Tariff takeaways

** Editor’s note: This article first appeared in the February 2025 edition of our sister publication Greenhouse Management and focuses on how part of the green industry supply chains may be affected.

With proposed tariffs and shake-ups around trade agreements with the United States’ closest trading allies, the logistics industry is entering an era of uncertainty when it comes to moving goods around the globe. And it’s clear that the green industry is not immune to the effects of logistical upheavals. While most finished plants are sold and shipped domestically, inputs are often sourced beyond the borders of North America. So how does the industry manage?

To answer these questions, we reached out to Council of Supply Chain Management Professionals President and CEO Mark Baxa.

GM: Do you think tariffs on imported goods could impact the greenhouse and ornamental industry?

Mark Baxa: If I had a crystal ball, if that’s what you were asking me to do, I would predict that even in the ornamental industry, you’re not immune to tariffs. From a matter of supplies, everything from small petri dishes all the way up to large containers, to things like imported burlap, fertilizer and other inputs — some of that does come from places outside of the United States. You can expect you’re going to be hit with minimally a 10% to 20% tariff increase.

GM: What do you predict the timeline of tariffs might be?

MB: Once President Trump, through an administrative order, invokes an increase in broad-reaching tariff increases, those can go into effect as early as 60 to 90 days from the time that he proposes those. They go through a review period, but that review period is very short.

So, you don’t have much time to get things on the water because what will happen is those tariffs won’t be based on the time necessarily that they leave a foreign country. They’ll be based on when they hit the shores of the U.S. We don’t know if there’s any forgiveness.

GM: What’s your view on what those tariff impacts will be?

MB: The impacts are going to be your ability to actually plan and move timely around the world at a cost basis that you’re accustomed to. So, there’s going to be a margin of protection the industry is going to need to be ready for in terms of cost. It’s going to erode your margins, and you’re going to have to strongly consider price increases or absorbing those costs in some way or taking some form of optimization in your supply network based on timing, co-mingling larger volumes at one time if you will or mode-switching if possible to take costs out because tariffs are going to become a major impact to supply chain cost.

GM: Are there blind spots the industry might not be thinking about when it comes to increased costs due to tariffs?

MB: I would say keep an eye on your tier 1 and tier 2 suppliers that supply what you need to package up your ornamentals or move them. What’s important is they might be considering manufacturing shifts that could actually end up being disruptive.

They’re not telling you they’re going to be switching their sources because they can’t afford to buy components from China or other places that are higher risk. They might have to resource from other places. So, guess what? They can’t fulfill their contract and are going to be three months late. That could very well impact your business in the U.S. market, where your plants have got to be moving in by February and March in many places and some places earlier if you’re in the south.

GM: Can we find any assurance in the free trade agreements that have already been negotiated with Canada and Mexico?

MB: Trump’s prior administration renegotiated NAFTA and called it USMCA. It allows, under certain conditions, for trade to go between Mexico, the U.S. and Canada. If we meet certain component requirements in the manufacturing process and can attest to that, goods can trade between the three countries duty-free. And that’s a tremendous advantage.

It gives us the ability to leverage manufacturing capacity across all three countries. It gives us an opportunity to collaborate at a geopolitical level, and it gives us plenty of nearshoring options in the supply chain, because if it’s not produced in the U.S., it’s just a few more miles into Mexico or Canada.

GM: Will those agreements change at all in the coming years?

MB: Since the Section 301 tariffs were imposed in 2018, China became smart and started looking for alternatives with nearshoring. Now, let’s pretend for a moment that a Chinese-domiciled company is operating in Mexico, making the goods you need and shipping them across the border duty-free.

These companies will become a target in the upcoming renegotiations and review of USMCA between Mexico, the United States and Canada in 2026. Looking into my hazy crystal ball, I would look for President Trump to ask the president of Mexico and their USMCA negotiation team to carve out Chinese companies that have moved to Mexico and are now operating and supplying goods to the U.S. duty-free, because President Trump sees this as a way to circumvent the Section 301 tariffs on Chinese businesses.

In 2026, he’s going to double down on manufacturing, and he’s going to look at those industries with a fine-tooth comb because he claims that was not the intended purpose of USMCA.

GM: Is there anything the industry can do to prepare for those renegotiations?

MB: Well, you can realign your supply chain. So, where possible, look for alternative sources in Mexico that perhaps separate your company and the source manufacturers in Mexico from domicile businesses out of China. It certainly is not in my view that USMCA will go away. It continues to have its place. But there will be certain conditions that we should all expect the president to negotiate hard for. But on the other hand, diversification to create some form of cost resilience is very, very important for supply chains now and into the future.

GM: Are there concerns outside of tariffs the industry should be thinking about?

MB: Let’s talk about the transportation industry. As the economy slowed down around the world, warehousing and transportation had to be evaluated because underutilized capacity is not a good thing, just like it is in manufacturing. So now, what are we going to do as the economy rebounds? And we’re all counting on that happening. We know that puts pressure as we rebound on a smaller base of transportation capacity.

Now, on the ocean level, we can park ships and keep them idle, and we can respond within 30 to 60 days. As business comes back, we can reposition ships, and if that runs out, we can add them back in. It’s harder on domestic transportation. Now, we have to find drivers, we have to qualify them, they have to be able to pass the appropriate licensure. The vehicles must be inspected. All the trucks that are parked have to be restarted, so on and so forth. Your industry may have dedicated fleets that use their own capacity. But at times, depending on demand, they’re going to need surge capacity and must go to the open market. That becomes difficult.

GM: Is there a strategy to get ahead of that surge capacity?

MB: What you do about it is forward contracting. Conversations should be going on now with your third-party logistics and/or contracted transportation providers to ensure they have access to assets. And should the economy rebound, take a measured approach in terms of your overall 12-month demand, your own peaks and valleys and your distribution cycle. It’s key that you look at that, because right now, we’re anticipating 2025 to be a better year than 2024, and that puts more pressure on the logistics sector, warehousing, storage, but namely transportation.

GM: Many big growers maintain their own fleet of trucks to ship plants. Are there considerations around fuel or labor they should be thinking about?

MB: So many parts on these trucks that keep them running come out of China. That is going to shift as well. Producers with their own fleets are going to have to understand that, depending on the age of the fleet and the amount of repairs needed, access to those parts are going to be very important.

So critical parts — things that break often, that are low cost and needed to keep those vehicles running — you might want to stock up just a little bit and get ahead of it. Things that don’t break as often are just going to be a little more expensive in the short term. But look, we’re not going to run out of supply. The question is, are you going to have it when you want it?

GM: What’s the bottom line as we look at logistics in the coming years?

MB: I would say over the next couple of years, no two days are going to be exactly the same. So, when you go to bed on Monday, you are going to face new news on Tuesday, and it’s likely going to affect your supply chain. The most important thing you can do is take top-to-top meetings as frequently as possible with your supply base you are most dependent on to keep your business moving and make sure that what they commit to on your behalf is genuine.

We will all face uncertainty, but yet, we’ll navigate through it. Your supplier network is a key part of being a resilient enterprise and a resilient supplier to big customers. The advice I would give you is stay sharp and stay in tune.

Patrick Alan Coleman is editor of Greenhouse Management magazine.