Here’s how the tariff wars are playing out in the world’s supply chains, and how good visibility, proactive thinking, and reliable supply chain partners can help protect companies of all sizes from the impacts.
In May, we first reported on the potential impact that the U.S.-China tariffs and other “trade wars” could have on logistics and transportation. Since then, the U.S. has imposed more tariffs on international trade, subsequently provoking numerous retaliatory tariffs.
In September, the U.S. imposed tariffs specifically on Chinese goods valued at $200B. China has already responded with retaliatory tariffs on U.S. goods valued at $100B. The U.S. has been able to maintain a dominate trade position over China throughout this year’s trade conflict, with China importing roughly $505B in U.S. goods, and the U.S. importing only $130B, according to 2015 figures.
Leading up to the meeting between President Trump and President Xi at the G-20 Summit in Argentina on 11/30 & 12/1 there have been positive statements from both camps that indicate efforts are being made to bring resolution to the “trade war” as it stands now. The greatest effect for U.S. entities, businesses and their supply chains will be whether an agreement can be reached to either delay or cancel the pending increase of tariffs on the bulk of the current tariffs in place, $200B on over 6,000 Harmonized Tariff Codes, from 10% to 25% on January 1, 2019.
Measuring the Impact
Back in May, it looked as if ocean freight would feel the first pinch of the trade war impacts. Analysts also predicted a slowdown in global trade growth, overall business uncertainty, and negative impacts on global supply chains.
Despite tariffs on billions of dollars worth of imports coming in from China, Supply Chain Dive says imports at U.S. container ports are expected to stay at near-record levels. Citing reports from the National Retail Federation (NRF) and Hackett Associates, the publication says many companies will continue to import products from manufacturing facilities in China because changing up sourcing isn’t easy or fast.
Imports will continue to soar through the holidays, Supply Chain Dive adds, with that activity largely driven by strong consumer demand during peak season.
Sebastien Breteau of Supply Chain Brain highlights some of the key industries that are being impacted by the latest tariff changes in Trade War Disrupts Supply Chains, and Spurs a Slow Shift From China. “The ongoing U.S.-China trade war is miring global supply chains in increasing uncertainty, with over half of U.S. companies with global supply chains reporting adverse impact on business operations,” Breteau writes. “The trade war backlash, impacting more than just soy farmers and auto manufacturers, is prompting organizations to adapt in ways that will disrupt global supply chains.”
Globally, an average of 38 percent of companies say they are suffering supply-chain disruptions because of the U.S.-China tariffs, Breteau reports, noting that this figure is almost double for the homeware and gardenware industry (including furniture). Finally, Breteau points out that large companies are more likely than small or medium-sized enterprises (SMEs) to have a diversified supply chain, which means they are less affected by the China-U.S. dispute — “and therefore less likely to need to search for other suppliers.”
Offsetting the Challenges
In Supply Chain Risks Come from All Sides, Industry Week’s Matt Gunn points to end-to-end supply chain visibility as a good line of defense against any logistics challenges brought on by the tariffs. “Businesses that have end-to-end visibility of their supply chain are able to react to change more quickly and reduce the harmful effects of a breakdown somewhere along the way,” he writes. “Doing so takes more than simple point systems; it requires all parties involved in the supply chain to interact and share information in real time.”
If, for example, a factory runs out of materials or a ship can’t get to port, then organizations can “dynamically shift inventory or production somewhere else.”
Ultimately, the trade war between China and the U.S., like any war, will have winners and losers. “Tariffs restrict purchasing power, meaning consumers will face higher prices and slower growth. U.S. Consumers are affected as producers face increased costs of raw materials, like steel and aluminum,” Lucy Harding writes in Tariffs, trade wars and the impact on the global supply chain. “However, in the short term at least, tariffs and rising protectionism look set to stay.”
Odyssey continues to work with all of our clients whose supply chains are affected by the various Section 231 and 301 tariffs that have recently gone into place. Odyssey is providing guidance for understanding and planning, as well as consultation on handling and payment of increased duties. We are able to provide operational solutions that allow customers to take advantage of transportation options to beat various tariff implementation dates. Odyssey continues to operate with our clients, not only as a service provider but as a partner, helping to find solutions and efficiently execute them.