Supply chain expert explains how Trump's proposed tariffs could affect horticulture industry

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 greenhouse growers are 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 increased input costs while making sure they have what they need to grow when they need it?

To answer these questions, we reached out to Council of Supply Chain Management Professionals President and CEO Mark Baxa. The following conversation digs deep into his global view and historical knowledge, providing tips and advice for how the green industry can stay nimble and contain costs in a new era of global trade.

Greenhouse Management: At the time of this conversation, there is concern about the impacts of widespread tariffs on imported goods put in place by the incoming presidential administration in the United States. Do you think these 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, — not just China, but broad-reaching — 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, very short, 45 days at the most. 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 United States. We don’t know if there’s any forgiveness. So that’s very, very critical.

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, not just in the U.S., but around the world.

GM: What will ornamental plant growers need to do to overcome the impact?

MB: Think about the extended supply chain that you need for your ornamental business to succeed, like the volume of containers that are needed to hold plants or bulbs or anything that you move to that end customer. You can expect that sourcing is going to become difficult, so now is a good time to strongly consider genuine Mexican-owned industries that are not impacted by Chinese influence in Mexico as alternative source points for goods ordinarily imported from China. No real commodities in large groups are going to be forgiven initially. It’s likely to hit everything, with a few exceptions.

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: Is there a way to manage those possible delays?

MB: Take a very assertive approach with your supplier community because they may be making shifts that are totally benign to you that could actually impact themselves supplying you with what they have contracted. Everything that you need from an input perspective could be at risk at this point until finally defined, because you may or may not know where all their products come from. They too are making the same considerations. Everything is in a state of flux right now, everything.

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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 United States, 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 incoming 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, especially when the overall economy is responding.

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: Let’s talk more about inputs for our industry, like plastic pots and blank plant tags, that might be manufactured overseas. How do we control the costs of these from a logistics standpoint?

MB: When you consider anything made out of plastic, the raw, non-recycled material is originating from petroleum-based production. A lot of this does come from countries around the world where regulations aren’t as stringent. And China is perhaps one of the most likely sources. In the short term, the cost impact of these goods coming out of China will be directly affected depending on the timing of bringing it in. Pulling as much of that forward as possible is a short-term solution to help mitigate cost increases. But at the same time, looking for alternative source countries and source points is key. Now, if the cost of a 5-inch pot doubles when it hits the United States, can you afford to absorb it? And if not, how much can you pass along? What will the market bear is the easiest consideration, short of moving things to different source countries or taking steps to pull it forward. Keep in mind everybody’s trying to pull their freight forward right now. So, capacity is tight.

GM: Many big growers maintain their own fleet of trucks to ship plants to their customers. Are there any considerations around fuel or labor they should be thinking about as we move into the new year?

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 that are 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: And what about the labor to drive those vehicles?

MB: As long as businesses continue to pay their people and train them and support them, they’re going to stay on the job. Now, one thing to watch out for is if you’ve got a tandem axle driver that’s a CDL-licensed driver, they are very valuable as the economy rebounds. So, $20,000 can pull them right out of your business in a heartbeat as the economy rebounds. Be mindful that taking care of your people and staying attuned to current rates in the marketplace and creating a great place to work is very important to keep your own core drivers. You don’t want to lose those people.

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. Those relationships will matter. 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.