Economists differ on how much blame the Smoot-Hawley tariffs deserve for the Great Depression. They also disagree on how much credit President Franklin Roosevelt deserves for the Reciprocal Tariff Act, which put the U.S. on a path to lower tariffs. One thing appears certain. The potential economic impact of tariffs causes uncertainty on Wall Street. The stock market lost 800 points on Tuesday this week. Trump claims his tariffs will level the playing field. He may be proven right in the long term but there may be a severe short-term price to be paid.
The Trump administration continues to escalate a trade war between the world’s two largest economies, moving ahead with tariffs on $50 billion of Chinese goods and provoking an immediate response from Beijing. Additional tariffs which may exceed $200 million. The shipping community has been on edge about the impact the tariffs may have on the logistics market since the tariffs were proposed. Before we examine the potential fallout lets outline precisely what industries will be affected.
In January 2018, Trump imposed tariffs on solar panels and washing machines, and later this year, he imposed tariffs on steel and aluminum. Beginning on June 1, 2018, the Trump administration imposed a 25% tariff on imports of steel, and a 10% tariff on aluminum, on the European Union, Canada, and Mexico. The tariffs angered U.S. allies, who planned retaliatory tariffs on U.S. goods and heightened chances of a trade war. China said that it would retaliate for the tariffs imposed on $50 billion of Chinese goods that come into effect on July 6. India is also planning to hit back to recoup trade penalties of $241 million on $1.2 billion worth of Indian steel and aluminum. Other countries, such as Australia, are concerned with the consequences of a trade war.
Industries Most Affected
For American companies which manufacture metals, the tariffs are good news. But businesses that consume steel and aluminum, like automakers and beverage producers, the tariffs will likely mean higher prices. Domestic automakers will experience significant increases in raw materials in auto production and aftermarket parts. Beverage and food manufacturers will also see price increases in aluminum and metal can material. Just about any other manufacturer that incorporates metal in the production of their products like Caterpillar, Boeing, and Lockheed Martin will be facing higher raw material costs. For a full list of the products and tariffs, click here. As we all know by now, these costs will translate to higher retail prices for cars, beverages and airline tickets.
Managing the Coming Challenges
Importers will have to plan for how these tariffs may affect their product mix. These and other trade policy shifts are disruptive to global supply chains, and the businesses and consumers depend on them. Regulatory modifications require companies to be keyed into new or altered trade sanctions, export license requirements, customs documentation, tax and duty codes, and stacks of legal requirements.
Companies engaged in global trade must manage a tremendous amount of information to establish and maintain compliance with regulations. This information, also referred to as trade content, ranges from the harmonized tariff schedules for product classification, to the duty rates needed to calculate landed cost, to the controls that determine what is required for a transaction to be legally completed. To efficiently import or export goods, shippers need fast access to data for all the countries where they trade.
Unfortunately, collecting, cleansing, and publishing trade content is a complicated task; which becomes even more challenging when considering the number of countries, number of government agencies, differences in trade regimes, and the ever-changing trade position of each country in the supply chain.
West Coast Warehouses Are Bulging
Oakland convened the quarterly meeting of its “Efficiency Task Force” last month. In their recent evaluation of trade dynamics, the majority of these members maintain that cargo volume is spiking right now but could drop by January.
Here were the trends noted by Task Force members assembled in Oakland:
Warehouses are filling up as U.S. retailers import merchandise from Asia.
Shipping lines have added more than 30 extra voyages to regularly scheduled Transpacific services to transport larger container volumes.
Ports up and down the West Coast have reported unprecedented cargo volume growth since mid-summer. West coast importers seem to be stocking up. Now is the time for contingency planning for just how the tariffs may affect your organization.
Many companies lack the personnel and expertise to monitor trade compliance and manage international supply chains. Perhaps now, more than ever is the time to consult a qualified Logistics provider like Land Link Traffic Solutions. Our experts can ensure an uninterrupted supply chain during the trade tariff storm ahead. Contact us today to discuss your needs @ www.Land-Link.com.
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