It’s a hard pill to swallow, but Trump’s tariffs are here to stay (at least for now). China has been the Mecca for raw materials, labor, electronics, etc. at incomparable prices. However, that might all be changing. President Trump hit China with tariffs on $200 billion worth of goods earlier this month on top of the $50 billion worth already taxed earlier this year. Goods on the list include: steel, aluminum, solar panels, circuit boards, vinyl, automotive parts, food processing machinery, lasers, medical equipment, plywood, and much more.  If that wasn’t enough to rattle financial markets,
Trump stated that he was prepared to “immediately” place tariffs on another $267 billion worth of imports if China retaliated again. 

What does this mean? It means roughly half of all Chinese imports into the US will soon face levies. High profile companies Microsoft, Google, and Amazon to name a few are investing considerable resources lobbying against the tariffs. Recently, retail giant Wal-Mart has warned the US Trade Representative that they will have to raise their prices for house items ranging from cribs to Christmas lights due to tariffs. Unfortunately, the trade war will not only affect corporations but also affect the everyday consumer. The tariffs are said to raise prices on food, electronics, tools, furniture, and much more.

For readers not keeping up with political news (don’t worry, you’re very much not alone) and wondering why Trump is tariff happy, here's the gist. The tariffs are intended to pressurize China to change their trade practices that Trump states are hurting American businesses. Trump asserts that the US can no longer tolerate the trade gap between what is exported to China and what is imported back in. America’s economic strength along with China’s economic slowdown was an advantageous environment for Trump to strike. The only way for China to gain relief would be to reach an agreement with the administration’s trade demands, which include allowing American companies have greater access to the China market. Economists and trade analysts widespread are stating that Trump’s actions are unfavorable for U.S. growth. The National Association for Business Economics survey showed 91% of respondents stated the tariffs will have “unfavorable consequential impacts” on the U.S. economy. Furthermore, let’s not forget that China isn’t the only one being taxed. Trump’s administration have also imposed tariffs on other countries such as Canada, European Union, Australia, Mexico, India, and Argentina.

This trade war has intensified pressure on companies, specifically, Procurement organizations to reevaluate their strategies in order to mitigate the current landscape. 

Three approaches Procurement organizations can take include: 1) find alternatives sources/suppliers; 2) optimize their supply chains; 3) identify cost savings opportunities in other areas of the business in order to remain cost effective, competitive, and retain their customer base. 

Option 1 would include extensive market research into the category(s) affected by the tariffs in order to find new sources. Once you do, you will want to strategically negotiate a new agreement(s) to ensure continuity of supply while reducing transitioning costs. Option 2 would require a full investigation of your organization’s supply chain and thoroughly understanding the logistics and handling of your goods to identify efficient work arounds to alleviate added costs. Option 3 would require a collaboration across the enterprise to review the organization holistically and engineer a savings pipeline in order to offset costs. If you have exhausted all three options or if the three options don’t make sense for your organization, you will have to strategize an effective way to communicate with your customers and allow them to fully understand the reason for the downstream impacts and possibly incentivize in order to hold their business.

Though President Trump continues to tweet upbeat about his actions and progress, only time will tell the future of the economy. We will have to continue to keep a close watch and remain agile in order to sustain this ever changing landscape of the global economy.  

Share To:

Jaisheela Setty

Post A Comment: