As a follow-up to our previous Supply Chain Matters alert posting to multi-industry supply chain teams, President Donald Trump indicated this afternoon that the United States is planning to levy tariffs on about $60 billion of designated imports from China, as well as impose restrictions on technology transfers to pressure China to curtail what the U.S. considers unfair trading and investment practices. 

Declaring that trade practices with China are “out of control” the President formally invoked what is termed as a Section 301 Trade Action.  The $60 billion of tariffs on U.S. imports represents upwards of 10 percent of the trade imbalance while investment restrictions, characterized as primarily technology industry related, are expected to impact upwards of 200 product categories. The President further characterized today’s actions as the “first of many subsequent actions” and stressed the word “reciprocal” as the key tenet to his Administration’s trade policy.

The specific listing of products to be impacted is expected to be released in 30 days while U.S. business interests will be provided 15 days to comment on which products should be included in the tariffs. According to reports, the U.S. Trade Representative has selected upwards of 1300 product categories that might be included in the new tariffs., many described as high-tech in nature.

Further indicated was that the United States is expected to bring a case before the World Trade Organization (WTO) arguing that China, through its business practices, is favoring domestic firms when it comes to licensing technologies.

News of this afternoon’s announcement has fueled a major market sell-off on the Dow, trending down 2 percent as we pen this posting, over investor fears of a major global trade war.

China is expected to counter today’s announcement with its own trade actions, yet to be defined.

As stated in our prior posting, today’s actions by the Trump Administration should strike immediate alarm bells for technology and other industry supply chains.

Product and market sourcing as well as contingency planning scenarios and actions should now be a very important consideration for contingency planning among line-of business and industry supply chain leadership teams. Now is the time to be prepared for assessing alternative sourcing scenario and determining how much added supply chain costs can be adsorbed or passed along to customers.

Industry supply chains are likely to experience a period of terribly disruptive trade actions resulting in added risks and market volatility. Be prepared and diligent in providing senior management with needed information to make the most informed and timely decisions related to global product and supply chain support strategies in the coming weeks.

 

Bob Ferrari

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