Latest / Beyond Fulfillment Podcast / From Volatility to Opportunity: Preparing for 2026 Tariff Realities with Jim Tompkins

Transcript

From Volatility to Opportunity: Preparing for 2026 Tariff Realities with Jim Tompkins · Beyond Fulfillment Podcast

• 0:00
  Foreign.
• 0:06
  Jim Tompkins, welcome back to Beyond Fulfillment.
• 0:09
  Thank you, Dave.
• 0:10
  Good to be here, and welcome to 2026.
• 0:14
  Yes, yes.
• 0:15
  Early in 2026, as we're recording this, and once again, we're talking about tariffs, specifically what impact tariffs really had in 2025 and.
• 0:26
  And what business leaders can expect in 2026.
• 0:30
  So, Jim, you've said tariffs are leveling the playing field.
• 0:35
  What do you mean by that?
• 0:37
  Well, you know, Dave, for decades, global trade has not been fair.
• 0:44
  And other countries have used tariffs, they've used subsidies, they've used regulatory barriers to tilt the playing field in their favor, while the US Played by a different set of rules.
• 0:59
  What is happening now is a correction.
• 1:03
  It's not retaliation.
• 1:05
  It's just saying, hey, let's get back to where we should be.
• 1:08
  And so tariffs are leverage, and leverage creates clarity in how trade should be done.
• 1:16
  Tariffs force renegotiation.
• 1:19
  They force rebalance.
• 1:21
  They force competition to come into the negotiating table and to play fair.
• 1:27
  And so what I mean by the playing field being leveled is American companies now have an opportunity to win, and I think they will win because we are more innovative, more resilient, and we're more efficient.
• 1:42
  Okay.
• 1:43
  And I'm sure, you know, all the critics have said that tariffs hurt the economy, and from the beginning, you've argued the opposite.
• 1:51
  Why is that?
• 1:53
  Well, you know, the battle started with the purist that said tariffs are a tax, and anytime you have a tax, it's going to raise prices and therefore they're inflationary.
• 2:06
  That statement's not wrong.
• 2:08
  But that assumes we're going to look at tariffs just by themselves, and, and tariffs alone are inflationary.
• 2:16
  There's no question about it.
• 2:18
  But when tariffs are paired with tax cuts, with reduced regulation, with cheaper domestic energy, with smarter sourcing, with better supply chains, what you'll find is the bottom line is that they are not inflationary.
• 2:38
  In fact, what you're doing is, is you're removing costs from the system at the same time that you're applying pressure abroad.
• 2:47
  It forces suppliers to adjust pricing.
• 2:50
  It forces you to shift production.
• 2:53
  It forces you to compete on more fair terms.
• 2:57
  The result is a stronger domestic environment where we are investing in domestic manufacturing, we're doing more reshoring, we.
• 3:07
  We're doing more near shoring, and we're developing a supply chain that's more resilient and in fact, much, much, much better to handle the disruptions as opposed to the fragile supply chains of the past.
• 3:22
  Now, if you look at the facts, I have a article here from the Wall Street Journal.
• 3:28
  And the article says, do tariffs cause inflation?
• 3:34
  Data offers clue.
• 3:35
  This is from January 6th, last Tuesday in the Wall Street Journal.
• 3:41
  And what it says in the Wall Street Journal is the highest tariffs in almost a century hasn't caused the massive surge in inflation many economists feared.
• 3:53
  But that shouldn't have come as a surprise.
• 3:57
  According to two new studies looking for.
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• 4:28
  Now, as you know, you and I have been saying this for a year.
• 4:31
  You won't see the inflation.
• 4:33
  Here's the two new studies.
• 4:34
  The first one, economists at the Federal Reserve bank of San Francisco combed through data from 1886 to 2017 and found that previous tariff increases usually didn't lead to higher inflation.
• 4:53
  I'm going, hey, people been arguing with me for a year on this here.
• 4:58
  It says goes on to say a separate recent paper by economists at Northwestern University found that inflation picked up found that inflation picked up following tariff increases, but only a little.
• 5:15
  Another survey by Bloomberg came out and said, this is Bloomberg from yesterday and it said the NRF is projecting a 2.7%, the 3.7% increase for 2025 on par with 2024.
• 5:41
  And so what we're seeing is there is something between 3/4 of a percent and 1% inflation that we're seeing.
• 5:50
  But the fact of the matter is that the tax changes haven't taken effect yet.
• 5:57
  That started January 1st.
• 5:59
  And so what we're seeing actually is the tariffs have actually come in.
• 6:04
  And if we're able to backfill the tax cuts in, in fact, it has not been inflationary one penny.
• 6:11
  It's actually been deflationary.
• 6:15
  Okay.
• 6:17
  So, Jim, how would you evaluate President Trump, President Trump's approach to trade negotiation?
• 6:26
  Well, that's a difficult one because the question is, are you looking at President Trump as a politician or as a businessman?
• 6:36
  Okay, I prefer to look him as a businessman because I think he is a businessman.
• 6:40
  I don't think he's a politician.
• 6:41
  I think he proves that almost every day that he's not a very good politician.
• 6:44
  He puts his foot in his mouth, but he negotiates like a businessman.
• 6:49
  I know that for sure.
• 6:50
  In that what he does, he negotiates to create leverage.
• 6:55
  President Trump is all about leverage, and he wants to know how can he leverage his position to become a winning position.
• 7:04
  He forces engagement, and he doesn't accept the old assumption that the US Must tolerate structural disadvantages.
• 7:12
  He says, no, there's no reason that we should play with a hand tied behind our back.
• 7:17
  We should have a level playing field.
• 7:19
  And so if you like his style or don't like his style, I mean, I don't care.
• 7:24
  It doesn't matter if I like his style or don't like his style.
• 7:26
  It's the outcomes that matter.
• 7:29
  And trading partners who ignore power, political diplomacy for decades are suddenly at the table.
• 7:37
  They, they are now negotiating.
• 7:40
  And now that we've got them negotiating, we have pressure on them, which proves that the point that leverage creates clarity, and that's what's happening in global trade.
• 7:51
  So President Trump, the result of him as a businessman, is really getting the negotiations taking place at the table and is making really great moves for the US Trade environment.
• 8:05
  Okay, so now, what should companies expect in 2026 when it comes to tariff policy?
• 8:11
  Well, it's going to continue to have a lot of uncertainty, that's for certain.
• 8:17
  There's going to be a lot of volatility.
• 8:19
  There's going to be a lot of movement.
• 8:22
  I wouldn't say there's going to be any reversals.
• 8:25
  In fact, regardless of what the Supreme Court decides, tariffs will remain in place, either under the established authority or going to move to some new authority.
• 8:39
  The direction is unmistakable.
• 8:41
  The US Is not going back to passive globalization.
• 8:47
  Companies that assume tariffs are temporary are going to be making a major, major, major mistake.
• 8:53
  Tariffs are not temporary.
• 8:55
  Tariffs are here to stay.
• 8:57
  They're a permanent feature of the landscape, and they will allow you to win.
• 9:03
  If you play into that strategy.
• 9:06
  Companies that understand leverage creates Clarity will navigate 2026 and be fine.
• 9:13
  In fact, if we look at a January 8 Bloomberg report, and I would like to quote from this report, because I thought it was said very clearly.
• 9:23
  It says the IEEPA tariffs have remained in effect as the legal proceedings continue.
• 9:30
  If the Supreme Court concurs that these duties are unlawful, large swatches of levies Trump has imposed so far in his second term could come undone and leave the government on the hook for tens of billions of dollars in
• 9:47
  refunds.
• 9:47
  It actually turns out to be not tens of billions, as it says.
• 9:50
  It's actually $133 billion that we've collected.
• 9:55
  Still, it says there are other means by which his tariff policies could continue.
• 10:01
  While the Constitution gives Congress to power to levy taxes and duties.
• 10:06
  Lawmakers have delegated some of the authority to the executive branch through a number of statues.
• 10:12
  And in fact, the number of statues that would be easier for Trump to deploy but maybe doesn't give him quite as much freedom.
• 10:22
  We got section 232 of the 1962 Trade Act.
• 10:27
  We've got section 201 of the 74 Trade Act, 301 of the 74 Trade Act, 122 of the Trade act of 74, and section 338 of the Smoke Hadley Tariff act of 1930.
• 10:43
  So there's five laws on the box that says the President can invoke tariffs.
• 10:49
  And so all this hubbub about the Supreme Court, it would be most convenient if we keep the existing tariffs on the books.
• 10:58
  However, there's now over 1,000 companies who are requesting this $133 billion back.
• 11:05
  At the very best, let's say they throw them out and they don't allow any of these other statutes.
• 11:10
  This thing's in for a two or three year battle over who's going to get the money and how they're going to get it.
• 11:15
  And so, so this is not going to end anytime soon unless they say they're legal or if they say, well, they're illegal.
• 11:22
  But we accept this as a return for them.
• 11:25
  And so 2026 is going to be a great year for the United States because we've got some really great deals in place already and we're going to continue to have great deals put in place and we have the
• 11:37
  leverage and that's what we need to accomplish, and that's what we've got.
• 11:40
  So 26 can be a great year for the business.
• 11:44
  Okay, and so how would you say executives should prepare for that environment?
• 11:50
  Well, I think there's, well, there's something like three things you should do probably first, and we've talked about this before, you should diversify, sourcing.
• 12:01
  We used to talk about China plus one.
• 12:05
  Now I'm talking about China plus many.
• 12:08
  And so let's not just limit ourselves.
• 12:10
  In fact, I believe a 40, 40, 20 strategy.
• 12:13
  And, and in some cases, depending upon the commodity, I'm suggesting China gets the 20% and we take the 40, 40 elsewhere.
• 12:22
  We want to make sure that we have the ability to change that around.
• 12:27
  So maybe I go 40, 40, 20 and I give one of the 40s to China, but I want to have the flexibility to take that 40 and turn it into 20.
• 12:36
  I want to have the flexibility to take that 40 and turn it into zero.
• 12:39
  And so I want to build flexibility into my contracts and into my logistics networks so that I can pivot quickly, depending on what might come down.
• 12:49
  I mean, we don't know what's going to happen on the political scene.
• 12:52
  And all this Iran stuff and the Taiwan stuff and all the Russia, Ukraine stuff, the Venezuela stuff, oh, my, my.
• 13:00
  It's unbelievable.
• 13:02
  No one can predict what's going to happen.
• 13:03
  President Trump can't predict what's going to happen.
• 13:06
  And so what we need to do is let's be in a position where we can make changes when we need to.
• 13:12
  And then the third thing we can do is we can engineer tariff resilient supply chains.
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  The most tariff resilient is to make it a US Only supply chain.
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  The second thing that's most resilient or gives you a great ability to control is to have it be a North American supply chain.
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  And then the third thing that would be, would be to have it a Western hemisphere supply chain.
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  So more and more and more we're going to be looking at our hemisphere and that's going to give us resiliency in our supply chains and that's going to give us the ability to leverage, to benefit from creating this
• 13:51
  leverage that President Trump has created for us.
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  So we need to have the ability to address the volatility.
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  Don't be surprised by the volatility.
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  The volatility, the uncertainty is coming.
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  So let's be ready for it and use it as a competitive weapon and not as something that's going to hurt us.
• 14:08
  Okay.
• 14:09
  Now, Jim, when you've said tariffs are working, what evidence would you point to?
• 14:16
  Well, you know, that's, that's controversial, but certainly I have some strong feeling that they are working.
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  I look at how global suppliers are coming to the table and they're sitting down and they're talking with us.
• 14:35
  I see production that's shifting.
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  There's lots of movements.
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  We at Tompkins Ventures do a lot of transportation work and I'm seeing lots of work is changing.
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  And what was last year's transportation routes are not what 2026 is based on.
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  I'm seeing a lot of terms being renegotiating.
• 14:57
  Okay, so we have, you know, the books say there's a 25% tariff, but by the time you look at the exceptions and so forth, it's really not 25 across the board.
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  It's about 14.1% and in many situations it's 10% or in fact, lower.
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  And so we're seeing people making investments back in North America.
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  That doesn't happen unless somebody's pressuring them.
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  What's pressuring them?
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  It's the tariffs.
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  Look at the US Economy.
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  We have manufacturing expansion, we have stronger domestic investment.
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  We got companies rethinking the long term sourcing strategies.
• 15:35
  I know.
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  I mean, I talk every day to supply chain leaders that are telling me that they are re globalizing, they're changing, they're getting ready for a very bright future.
• 15:48
  We're forcing that reset and we're seeing that we are getting some real strong support.
• 15:55
  However, if you want me to give a hard answer to that question, which I think is a good thing to do, if I look at a column from January 9th in the Wall Street Journal, it says the headline
• 16:10
  is this is right out of the Journal.
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  And it says trade gap falls to lowest since 2009.
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  2009, my goodness, that was 2009, 17 years ago.
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  Wow, that blows my mind.
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  And what it says here is the US Trade deficit shrank dramatically in October to its lowest level since 2009.
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  The Commerce Department said Thursday.
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  An unexpected twist in a year of volatile trade flows that have been buffeted by the Trump administration steep tariffs.
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  So the trade deficit is down.
• 16:55
  Okay.
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  There's some very interesting numbers we can see with respect to how far it has fallen.
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  And those numbers I don't have in front of me.
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  But it's very interesting how we have taken over $100 billion out of the trade deficit.
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  We took 29 billion out of just this fall out of the trade deficit.
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  So a huge success.
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  Another success that we have is Wall street is bullish on the economy.
• 17:28
  We all know the markets as record or near record highs.
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  Here's an assessment of the Wall Street Journal.
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  This is from today's Journal.
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  It says the Dow Jones Industrial Average is off to its best start to a year since 2003.
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  Investor demand has been particularly strong for the stocks of companies exposed to the swings in the economy, such as retailers.
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  So what we're finding is the market is up and it's flourishing in and we're getting a lot of positive support.
• 18:01
  It says there's optimism about the economy is not only reflected in the stock market.
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  It's also the bonds have sent a similar signal with the gap winding between the yields on the short and long term treasury yields, or what is known as the Wall street as a steepening yield curve.
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  And so stocks and bonds are both saying that the economy is strong.
• 18:27
  We're seeing the trade deficit is, is, is way down and we're moving towards the goal of the whole tariff thing, which is a balanced surplus of trade.
• 18:40
  And, and, and that's happening.
• 18:41
  And so that's really, I mean, it's, it's so cool because what was said we were trying to accomplish is we're really accomplishing with hard numbers and it's exciting.
• 18:52
  Okay, so with all that said, what would you say to business leaders that still see tariffs as noise rather than a strategic reality?
• 19:03
  Yeah, I think they're looking in the rearview mirror.
• 19:06
  I think they got to look out the windshield.
• 19:08
  I really think that global supplier behavior, production shifts, things that are being renegotiated are just unbelievable.
• 19:20
  And that points in the direction.
• 19:22
  There's hard evidence that says that, hey, stop calling tariffs politics.
• 19:30
  They're not politics.
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  Tariffs are a strategy.
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  They're structural.
• 19:35
  We're changing the rules of the game and tariffs are here for the long term.
• 19:40
  This isn't a part time thing.
• 19:42
  This is, you know, President Trump calls tariff his favorite word and it is leading towards economic security, supply chain resilience, and it's leading to a fair marketplace where we're playing on that level playing field again.
• 19:58
  Leaders who cling to the old model will fall behind.
• 20:02
  Leaders who embrace the new reality will build stronger companies and more resilient supply chains.
• 20:10
  The world has changed.
• 20:12
  We have a new sheriff in town and for governments, for companies, for anyone willing to lead, what we're going to have is a time of flourishment.
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  I mean, this is really going to be a healthy economy and we're going to find is going to be the golden days are back again.
• 20:30
  And I think it's really, really, really exciting.
• 20:34
  Okay.
• 20:34
  All right.
• 20:35
  So, Jim, how do you wrap all this up?
• 20:38
  Well, I don't know.
• 20:40
  It's, it almost depends on what did the paper say this morning because there's a lot of different winds that are blowing.
• 20:50
  But I think the reality is there's a major shift in how global trade is working, a major shift on how economies are working.
• 21:02
  There's so many different parts playing into this and that I think that the companies that are going to win in 2026 are the ones that are going to understand that shift.
• 21:14
  And what they're going to do is they're going to change quicker than that shift and they're going to get ahead of it.
• 21:19
  Tariffs are not chaos.
• 21:21
  They sure felt like chaos last year.
• 21:23
  I mean, I felt the tariffs were 24, 86, 96, 159% tariffs.
• 21:30
  I mean, that's ridiculous.
• 21:32
  That's, that is chaos.
• 21:34
  But we had to make our point and we had to get the people to sit down.
• 21:38
  And now what we see is tariffs are strategy, they're strategic, and they are leverage.
• 21:43
  And there's a significant signal in the United States that as the United States is no longer willing to play on the unfield, playing, unlevel playing field, we will only play when the game is fair.
• 21:55
  And if the game isn't fair, we'll just pull out of that country.
• 21:58
  We won't work with them anymore.
• 22:00
  So whether if the court upholds the tariffs or not, there will create some more chaos and some confusion there.
• 22:07
  But the US Is moving forward with fairer trade, with stronger supply chain and a much more resilient industrial base.
• 22:17
  So my message to leaders is simple.
• 22:21
  Don't wait for clarity.
• 22:23
  We did that in 2025.
• 22:25
  We waited for clarity.
• 22:26
  We wanted to get rid of the uncertainty.
• 22:29
  I think what we need to do is realize that clarity is a tough thing to come by when you got so many variables.
• 22:36
  Something is going to switch almost every day and so build for the world that's emerging, not for a world that's fading.
• 22:44
  The organizations that treat these situations, these moments as opportunity, not as a disruption, are going to create the next American competitors.
• 22:56
  This is a time for decisive leadership, for us to show strategic flexibility and have the courage to adapt faster than the market is shifting.
• 23:06
  If we do those things as a country, as individual companies, we will win and the balance of trade will disappear and we'll be moving forward to a balanced budget.
• 23:19
  And the golden days are here again.
• 23:22
  So I'm excited about 2026.
• 23:26
  I think we're going to see tremendous progress taking place when people really understand the benefits of the big beautiful bill.
• 23:35
  I think we're probably going to see some tariff refunds that are going to happen that are going to stimulate the economy further.
• 23:42
  And I think it's going to be exciting time.
• 23:44
  I think we're going to find people saying, well, yeah, we didn't reduce the cost of all the goods, but we reduced the important ones of energy and, and eggs and beef and got those prices down.
• 23:57
  And guess what?
• 23:58
  Some inflation is okay because our salaries are much higher and we actually have a more affordable economy going forward than we've had in the past.
• 24:07
  So 2026 is going to be a great year.
• 24:11
  And I'm just excited about having the opportunity to help folks with their supply chains and make sure that this part really allows us to flourish.
• 24:21
  Okay, well, well said.
• 24:23
  All right, Jim, thank you as always for joining us and sharing your, your valuable insights on this topic with our listeners.
• 24:29
  We greatly appreciate it.
• 24:30
  Thanks so much, Dave.
• 24:31
  I appreciate your.
• 24:33
  Your participation and your questions.