What's your strategy?

Art of a trade war

Donald Trump's tariffs on steel and aluminum gave rise to a trade war now raging around the globe. Here's what you can do to build a wall around your company.

Mike Towle 28.06.2018

An update from the front lines

Stuttgart (AEB) - Every week a new story seems to play out in the trade war raging right now around the globe. U.S. President Donald Trump has taken on the EU, China, Canada and Mexico in what he calls an effort to level the playing field but what others see as tactics more intent on winning him votes.

In just a few of his recent actions, Trump has taken aim at foreign auto imports, approved a 25 percent tariff on $50 billion worth of Chinese imports (Beijing responded with equivalent tariffs and Trump has fired back with threats of more tariffs) and gotten into a war of words with Harley-Davidson executives after the shift of some production out of the U.S. as a result of Europe’s retaliatory tariffs.

How it began

The banter got underway earlier this year when Trump announced he would levy sharp tariffs on steel and aluminum imports based on a seldom-used law that allows presidents to seek market restraints when they feel national security is being threatened.

The result of Trump’s action is a 25 percent tariff on steel products and a 10 percent hit on aluminum. ‘’Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world,’’ he said in a tweet from his famous Twitter account.

Impact on supply chains

Trump’s rhetoric aside, such actions by governments can result in trade barriers that impact the global supply chain and the companies attached to it.

For example, China is a major market and an important part of the global supply chain of many U.S. companies. Apple produces the iPhone there and auto giant General Motors sells more cars in China than it does in the U.S.

While many in industry routinely adjust operations to account for a variety of barriers, they are widely believed to be capable of driving up costs, creating uncertainty in markets, and inviting politically motivated counter measures that can attack a trader’s bottom line.

How we can help you win the battle

At AEB, trade barriers are a reality in supply chain logistics and part and parcel to our daily business operations.

Our logistics software is designed to clear the hurdles – big or small – regulators throw in front of your company and its profits. It can automate and standardize your customs management, and seamlessly embed export, import, and more into the logistics process.

AEB’s software is designed to help our customers stay the course when the regulatory waters become rough, murky, or the focus of political football.

Examples from our experts

How do trade barriers impact the global supply chain? Here are a few examples cited by AEB experts:

  • Companies typically look to redesign their supply chains. In the case of steep tariffs, they may look for domestic rather than foreign suppliers.
  • Exporting companies in the chain may look elsewhere for business, believing their products are no longer competitive in a tariff-heavy marketplace.
  • Changes in customs regulation can create barriers with complexity. The lack of communication between brokers and agencies and a subsequent lack of data quality can create delays in the chain.

Ted Roth, General Manager at AEB Sweden, said supply chain managers must learn to cope with the barriers created by regulators to grow and survive in their markets.

‘’One of the re-occurring key delays is in customs handling,’’ Roth said. ‘’The complexity of cooperation between brokers and agencies and the lack of data quality causes issues to be compliant in the processes, i.e. a direct delay in the supply chain.’’

Roth said national and local regulations often create a hidden barrier for some companies. ‘’Customs experts are not that many anymore and I see a struggle within many companies (even the bigger ones) to find good skilled people… to understand the local regulations.’’

What to do right now

Mark Brannan, International Business Development Director at AEB, said new trade barriers will ‘’undoubtedly drive companies to examine how best to redesign their supply chains.’’

‘’With new U.S. tariffs, U.S. companies may look for domestic rather than overseas suppliers in order to keep costs down. Similarly, exporters to the U.S. may find that their products are no longer competitive and will therefore need to seek new markets. Typically, new trade barriers result in tit-for-tat responses from other governments, so it makes the situation even more complicated for traders.’’

The effect of the tariffs on steel and aluminum proposed by Trump are a difficult call, Brannan said. He said it’s difficult to tell if Trump will carry through or if the political imbroglio surrounding them will stop them from ever being enforced. He points out that Trump may just be using the tariffs as a NAFTA negotiation ploy with Canada, the largest supplier of steel to the U.S.

‘’With regards to supply chains, it’s clear that any U.S. tariffs may impact on the flow of goods,’’ he said. ‘’British steel manufacturers are concerned that U.S. tariffs will encourage manufacturers in other countries to look at non-U.S. markets for their steel, making the market even more competitive.’’

Based in Stuttgart, Germany, AEB is a global enterprise with over 5,000 customers in Europe, Asia, and North America. For more of our insights on news and trends in supply chain and logistics, sign up for our monthly newsletter.

AEB, with its vast experience and expertise in the fields of SCM and customs, offers IT support for all intralogistics processes and beyond, merging global trade and logistics in a single solution.Learn more about us at AEB.com.

Over de auteur
Mike Towle
Mike Towle has been involved in content creation for more than three decades. A former reporter, he’s worked in all forms of international media – digital, print and video. He’s driven to find the best way to tell every story and then publish it in a mode that finds its perfect audience.

Similar content

Deze website maakt gebruik van cookies. Door de website te gebruiken, stemt u in met het gebruik van cookies  Informatie over gegevensbescherming.