US Trade Tariffs’ Supply Chain Disaster

Trump’s outrageous ’emergency’ executive order announcement of import tariffs on goods coming from Canada, Mexico and China – the USA’s three biggest trading partners – was not unexpected but still shocking, repulsive and disastrous. His reckless actions, threatened to commence on Tuesday, would cause price rises for American consumers, bottlenecks, disruption, red tape and inventory problems, not to mention the negative impact on business confidence and economic growth for the global economy. When he subsequently ‘suspended’ the threat we knew it was a bluff and the typical ‘mob-style’ antics that the man uses.

Chris Clowes, executive director at global supply chain and logistics consultancy, SCALA, commented:

“The announcement of the US’s incoming trade tariffs on Canadian, Mexican, and Chinese goods, coupled with Trump’s ongoing rhetoric around trading with the EU, is bold. Waging a trade war with four of its biggest trading partners could have negative ramifications for the US. Nearshoring manufacturing to the US will be hard to justify for some companies, given the higher cost base and the expertise and sheer scale of operations that overseas manufacturing has previously provided. And with business challenges come consumer impacts. Rising costs would likely lead to cost-push inflation – meaning the consumer pays more for the goods and services they seek – and dampened purchasing power. For the rest of the world, however, we could see the likes of China, the EU, Canada, and Mexico form a trade alliance. We could also see potential trading opportunities for places like the UK open as countries look for new places to import.”

Chris Clowes, Scala

US Tariffs on China Ignite Trade War Tensions: What’s Next for Global Logistics?

As of this morning, China has been hit by an increased import charge of 10% for any item entering the US. Because of this, they’ve now vowed to retaliate after 10% tariffs were placed on Chinese imports into the US earlier today. And, with the EU, Canada, and Mexico also set to have tariffs imposed on them in the coming weeks, the question on everyone’s lips is: What is next for global logistics businesses?

What are tariffs?

In simple terms, tariffs are taxes on goods imported from other countries. The majority of tariffs are set as a percentage of the value of the goods, which the importer generally pays. So, for example, if a product imported to the US from China (after the 10% tariff imposed today) is worth 5 dollars, it would face an additional 0.50 cent charge applied to it. By increasing the price of imported goods, the US hopes to encourage consumers to buy cheaper domestic products instead, to help boost their own economy’s growth by growing the US economy, protecting jobs, and raising tax revenue.

What does this mean for the logistics industry?

Jackson Wood, Director of Industry Strategy, Global Trade Intelligence at Descartes, states, “Since the beginning of the COVID-19 pandemic, companies conducting global trade have been dealing with an increasingly volatile and uncertain environment. From product shortages, congested shipping lanes and military conflicts to political upheaval and environmental disasters, supply chains have been tested to the limit for the past five years.”

Jackson Wood, Descartes

Wood continued, “What has remained constant through these disruptions is the imperative to build resiliency and responsiveness into global supply chains. This includes diversifying supplier/customer relationships, identifying alternative trade lanes, and potentially leveraging trade instruments (including Foreign Trade Zones and Free Trade Agreements) that can mitigate the risks posed by this volatility. These same concepts apply to the new paradigm of tariffs and protectionism — those companies that have prioritised resiliency and responsiveness in their global trade operations will be better positioned to thrive.” However, only time will tell until we see the true effects of the upcoming trade war on the horizon…

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