EU proposes tariffs on $20B of US imports

Dive Brief:

  • The European Union on Wednesday released a preliminary list of U.S. imports to be considered for tariffs, in response to a World Trade Organization (WTO) ruling that found the U.S. illegally subsidized Boeing. The list includes products such as seafood, fresh and dried produce, nuts, alcohol, chemicals, adhesives, suitcases, handbags and tractors, representing a total of $20 billion of U.S. exports to the EU.
  • The EU’s list follows a proposal last week from the Office of the U.S. Trade Representative (USTR) to put tariffs on $11 billion worth of EU imports. At the time, the EU said it was ready to retaliate in kind. “But let me be clear, we do not want a tit-for-tat,” EU Trade Commissioner Cecilia Malmström said in Wednesday’s announcement. “While we need to be ready with countermeasures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the U.S.”
  • An arbitrator appointed by the WTO will decide the value of goods appropriate for tariffs. The EU will release a final list “taking into account the arbitrator’s decision in the near future,” the European Commission said.

Dive Insight:

While the lists of tariffs from the EU and U.S. are preliminary, the EU proposal sounds a warning bell for U.S. companies with global supply chains that import from or export to the EU. There’s a possibility the WTO could determine the values of goods subject to tariffs must be lower than the proposals, or the EU and U.S. could follow through on a commitment made last year to work toward zero tariffs. Still, it’s likely many of these businesses will plan around the worst-case scenario to mitigate potential tariff impact.

A similar situation unfolded with tariffs on $200 billion worth of Chinese imports. Although the duty rate remains at 10%, companies such as Dollar Treeand Williams-Sonoma shifted their business plans and sourcing with the assumption tariff rates would rise to 25%.

“The only way for a business to operate is to assume things could get worse before they get better,” Maine Pointe CEO Steve Bowen previously told Supply Chain Dive.

Retaliatory tariffs on $20 billion worth of U.S. imports to the EU could prove particularly taxing for U.S. businesses. The U.S. exported $319 billion worth of goods to the EU last year, according to data from the Census Bureau. Top categories included machinery, pharmaceuticals and medical equipment.

In 2016, the latest data available from USTR, U.S. exports of agricultural products to the EU totaled $11.5 billion, including nuts, soybeans, wine and beer and prepared food. Several of these items are on the EU’s preliminary list of goods to face countermeasures.

The likelihood of an impending trade resolution seemed to increase when the EU gave the green light Monday to open formal negotiations with the U.S. The EU continues to emphasize the U.S. is an important trading partner and that it remains open to discussions. So far, no specific dates for talks have been announced by the EU nor the U.S. This latest list of proposed tariffs could sour the mood and add further tension to U.S.-EU relations.

18 April 2019 | Shefali Kapdia | Supply Chain Dive

EU green lights US trade talks amid tariff threats

Dive Brief:

  • The Council of the European Union on Monday authorized trade talks with the U.S. to seek the elimination of tariffs on industrial products. The negotiations follow through on a joint statement made last July by EU Commission President Jean-Claude Juncker and Donald Trump to work toward zero tariffs.
  • The EU’s opening of negotiations follows a U.S. proposal last week to put tariffs on $11 billion worth of imports from the EU following a dispute over aircraft subsidies. In response, the European Commission reportedly drafted a list of tariffs on 20 billion Euros ($22.6 billion) of U.S. imports, according to Reuters.
  • The EU Council said it would unilaterally suspend negotiations if the U.S. put further trade restrictions on European products.

Dive Insight:

The EU Council’s move to begin formal trade talks with the U.S. is several months in the making and separate from the recent U.S. threat to impose tariffs on $11 billion worth of goods.

The coincidental (or not) timing of the latest tariff threat further escalates tensions between the two trade blocs and could cast a shadow over the negotiations.

The EU Council laid out requirements for the negotiations: The talks won’t conclude as long as tariffs on steel and aluminum remain in place, and the EU can suspend negotiations if the U.S. adds trade restrictions (such as the proposed tariffs) to European goods. Any violation of these parameters could quickly unravel the talks.

The subsidies to Airbus and Boeing are the latest in a saga of escalating tensions since the July 2018 agreement to seek zero tariffs. The U.S. and EU reportedly disagreed on how to proceed with the trade talks and what exactly was agreed upon at the meeting, Bloomberg reported.

EU Trade Commissioner Cecilia Malmström said agriculture would not be part of the negotiations. The EU Commission’s announcement from today said trade talks would exclude agricultural products.

Gordon Sondland, U.S. ambassador to the EU, said agriculture was “absolutely discussed” during the meeting in July. A joint statement from Juncker and Trump said the leaders will look to increase trade “in “services, chemicals, pharmaceuticals, medical products, as well as soybeans.” Soon after, Trump tweeted “European Union representatives told me that they would start buying soybeans from our great farmers immediately.”

It’s unclear when the trade talks will formally begin. The EU is expected to publish a proposed list of U.S. imports subject to tariffs this Wednesday, according to Reuters.

15 April 2019 | Shefali Kapadia | Supply Chain Dive

Agreement on ‘enforcement offices’ could signal US-China trade war winding down

Dive Brief:

  • The U.S. and China will set up “enforcement offices” to ensure the stipulations in a trade deal are carried out, said U.S. Treasury Secretary Steven Mnuchin on CNBC Wednesday. “Both sides are taking this very seriously,” Mnuchin said regarding the enforcement mechanism. Such a deal could end the ongoing trade war between the two countries.
  • The current deal on the table gives China until 2025 to allow U.S. entities to wholly own businesses in China, according to Bloomberg. The enforcement offices would be responsible for monitoring this and other stipulations of the agreement, triggering retaliatory actions if the parties do not adhere to the deal.
  • Mnuchin, who continued negations with Chinese Vice-Premier Liu He this week, did not confirm on CNBC whether or not tariffs currently in place would be removed in the case of a finished deal, nor did he offer a timeline for completing the deal.

Dive Insight:

“If we can complete this agreement these will be the most significant change to the economic relationship between the U.S. and China in, really, the last 40 years,” said Mnuchin Wednesday.

Though an end to the China trade war would likely be welcomed by most U.S. businesses, this news from Mnuchin is much more comforting to those businesses that operate in China than those that simply purchase from China.

Last month, White House economic advisor Larry Kudlow ​told reporters tariffs on Chinese imports may not go away if and when the administration reaches a deal with China, and Mnuchin made no comment on the issue Wednesday.

On the same broadcast, Mnuchin said: “As soon as we’re ready and we have this done, [President Trump is] ready and willing to meet with President Xi and it’s important for the two leaders to meet and we’re hopeful we can do this quickly, but we’re not going to set an arbitrary deadline.”

Bloomberg’s report of the changes to company ownership requirements in China represents one of the historically intractable issues between the parties, which could be a good sign for progress if the provision indeed ends up in the final deal. Mnuchin declined to lay out any specific “sticking points” in the negotiations. He said the deal was currently 150 pages with “multiple chapters.”

12 April 2019 | Emma Cosgrove | Supply Chain Dive

Channelling big data into connected services at Toyota

Toyota is garnering telematics data every ten seconds from the 9m vehicles it produces annually to transform itself into a future mobility services provider still relevant to a vehicle market undergoing some seismic changes.

Developments in connected and autonomous technology have made the term ‘carmaker’ too narrow. Companies are now positioning themselves to provide a range of technologies to customers who are as interested in the services they can access while in a vehicle as they are in the drive itself. And they are doing so conscious of the fact that outside players such as Google, Apple and Dyson are waiting in the wings to gain ground on them if they do not.

Speaking at last week’s SMMT Connected conference in London, Agustin Martin, CEO of Toyota Connected Europe (pictured), said there was going to be a huge difference in what carmakers did moving forward and that they would be up against rivals from outside the automotive industry eager to tap into the potential in the connected and autonomous vehicle (CAV) market.

“This change is not just there for the so-called incumbent players in the industry,” said Martin. “The huge difference that we see moving forward is that there are many other players that have other skills and capabilities compared to the ones we have that can also tap into the [market] potential. If you want to remain relevant, you need to remain conscious about this.”

Martin had some facts to back up the change. He said that 94% of the €502 billion automotive revenue pool in Europe in 2017 came from vehicle sales, with only 6% then accounted for by connected or mobility services. By contrast he said that by 2030 the market would be worth €643 billion with 37% of that revenue coming from connected and mobility services.

There are three main factors contingent on this shift in the market, according to Martin. One is that the customer is no longer necessarily concerned about owning a vehicle and is open to other models of use. Another is that cities are reinventing themselves as spaces of living and interaction, which has repercussions for car companies who want to remain relevant. Thirdly, technology has developed at an exponential rate to help solve the needs that the consumer (or producer) in ways that were considered impossible yesterday.

“The combination of these three things is driving a change in customer expectations, [they] are looking for an experience that is connected, seamless, on-demand and as personalised as can be,” Martin recognised.

As far in-car technology goes, Martin said Toyota Connected Europe was leading developments in telematics and big data as part of that mission to create seamless mobility services for the customer. He said that transformation was why the Toyota Connected was set up in 2000 in Japan, but significantly for the UK the European division is based in London. That, he continued, was because of the rich pool of talent in data science, software development and financial technologies (fintech) there.

“You need to be where the talent is and you need to be next to where these other new companies are also building their centres of competence, so that you are part of that ecosystem,” he said.

Toyota is using that talent to analyse the huge amount of data that feeds into its global big data centres and turn it into useful information designed to provide customers, corporations and cities with services.

“Thanks to that ingestion of data and the analytics of it, we can create the Mobility Service Platform. That is an open architecture that enables in turn other services,” he said. “You can imagine the vast quantity of information that is going through the Toyota Big Data Centers across the world. Our ability to turn this data into insights and those insights into relevant services is what we are talking about.”

10 April 2019 | Marcus Williams | Automotive Logistics

USMCA no closer to ratification as opposition digs in

How a trade deal that should not have ruffled many feathers, by virtue of being quite similar to the deal it is replacing, has ended up ruffling plenty.

The United States, Mexico and Canada Agreement’s (USMCA) biggest draw for proponents of its predecessor NAFTA — and the biggest disappointment for those opposed — is the similarity between the two.

After the three countries’ leaders agreed to a final version of the USMCA in October, the task of ratification fell to the legislatures of the three nations and ironically, the possible penalties for not ratifying the deal are starting to appear more drastic than the differences between NAFTA one and NAFTA two.

Last month, the International Monetary Fund (IMF) released an analysis of the economic impact of the USMCA showing stasis for Mexico and Canada and a slight economic loss for the U.S. The most substantial drops predicted in exports were apparel and textiles, and motor vehicles and parts. Essentially, a trade deal that should not have ruffled many feathers, by virtue of being quite similar to the deal it is replacing, has ended up ruffling plenty.

President Donald Trump has threatened many times to accelerate the U.S. withdrawal from NAFTA in order to encourage lawmakers on all fronts to ratify its replacement. Some recent legal thinking holds that he may not have the power to do so without Congress, but if he does pull the U.S. out of NAFTA before ratifying the USMCA, the U.S. trading relationship with its neighbors will revert back to pre-1994 status.

Getting the deal through the House will require 30 Democrats to vote in favor of ratification and since the most substantial stakeholder qualms come from key constituencies, reaching a majority seems no more likely than it did in October.

The list of parties making statements against or putting conditions on their support for the USMCA has grown in the past six months. And new complications surrounding U.S.-Mexico trade caused by the current slowdown on the border are further muddying the waters.

Both Mexico and Canada have stated multiple times that they do not wish to reopen negotiations. But some U.S. legislators are calling for just that. Here are the issues and parties holding up what President Trump has called his number one priority for 2019.

Organized labor objections put Democrats in a holding pattern

The AFL-CIO, and subsequently, Democrats in Congress, have had major qualms with the USMCA since it was first announced. (The labor organization was also a vociferous critic of the original NAFTA deal.)

Regarding what AFL-CIO President Richard Trumka called “the new NAFTA,” the labor leader wrote in an op-ed for The Hill that though the deal contains, “some improvements on labor protections, foreign investment, and American content standards,” it falls short on details regarding Mexican labor laws. Trumka and other labor representatives argue low wages and poor working conditions in Mexico keep U.S. wages from rising and make U.S. manufacturing less competitive. Higher wages and better conditions in Mexico would relieve “some of the downward pressure on American wages,” Trumka wrote.

Speaker of the House Nancy Pelosi has said she won’t call a vote to ratify the deal until Mexico changes its labor laws. Pelosi also mentioned to Politico that some language in the deal needs to change to ensure proper enforcement, though she did not describe this element as a deal breaker. Stronger collective bargaining rights for Mexican workers, that require full union membership votes could enable the changes Trumka and others have called for.

Friday, the Mexican majority party in its lower house added language to a labor bill that would reportedly meet the U.S. demands. AFL-CIO Trade Policy Specialist Celeste Drake told Politico the draft bill “is an improvement and meets a key criteria of ensuring workers can vote on their collective bargaining agreements.” Pelosi has since said that should the Mexican bill pass, she will need to ensure proper enforcement to consider this a resolution of the issue.

Trump himself contradicts the deal with tariff threats

The USMCA requires that cars contain 75% content from the three nations in the deal — up from NAFTA’s 62.5%— which could cause some automakers to undergo pricey supply chain transitions. But on the whole, the industry has supported the deal. Ford, for example, put out a statement almost immediately in support of ratification.

The Trump administration’s view is that these provisions will encourage further development of the U.S. auto sector — White House adviser Larry Kudlow put the value at $80 billion and 70,000 to 80,000 jobs.

It would seem counterintuitive for President Trump to make moves that could undermine his own multilateral trade deal, but last week, that’s exactly what began to take shape. Trump said to reporters Friday that border security “is more important to me than the USMCA.” He threatened the U.S. would be “forced to Tariff at 25% all cars made in Mexico and shipped over the Border to us.” The tariffs, he added, will supersede the USMCA.

The Washington Post pointed out that the USMCA is designed so that Trump cannot inflict ad hoc tariffs on Mexican auto parts, but when a reporter pointed this out to Trump he reportedly said, “We haven’t finished our agreement yet.”

Though Mexico isn’t taking the threatened auto tariffs seriously, according to Politico, statements that suggest the President may overrule the deal at will are adding animus and uncertainty to an already fraught ratification process.

Canadian Steel tariffs could hinder ratification from north of the border

Existing tariffs on Canadian steel present a particularly pressing threat to the deal because of election timing for both neighbors. Canada’s foreign minister, Chrystia Freeland, said last week that tariffs on Canadian steel are a sticking point and the country won’t ratify the deal until they are dropped.

Canadian elections are in October 2019 and the Parliament adjourns in June. Sen. Chuck Grassley (R-Iowa) has expressed the need to ratify before that time or at least before the U.S. general elections in 2020. This is unlikely to happen without removing the tariffs. Pelosi has not expressed a specific timeline that she sees as realistic but has indicated that ratification should not be rushed and will “take some time.”

The same IMF paper that showed a slight economic loss for the U.S. also showed that trading volume among the three nations would stay roughly the same. Removing U.S. tariffs on imported aluminum and steel, and thus ending the retaliatory tariffs that resulted, would increase trade volume five-times more than what is expected under the USMCA.

There are plenty of other contentious issues throughout the deal that could make ratification difficult if unhappy constituencies can wield enough power.

House Democrats are reportedly dissatisfied with intellectual property provisions in the deal they say would preserve high pharmaceutical drug prices.

Cattle ranchers are also unhappy since the deal, in their view, maintains the parts of NAFTA that gave them no protection from cheaper imported beef and cattle.

The list grows as the potential timeline for ratification stretches into the future.

Another report assessing the impact of the USMCA on the American economy is expected in the next few days — this time from the U.S. International Trade Commission.

09 April 2019 | Emma Cosgrove | Supply Chain Dive

US proposes tariffs on $11B of EU imports

Dive Brief:

  • The Office of the United States Trade Representative (USTR) released a 14-page preliminary list of European Union goods “to be covered by additional duties,” USTR said in a statement. The products total about $11 billion.
  • USTR’s tariff proposal comes in response to a World Trade Organization (WTO) ruling, which found EU subsidies benefited Airbus and caused Boeing to lose sales and market share, resulting in “adverse effects” on the U.S., according to USTR. The office estimates the harm at $11 billion in trade each year and “requested authority to impose countermeasures worth $11.2 billion per year.” A WTO arbitrator must now evaluate the request’s validity.
  • The preliminary list includes a wide variety of goods, including helicopters, food items such as seafood and cheese, wine, apparel and minerals. USTR plans to release a final list once the WTO issues a report on countermeasures, which is expected this summer.

Dive Insight:

Just as U.S. businesses started to feel hopeful about the prospect of a wind-down of the U.S.-China trade war, another largely unexpected trade battle is brewing.

News on the U.S.-EU trade front has been largely quiet over the last few months. The EU and U.S. announced last summer they planned to work toward zero tariffs, after the U.S. imposed steel and aluminum tariffs on several trading partners. They also declared a cease-fire that halted threatened tariffs on European cars. Should tariffs be implemented, it would certainly throw a wrench in the zero tariff goal.

Simon Lester with the Cato Institute and formerly the WTO noted in a tweet the proposed tariffs could result in retaliatory tariffs from the EU on the basis of Boeing subsidies, thus affecting U.S. export supply chains to the EU. The WTO found in 2012 Boeing received billions of dollars in subsidies to the detriment of Airbus. “The EU is still waiting to hear from the WTO about what ‘retaliation rights’ it has,” CNBC reported.

A spokesperson for the European Commission said the EU is ready to retaliate in kind if tariffs on $11 billion worth of goods take effect, according to multiple news reports.

The overall effect of tariffs on $11 billion of EU imports — and potential retaliatory tariffs should they arise —  would be relatively small compared to the 10% duties of $250 billion in Chinese imports. It is unclear what percent tariff may be imposed on the EU.

Still, the USTR’s announcement adds further turmoil for businesses trying to navigate trade policy, adjust their supply chains and mitigate tariff cost as much as possible. Tariffs on EU imports would add fuel to the already burning fire of tariffs on Chinese products, slowdowns on the U.S.-Mexico border and the uncertain future of the United States, Mexico, Canada Agreement (USMCA).

09 April 2019 | Shefali Kapadia | Supply Chain Dive

Track-and-trace, supply chain expected to lead IoT spending growth

Dive Brief:

  • Among industries spending on Internet of Things (IoT) technology, the track-and-trace sector is expected to have the largest spending growth — a 24.2% increase — on IoT devices between 2017 and 2023. Inventory and supply chain management is expected to see a 20.2% increase in spending during the same time period, according to a report from Forrester.
  • Total global spending on IoT technology is expected to increase from $186 billion in 2017 to $435 billion in 2023, according to the Forrester forecast.
  • Forrester sees Deloitte, IBM, Accenture, HCL Technologies and Atos as “leading the pack” in the IoT space according to a separate report on the IoT industry from last year.

Dive Insight:

A definition of IoT products has been a sticking point for legislationinvolving the technology, but broadly speaking, it refers to any device that connects to the internet other than your standard laptop, desktop or smartphone. When combined with various sensors, it’s easy to see how the ability to share data quickly over the internet can come in handy for supply chain operators.

While spending might be starting to speed up now, this line of thinking around data sharing has been around for a number of years. Deloitte argued in 2015, “information provided by IoT deployments allows supply chains to invest less in eliminating variation because timely and effective responses are now possible, and instead to use variation as a foundation for new types of competitive advantage and even as a driver of innovation.”

Noha Tohamy, a vice president of supply chain at Gartner, argued a similar point in 2015.

“With the IoT, the supply chain will have unprecedented access to data valued by internal and external stakeholders,” Tohamy said. “This presents an opportunity for supply chain groups to co-develop new information-based solutions for individual customers or markets.”

These points must have hit home with carriers, logistics providers and other supply chain operators, as many of these companies have since announced IoT projects they say will provide them greater transparency or help in eliminating slow and laborious manual processes.

Earlier this year, the Port of Rotterdam Authority started using an IoT application to help manage its shipping operations. It uses sensors around the port to collect water and weather information to help with ship scheduling.

This kind of sensor deployment provides operators with a real-time overview of what’s happening at the port. All of this data collection can also help with further technology implementation in the future — “This lays the foundation to facilitate autonomous shipping in the Port of Rotterdam in the future,” the port said in a press release earlier this year.

Meanwhile, the carriers hauling containers are also looking to IoT to better understand their operations. MSC has equipped 50,000 dry van containerswith IoT devices to track the location, temperature, vibration and other aspects of a container’s journey. This will give MSC greater transparency into the journey of a container, but it also expects it to help expedite the customs process.

IoT is also proving useful in the warehouse. Sensor-equipped drones are one of the more high-flying ways of managing inventory. Drones can scan RFID tags throughout a warehouse, eliminating the need for a human to do this work and potentially helping address labor shortages in warehouse work.

As IoT technology reaches new heights, so too will the money being spent on the technology. Whether companies find value in these investments will come down to whether the devices are collecting quality data and if the companies are able to use this data to make meaningful changes to the status quo.

02 April 2019 | Matt Leonard | Supply Chain Dive

Truck wait times rise to 5 hours as CBP reassigns staff on US-Mexico border

Dive Brief:

  • The reassignment of Customs and Border Protection (CBP) officials from ports of entry between the U.S. and Mexico is altering logistics in border cities. Prior to reassignment, trucks waited an average of one hour to cross the border. Now, the average wait time is five hours.
  • CBP will close the Bridge of the Americas — one of four ports of entry in the El Paso-Juárez metropolitan region — to commercial traffic on Saturdays until further notice, the El Paso Times reported.
  • Manufacturing plants in Ciudad Juárez, Mexico, are storing finished product in trailers as they wait for the cargo capacity to transport goods to the U.S., according to Norte Digital. One auto parts producer reportedly had to stop production altogether after supplies were delayed.

Dive Insight:

The border slowdown began on March 28, a day after CBP hosted a press conference in El Paso, Texas, “to discuss the impact of the dramatic increase in illegal crossings that continue to occur along the Southwest border.” With hundreds of migrants being apprehended and placed into custody each day, the federal agency said it needed to reassign its labor to deal with the situation.

“Up to 750 CBP Officers (CBPO) from ports of entry along the Southwest border will soon be supporting Border Patrol with care and custody of migrants,” a CBP statement reads. “This shifting of resources and personnel will have a detrimental impact at all Southwest border ports of entry. CBP will have to close lanes, resulting in increased wait times for commercial shipments and travelers.”

The effects were noticed in the border region almost immediately. As wait times jumped for daily travelers, El Paso residents with business in Ciudad Juarez opted to stay on the Mexican side of the border to avoid delays, and businesses in El Paso were more empty, local residents told Supply Chain Dive.

Businessmen fear the worst of the traffic is yet to come as further port closures loom. The automotive industry has the most to lose from the slowdown, as its just-in-time model means penalties for delayed parts could cost suppliers up to $7,000, El Diario de Juárez reports.

The news comes ahead of another announcement surrounding border closures that could be made by President Donald Trump. Friday, the President will visit Calexico, California, to see a recently-finished border fence replacement project and will host a roundtable with local law enforcement officials.

Local leaders fear the President will use the visit to justify further steps to shift border security resources, the Palm Springs Desert Sun reports.

“The purpose of the trip seems to be to shed light on what the White House is calling a ‘border crisis,'” Eduardo Garcia, a California assemblyman, told the Desert Sun. “But if you drive down and look at the Calexico Port of Entry, the crisis there is very different than the crisis the president is drawing attention to. It’s three- to four-hour wait times at the border, which have a significant impact on the economy, both in the border region and our state.”

04 April 2019 | Edwin Lopez | Supply Chain Dive

Gravity Supply Chain Solutions: Mitigating the risks of trade wars and tariffs

As trade wars heat up, businesses need to protect their profit margins from increased tariffs. Gravity Supply Chain Solutions CEO, Graham Parker, explains how this can get achieved by digitising the supply chain.

Optimism over an end to the trade war between the U.S. and China seems to have grown further following an extension to the original 90-day trade deal truce, which was due to expire at the beginning of March. However, the U.S. government alleges that the CFO of the Chinese telecoms giant, Huawei, has broken U.S. trade sanctions, and accuses the company of acting as a backdoor for the Chinese government to access U.S. trade secrets, subsequently passing a law that bans federal agencies from buying their products. Huawei, in return, now intends to sue the U.S. government.

In the wake of these allegations, growing hostilities between the two nations could result in trade wars intensifying yet again. For businesses, this would likely mean more rising tariffs. The immediate impact of the tariffs is that they make it more expensive for American companies, manufacturers, retailers, and suppliers, to import products or raw materials from China. American firms will also find it costlier to export goods into China.

China is the largest trade partner of the U.S. according to the U.S. Census Bureau, which estimated that bilateral trade between China and America, reached US$636 billion in 2017, and given this fact, it is highly likely that the reciprocal tariffs will increase the costs of a large proportion of U.S. based companies.

Many noteworthy U.S. corporations have already attested to this fact. For example, General Electric stated that new tariffs on its imports from China could raise its costs by US$300 million to $400 million. Caterpillar claimed U.S. tariffs on imports from China would increase its material costs by around US$100 million to $200 million in the second half of the year.

Protecting Your Business From Tariffs, And Trade Wars

In light of these increased costs of importing from China, companies may choose to absorb the higher expenses which will lower their margins, or decide to pass on the increased costs to their customers by raising the prices of their goods. However, this may reduce demand for their products, negatively impacting sales.

The most effective way for companies to cushion the impact of tariffs is to find ways to make their business run more efficiently which will reduce operating expenses, and offset any increased costs due to tariffs. One powerful way of making business more efficient is through digitisation of the supply chain.

Digitising The Supply Chain

Here are three ways that digitisation of the supply chain can improve business revenues and margins, and offset the impact of tariffs.

1) Removing the pain points of laborious manual processes

Supply chains are complex operations, with hundreds or sometimes even thousands of people involved. While recent technological advancements have made supply chain management easier, many companies still rely on manual processes to collect, review, and input data; including manual data entry – keying in data for purchase orders, bookings, invoices, or quotes – which often involves copy and pasting such data from another system. If you multiply this type of repetitive, mundane activity, by the number of times an employee performs the operations throughout the working week, it equates to a great deal of wasted time.  Manual tasks are also hugely error prone, inconsistent, and difficult to track, resulting in poor visibility, and insights that are inherently flawed due to being based on substandard data which makes it challenging to stay on top of what’s happening in the supply chain, and diminishing the ability to make smart data-driven decisions.

Businesses can invest in a digital supply chain platform that automates such data entry by automatically collecting, and updating the data from across the many relevant sources, all accessible in a single system, rather than spread across multiple systems that don’t communicate. Such automation streamlines workflows, resulting in the reinstatement of the many previously wasted working hours while saving the company money as a direct result of the management of the supply chain getting performed at a much faster and more efficient rate. For example, automating the process of choosing the best sailing schedules for 100 major ocean carriers, covering over 90 percent of global container capacity, will give managers more time to spend on activities which grow the business, such as negotiating better vendor prices.

2) Accelerating speed to market

In today’s world and thanks to the likes of Amazon, smart technologies and mobile devices, consumers want products as quickly as they can get them. Businesses which fail to provide their customers with what they want, as soon as they want, will lose sales opportunities, and market share, to competitors.

The ability to get products to consumers quickly is contingent upon the speed of a company’s supply chain. Primarily, a digital supply chain provides real time visibility on the movement of goods across a company’s supply, and logistics networks, from product conception, to transit, to arrival at destination. This visibility allows companies to make data-driven decisions to ensure the timely delivery of products. As an example, an early warning that announces if a shipment might become delayed due to port congestion; allows for a company to take remedial action, such as air freighting inventory from another warehouse, to compensate for the delayed shipment.   

Furthermore, a digital supply chain provides a single platform through which all supply chain partners ranging from businesses to logistics providers, to suppliers, can all share information, and collaborate seamlessly, facilitating teamwork, and reducing misunderstandings, all of which contribute to a faster delivery timeline.

Lastly, the automation of manual processes as mentioned above means less time gets wasted on administrative work, allowing for more time to get spent on optimising deliveries.

Through faster speed to market, companies could also increase their sales and revenue.

3) Reducing the costs of product sourcing

When a company’s regular suppliers are charging extra due to tariffs (or any other reason), organisations are forced to look for alternative supply partners or even new supply markets that can offer better prices. A digital supply chain platform can support sourcing teams to make the data management aspects of this process seamless, by providing a single platform to onboard vendors, send briefs, and receive and compare quotes all in one place (rather than spread across various emails, systems, and documents). In this way, a business can take new vendors onboard and compare their quotes quickly and painlessly, so allowing them to identify which vendor is offering them the best value quickly.

In conclusion

Tariffs, like corporation tax, are external economic pressures, which affect the bottom line of companies, over which businesses have little, or no control. The supply chain is, however, something which companies do have control over.  By digitising their supply chains, companies can become much more efficient at what they do, helping them offset tariffs and other external economic overheads.

28 Mar 2019 | Henry Menear | Supply Chain Digital

China extends tariff suspension on US vehicles

Dive Brief:

  • China will continue to suspend tariffs on imported U.S. cars as trade negotiations between the two countries drag on, China’s State Council announced this week, Reuters reported.
  • China announced in December 2018 it would remove an additional 25% tariff on U.S. imports of cars for a three-month period beginning Jan. 1. This latest announcement is an extension of that change. The government said it would make a separate announcement detailing when these suspended tariffs would again take effect.
  • “It is a positive reaction to the U.S. decision to delay tariff hikes and a concrete action adopted (by the Chinese side) to promote bilateral trade negotiations,” the State Council said, according to Reuters.

Dive Insight:

The extended tariff suspension from China is the latest goodwill gesture between the U.S. and China amidst their ongoing trade war. Tariffs on $200 billion worth of U.S. imports from China were set to increase from 10% to 25% on March 1. Trump announced a delay to this increase in February, and tariffs have not increased since.

Trade negotiations between China and the U.S. are still unfolding. Vice Premier Liu He and a Chinese delegation are traveling to Washington this week to meet with U.S. trade partners on Wednesday, according to The New York Times.

The two countries hope to reach an agreement by the end of this visit and potentially hold a signing ceremony later this month with President Trump and Chinese President Xi Jinping, The New York Times reported.

China is not the only country in trade negotiations with the U.S. The Trump administration is also in talks with the European Union, and Trump said last month he is reviewing the potential for tariffs on European imports of automobiles, according to CNN.

If such tariffs went into effect, they could do more harm to the global economy than the U.S.-China trade war, World Trade Organization Chief Economist Robert Koopman said Monday, according to Bloomberg.

“U.S.-China trade is about 3% of global trade,” Koopman said. “Automobile trade globally is about 8% of global trade. So you can imagine that the impact of automobile tariffs are going to be bigger than the impact of the U.S.-China trade conflict.”

02 April 2019 | Matt Leonard | Supply Chain Dive