a range of US goods from crude oil to agricultural machinery.

No measures have as yet been announced for European trading partners, but Trump told reporters that tariffs on EU goods imported into the US could happen “pretty soon.”

Trump is ‘forcing companies to react in real-time with limited visibility’

While a trade war with Canada and Mexico has been averted for now, businesses do not know for sure whether the tariffs will now come into effect on March 4, as the Trump administration has warned, or whether the threat of tariffs will be used to extract further concessions, said Lekstutis.

As such, food, beverage, and household goods companies trying to navigate this fluid situation are being “forced to react in real-time with limited visibility,” he said.

“Even if tariffs don’t go into effect, the potential alone drives inefficiencies in procurement, production, distribution and logistics as companies move to hedge risks, accelerate purchasing, and reassess supplier relationships. The broader impact? Higher costs, disrupted operations, and an uneven playing field where some companies are better positioned to adapt than others.”

He added: “The key question being asked is: How do you make confident decisions when policy remains a moving target?”

Real-time data, AI-driven risk modeling, and scenario planning 

The companies that remain competitive won’t be those reacting to each policy shift, but those that have built agility into their supply chains, he claimed.

“Organizations that have prioritized supplier diversification, regional sourcing strategies, and built-in contract flexibility are already ahead, maintaining supply chain continuity while keeping costs under control. Those that haven’t are now under pressure to accelerate these capabilities, as adaptability is quickly becoming the difference between operational resilience and costly disruption.”

Right now, he said, “We’re seeing firms expand their options, not just their visibility. Some are doubling down on real-time data, AI-driven risk modeling, and scenario planning to sharpen decision-making. Others are securing alternative production hubs, leveraging tariff engineering, and restructuring supplier contracts to introduce greater flexibility.”

For industries where supply chain shifts are more complex, inventory positioning, cost-sharing models, and proactive supplier collaboration are also becoming critical levers, he added. “Companies that treat optionality as a strategic advantage will be in a far stronger position to navigate continued uncertainty.”

The firms that are ahead of this have “clear playbooks in place,” he claimed. “Short-term, they’re optimizing supplier negotiations, cost-sharing agreements, and inventory strategies. Medium-term, they’re diversifying their supply base, strengthening risk assessments, and running scenario models. Long-term, they’re looking at nearshoring, automation, and securing critical IP to future-proof operations.”

AFBF: ‘Farmers and rural communities will bear the brunt of retaliation’

His comments came as food and ag groups warned the Trump administration of the potentially devastating effect of a trade war with America’s biggest trading partners.

“The President is right to focus on major problems like our broken border and the scourge of fentanyl,” said the US Chamber of Commerce in a statement on Monday. “But the imposition of tariffs under the International Emergency Economic Powers Act is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains.”

In a press release, the International Fresh Produce Association added that the “broad application of tariffs can disrupt supply chains, threaten market expansion, increase costs for consumers, and place unnecessary strain on growers and producers,” while FMI the Food Industry Association issued a statement stressing that imports are unavoidable if American consumers want year-round availability of certain fresh foods.

“With 1.6% retail and 7.5% food manufacturing net margins,” tariffs will put “incredible pressure on our members… at a time consumers are extremely concerned about prices,” said the group.

“We know from experience that farmers and rural communities will bear the brunt of retaliation,” added the American Farm Bureau Federation (AFBF) in a statement on its website. “Over 80% of the United States’ supply of a key fertilizer ingredient — potash — comes from Canada. Tariffs that increase fertilizer prices threaten to deliver another blow to the finances of farm families already grappling with inflation and high supply costs.”

“The American people are counting on President Trump to grow the U.S. economy and lower inflation, and broad-based tariffs will put that at risk.” Retail Industry Leaders Association

Ontario premier: ‘We’re already feeling the impact’

In a post on social media site X, Ontario Premier Doug Ford said he was pleased a trade war had been averted for now, but said that the continued uncertainty made it hard to plan ahead. “Make no mistake, Canada and Ontario continue to stare down the threat of tariffs. Whether it’s tomorrow, in a month or a year from now when we’re renegotiating the United States-Mexico-Canada Agreement (USMCA), President Trump will continue to use the threat of tariffs to get what he wants.

“We’re already feeling the impact. So long as our trading relationship with our largest trading partner is up in the air, we will continue to see many potential projects frozen and projects that were already under way put at risk.”

‘Devastating’ trade war

His comments came as USDA secretary nominee Brooke Rollins told Senators during her confirmation hearing that USDA would offer financial aid to US farmers and ranchers negatively impacted by a potentially “devastating” trade war during the second Trump administration.

“Regarding the president’s tariff agenda, I think it probably comes as no surprise to anyone sitting in this room that he believes it is a very important tool in his tool kit to continue to bring America back to the forefront of the world and to ensure that we have a thriving economy,” said Rollins.

“But just as he did and we did in the first administration, he also understands the potential devastating impact to our farmers and our ranchers.”

While farmers would appreciate financial aid in the event of a trade war, said Senator Michael Bennet (D-CO), they would rather make a living by selling their goods. “What we have heard from our farmers and ranchers over and over again is they want to be able to do the work, they want to be able to export. They don’t want to solve this problem by getting aid to make up for what they should have been able to send to Asia and other places.”

Beer and Tequila  

Analysts at TD Cowen say tariffs on Mexico could negatively impact multiple CPG brands, notably Corona maker Constellation Brands, which brews beer in Mexico and is mid-way through building a new brewery in Veracruz. “The company sources corn and barley from US farmers, transports the raw materials to its Mexican breweries in Nava and Obregon, and then transports packaged beer to the US.”

As for Diageo, blanket tariffs could hit multiple areas of its business, including tequila exports from Mexico to the US, which account for 22% of the company’s sales in the US, said TD Cowen, which noted that a sizable chunk of Mondelēz International’s biscuit sales in the US also come from production in Mexico.

Charlie Dent: Trade wars have no winners

Speaking to AgFunderNews before Christmas, former Congressman Charlie Dent warned that tariffs would “have enormously consequential and negative impacts on American manufacturing and agriculture.”

Dent, a Republican who represented Pennsylvania’s 15th District in the US House of Representatives from 2005 to 2018, said both major political parties in the US have shifted away from globalism and multinationalism in recent years in favor of a more protectionist stance.

“It doesn’t take a rocket scientist to figure out that things could spiral out of control very badly,” added Dent, who claimed that the market was beginning to recover from the 1929 stock market crash before President Herbert Hoover imposed sweeping tariffs on goods coming into the US in a move frequently cited as a cautionary tale of how protectionist policies can backfire.

Contrary to Hoover’s expectations, claimed Dent, the tariffs raised the cost of imported goods for already cash-strapped US consumers and reduced demand for American exports as 25 countries responded with retaliatory tariffs.

“Yes, the United States ran a lot of trade surpluses during the 1930s ,” noted Dent. “But did anybody care when unemployment was over 20%? Once you start these trade wars there really are no winners.”

‘We did not change China’s behavior’

One overlooked aspect of tariffs is the “misconception” that they will reduce trade deficits, economist Dr. Joseph Gagnon told delegates at a recent summit hosted by the Consumer Brands Association.

“In economic models that the Federal Reserve uses to study this, and that we’ve used at [Washington-based think tank] the Peterson Institute for International Economics, tariffs have zero impact on the trade deficit,” he claimed.

“Why is that? If you put a tariff on China, say, the bilateral balance will go down with China, but it will go up with other countries. Likewise, if you put a tariff on one good, say steel, the steel deficit will go down, but the deficit for other goods will go up [for example as US companies paying more for steel become less competitive].”

And instituting across-the-board tariffs to address this whack-a-mole challenge “still doesn’t work,” claimed Gagnon. “Suppose you put a 10% tariff on everything entering the US? The dollar goes up 5% so that means that the cost of all those imports just went down by half of the tariff.”

Inu Manak, fellow for trade policy at the Council on Foreign Relations, added: “If you look at the tariffs Trump originally put in place, they didn’t achieve any of his objectives. We did not change China’s behavior. We did not increase US manufacturing. Meanwhile, all the costs were passed through to consumers.”

Further reading:

Trump’s tariffs won’t help US agrifood industry, says ex-Congressman Charlie Dent: ‘There are no winners’