This year promises to be interesting. Companies are grappling with rapidly advancing technology, geopolitical shifts, ever-fluctuating energy markets, and – of course – the new administration's wide-reaching and aggressive agenda.

As companies consider whether and how to respond to the array of market and political stimuli, location portfolios will be part of the conversation. Location determines access to supply chains, customers/consumers, energy and labor. It also determines nexus for taxation calculations and origination for tariff triggers.

Location portfolios are not rewritten overnight, but as companies consider future expansions, consolidations, and/or downsizing, portfolios grow towards or away from certain markets according to their alignment with companies’ long-term plans. The pressing question now is whether the US is poised to become a magnet for new investment - a place companies can’t afford not to be, or whether changes will be coming so hard and fast that companies will choose to defer projects altogether.

Supporters and critics of President Donald Trump alike agree that markets should “buckle up.” Tariff regimes and trade policies are going to be a moving target in the coming months if not years, and companies will need to be prepared for this new and largely unpredictable environment. And it’s no surprise which industries are most likely to be subjects of new tariffs: defense industrial supply chain, critical medical supplies, energy production-related verticals, automotive imports, aircraft/transportation equipment components and any industry that relies heavily on production in foreign markets.

The administration has been clear about its intent to use tariffs as a negotiating tool, even beyond trade-related issues. As a result, some tariffs may prove to be short-lived, leading companies to decide that weathering the disruptions is a better strategy than overhauling supply chains and production portfolios.

Companies also have faster, more flexible options than restructuring footprints or switching vendors, such as passing costs onto consumers, stockpiling ahead of tariffs, and tariff engineering -- strategies that will likely serve as the first line of defense for many.

Still, for some companies and industries, the best mid- to long-term strategy will be a realignment of their global footprints.

In recent years, the US has shifted toward a more protectionist stance – a trend likely to persist beyond the current administration, regardless of how strongly the next one enforces trade policies. As a result, some companies may opt to invest directly in the US to safeguard against being priced out of the market. However, this decision requires careful consideration of various factors beyond US tariffs, including labor costs, the risk of counter tariffs, national tax policies, currency fluctuations, energy costs and the availability of automation. Choosing the best course of action demands complex analysis and scenario testing.

The future of the Inflation Reduction Act (IRA) is also sparking considerable speculation. The Trump administration has already taken aggressive steps to block funding for certain sectors such as electric vehicles, creating confusion and raising concern about the broader implications moving forward. As of this writing, some projects heavily dependent on IRA grant funding are reporting delays or halts, while those relying on IRA tax credits, which are not currently in the crosshairs of the administration, are more optimistic and are largely proceeding as planned.

It would be unrealistic to expect the IRA to remain unchanged, but key provisions are likely to endure, especially given that conservative strongholds are poised to receive large portions of the benefits. Moreover, IRA programs are one of the drivers of manufacturing expansion in the US, and growing the manufacturing sector is one the Trump administration’s priorities.

This is, in many respects, a promising moment for US manufacturing. Despite differences in how to achieve it, there is a bipartisan mandate to rebuild the manufacturing sector in the US, bringing a renewed appreciation for manufacturing operations and production workers not seen in years.

The Trump administration’s agenda represents potentially drastic changes to the business environment – presenting both challenges and opportunities. Some manufacturers may find their supply chains and cost structures completely upended, while others could gain a competitive edge over foreign-produced goods. Some may benefit from lower operating costs, such as energy and taxes, as promised by the administration, and some may struggle with labor shortages due to stricter immigration policies limiting access to skilled foreign workers.

With all these moving pieces, the real challenge for companies will be predicting which group they will fall into so they can plan accordingly. It has been demonstrated throughout history that businesses don’t like uncertainty. Site selection activity may pick up this year, or there might be a delay as companies wait for market conditions to stabilize, leases to expire, new vendor relationships to form, and/or investment capital to be available.

However, as the landscape evolves, we anticipate a number of companies will make the decision to respond with shifts in their global footprints, particularly if a more protectionist tariff regime becomes entrenched. Changes will take time, though.

Manufacturing site selection projects that do go forward will face a shortage of available, development-ready sites, particularly those with sufficient utilities. Power availability remains a critical timing and financial concern, which dovetails into the forecast for data center site selection.

Data center projects, once coveted for their lucrative contributions to public finances in the form of property taxes, and large, steady electric loads, are now facing resistance in many locations. Explosive demand for automation, AI, and emerging quantum technologies has fueled a surge in activity that threatens to overwhelm communities and utilities.

According to the International Energy Agency, “Electricity consumption from data centers, artificial intelligence (AI) and the cryptocurrency sector could double by 2026. After globally consuming an estimated 460 terawatt-hours (TWh) in 2022, data center's total electricity consumption could reach more than 1,000 TWh in 2026. This demand is roughly equivalent to the electricity consumption of Japan.” In the US, the Department of Energy predicts data centers “are expected to consume approximately 6.7 to 12 percent of total U.S. electricity by 2028.”

Data center projects have not only increased in number but have also grown tremendously in size. Today’s hyperscale operations require massive utility requirements, sometimes leaving little remaining capacity for other types of developments.

In the face of staggering industry expansion, data centers are competing with a resurging manufacturing sector for a limited supply of industrial sites with adequate infrastructure. This has given rise to a new term in site selection – “BYOP,” or “Bring Your Own Power.” To meet their massive energy needs, large data center operators are increasingly exploring on-site generation solutions through solar, small modular nuclear reactors (SMRs), hydrogen fuel cells, and natural gas.

One of the Biden administration’s final actions was issuing an executive order directing federal agencies to make government-owned properties available for AI data centers and accelerate the development of large-scale AI infrastructure. While the Trump administration has quickly worked to undo many of the Biden administration’s initiatives, it seems poised to further support the data center industry by leveraging a national energy emergency declaration to expedite data center development.

Site selection and economic development have always required a multidisciplinary approach, incorporating labor analytics, logistics modeling, infrastructure assessments, and economic development incentives. Current conditions dictate that the expertise of international trade experts, utility engineers and federal policy specialists be brought to bear on the site selection process, with an emphasis on rigorous analysis and thoughtful scenario testing. This integrated strategy will be essential for crafting effective, forward-thinking location decisions in a highly unpredictable environment.

It’s going to be an interesting year.