Balancing Stockpiling and Diversification: Lessons from the 2018 Trade War

With President Trump returning to office and announcing new tariffs on Chinese imports, U.S. importers are already stockpiling goods to prepare for the anticipated trade disruptions. This surge in activity mirrors the strategies employed during the 2018–2019 trade war in Trump’s first term. Reflecting on how stockpiling played out then offers valuable insights for manufacturers navigating today’s challenges.

While stockpiling provided short-term relief during the last trade war—helping businesses avoid immediate cost increases and keep production running—it also exposed significant downsides that manufacturers must carefully evaluate.

Short-Term Gains in Uncertain Times

For some industries, stockpiling during the 2018 trade war delivered tangible benefits. Automotive manufacturers secured key materials like aluminum and steel ahead of tariffs, sidestepping price surges that hit competitors who delayed action. Similarly, electronics companies stockpiled semiconductors and components, ensuring they could meet demand without passing higher costs onto consumers.

Data underscores how widespread this strategy became. In 2017, as trade tensions mounted, U.S. aluminum imports surged by 18% in the first ten months compared to the same period the previous year, according to the U.S. Department of Commerce. Semiconductor imports from China followed a similar pattern. According to S&P Global, imports jumped by 44.3% in the three months leading up to October 2018 as suppliers rushed to beat the tariffs. However, this was followed by a steep drop—falling 38.7% in October 2018 compared to the same month in 2017—highlighting how excess inventory quickly accumulated.

Consumer goods manufacturers also benefited. Companies reliant on Chinese imports for items like appliances and home electronics used stockpiling to stabilize prices and avoid supply chain disruptions. For these businesses, stockpiling provided a crucial buffer, helping them weather the initial wave of tariffs.

A Long War No One Expected

The benefits of stockpiling were built on a key assumption: that trade tensions would be short-lived. Few predicted that tariffs would persist across administrations, becoming a bipartisan tool in U.S. trade policy. Today, tariffs are no longer temporary disruptions but long-term realities manufacturers must plan for.

Under the Biden administration, the tariffs were retained and even expanded, with a focus on supporting key domestic industries through targeted exclusions. Tariffs were raised on critical imports like electric vehicles, solar cells, and steel and aluminum products to counter what the administration deemed unfair trade practices by China.

Now, with Trump back in office and announcing an additional 10% tariff on Chinese goods, manufacturers face another wave of trade uncertainty. It’s clear that strategies reliant solely on stockpiling are insufficient to address the long-term complexities of a tariff-driven trade environment.

Downsides That Manifested After the Trade War

The last trade war revealed several critical drawbacks of stockpiling:

• Cash Flow Strains: Stockpiling ties up substantial capital in inventory, limiting financial flexibility. For manufacturers operating on slim margins, this diversion of funds left little room to invest in opportunities or manage unforeseen challenges.
• Logistical Burdens: According to news reports, the Port of Los Angeles saw unprecedented activity leading to the 2018 trade war, making 2017 its busiest year on record. This surge drove regional warehouse occupancy to record levels, significantly increasing warehousing costs. Port congestion at Los Angeles and Long Beach compounded the problem, with delays costing some businesses up to $100 per container per day in demurrage fees. For smaller manufacturers, these costs were especially damaging.
• Missed Diversification Opportunities: Many companies prioritized stockpiling over diversifying their supply chains. This left them vulnerable as tariffs persisted and geopolitical tensions grew. A 2022 survey of more than 200 manufacturing executives by Deloitte and the Manufacturers Alliance found that manufacturers with diversified supply chains were far less affected by disruptions. Those relying on suppliers in a single region faced greater challenges.

Lessons for 2025: A Balanced Approach

With new tariffs on the horizon, manufacturers need a strategy that goes beyond stockpiling. While stockpiling can still help mitigate immediate impacts, it should focus on hard-to-source materials and avoid overloading inventory, which can strain cash flow.

Diversifying supply chains is equally critical. Sourcing from regions like India can reduce reliance on a single country and build resilience against future disruptions. Paired with scenario planning to adapt to evolving trade policies, this balanced approach ensures manufacturers stay prepared for both short-term challenges and long-term uncertainties.