When it comes to predicting the future, it’s always been a challenge and now, as we enter the second quarter of 2025, that is going to be even more problematic as Trump’s tariffs begin and their impact starts to take effect.
Experts have warned that by imposing sweeping border taxes of 10% on allies and enemies alike – excluding China which is facing tariffs of 145% - the US has dramatically raised the possibility of a steep global downturn and the prospects of a US recession.
Over the course of 2024 distributors had faced tough market conditions and while there were several markets, such as medical electronics, that saw significant growth, many like the automotive industry struggled. Even before Trump’s announcement there had been a growing trend among large organisations, both in the US and Europe, towards reindustrialisation to address concerns over supply chain pressures and to de-risk supply chains.
Most of the interviews conducted for this article took place prior to Trump’s announcement and the uncertainty expressed about the introduction of tariffs were made before the true extent of what the US intended was made apparent.
When we spoke to Jörg Strughold, President EMEA Components, Arrow Electronics, pictured below, he said that distributors had been operating against a backdrop of an ongoing cyclical correction.
“We saw declines in almost all semiconductor segments last year. Products in the IP&E segment, however, were less affected by the decline. Industrial and automotive remained our largest segments, however, and despite the ongoing cyclical correction we saw relative growth in aerospace and defence and in medical electronics and we expect this trend to continue.”
Marie-Pierre Ducharme, Vice President of Marketing and Business Development EMEA, Mouser Electronics, pointed out that conditions in 2024 made it almost impossible to forecast going forward.
“2024 was challenging because of so much that was happening, geopolitically in particular. We were overly optimistic, as were many of our peers, that towards the end of the year the down cycle would be over and that simply didn’t happen.
“I think we did hit the bottom at the end of last year and we started to see a recovery of sorts. Recent sales in February were the best for a long time. We are now shipping out more items into Europe than was previously the case and while sales revenue may still be down, we’re seeing a lot of design activity taking place, which bodes well for the future.”
Whether those tentative signs of recovery will continue must now be in doubt.
“I’ve never experienced a downcycle that’s gone on for so long and one key sector that has obviously struggled has been automotive. Germany is behind its global competitors and when we do see a recovery, the opportunities will be in the development of EV infrastructure,” added Ducharme.
There are, however, emerging technologies that are creating new business opportunities such as artificial intelligence, the IoT and renewables.
The total AI market surpassed $184 billion in 2024, representing a substantial growth of nearly $50 billion from 2023 and this was expected to continue through 2025 and beyond, with the market predicted to surpass $826 billion by 2030. Figures from Statista expected the IoT market to be worth around $445.3 billion this year, and by 2033 that has been projected to rise to more than $934 billion.
But with sector specific tariffs expected, including on semiconductors, will that growth still be possible?
Trump’s tariffs
President Trump’s reciprocal tariffs are risking what his critics have warned could be a significant trade war, provoking retaliation by major trading partners such as China, Canada and the European Union, and will have added further complications for the distribution market. We’ve already seen China respond in kind imposing high tariffs on US exports.
“There is so much uncertainty around tariffs,” explained Tim Carroll, Vice President, eCommerce, at DigiKey, speaking to New Electronics last month.
The ‘confusion’ over the imposition and then postponement of tariffs has caused both uncertainty and volatility when it came to importing components making them more expensive.
“We are having to contend with different duties and tariffs depending on the country of origin and that is adding further complexity to our business. We’ve had to invest in back-office processes to address this and that’s diverting resources from more profitable activities,” Carroll said.
According to Strughold, Arrow had learned much from when tariffs had been instigated by the previous Trump administration in 2016.
“If you go back five or six years to when the first tariffs were imposed, we put a lot of processes in place then. We know what this looks like. Muscle memories are in place, and our posture will be to pass those [increased costs] on to customers as transparently as possible. Not to make money, but just to recover the uplift,” he said.
“Transparency and keeping customers informed will be critical,” added Carroll. “It means updating our website regularly and keeping customers informed of changing tariffs, or whether a product has a tariff or not.”
“Arrow has developed a robust ERP system, with a strong focus on data quality and delivering end-to-end visibility of supply chain transactions,” explained Strughold. “This enables streamlined workflows, improved operational efficiency, and supports the broader digitalisation of our supply chain and we can provide customers and suppliers with actionable insights for strategic planning, financial analysis, and supply chain innovation – which is, as we’ve seen with recent global developments, increasingly important.
“By leveraging advanced supply chain modelling, Arrow can optimise transportation modes, facility footprints, inventory management, and resource utilisation to improve performance, reduce costs, and support sustainability initiatives.”
To remain competitive Anglia, here in the UK, has launched Anglia Plus, a customer loyalty scheme that offers extended payment terms and money back rewards for customers that place orders through Anglia Live, its ecommerce platform offering a Free 1-2 day DDP delivery service.
According to Steve Rawlins, CEO at Anglia, “We wanted to offer customers something of real, tangible benefit to them during this challenging period. Not only will we be offering quicker service than our competitors, but we’re also offering a sample service for free.”
Customers using Anglia Live will automatically be enrolled in Anglia Plus and will immediately receive 90-day payment terms for all qualifying orders.
“Every time an Anglia Live order is placed, the total spend will accrue, at the end of each qualifying period an amount will be credited to the customer’s account based on the spend threshold reached ranging from £500-£2500,” explained Rawlins.
The breadth and depth of Trump’s tariffs will test distributors, even those who have worked hard to put more reliable supply chains, diverse product offerings and efficient business practices in place. For example, Mouser has continued to invest in inventory and to diversify its product range by adding new manufacturers to its line card.
Last month Ducharme said that 2025 would be a year of transition and one of recovery.
“There is still, however, a significant level of unpredictability to contend with. But looking on the bright side, we are at least all in the same boat,” she concluded.
As a result of the US president’s “liberation day” tariff policies, demolishing the international trading order, I’m not so sure there is a ‘bright side’.
