There is some evidence as to whether proposed U.S. tariffs related to imports from China will disproportionally impact manufacturers.
According to a recent published report from The Wall Street Journal (Paid subscription required): “The scenario highlights how a Trump Administration policy aimed at punishing China’s alleged trade abuses can boomerang, threatening to create corporate winners and losers and drive-up costs for American consumers.”
The WSJ collaborated with trade intelligence research firm Panjiva to analyze at least 345 product categories proposed to be included in the proposed import tariffs. For some categories, China imports reportedly amounted for a range of just 5 percent to less than one percent of trade value. The opinion expressed was that U.S, manufacturers will have an easier time of absorbing tariff costs of shifting supplier sourcing for such categories.
However, according to the analysis, 38 categories of products had a reported significant amount of China imports- of more than 30 percent in value. The view expressed was importers of these select products are likely to bare the brunt of the tariff cost impacts if they cannot find alternative non-Chinese suppliers. Further noted was that some tariffs could impact two companies in the same industry differently, depending on their existing component and product sourcing strategies.
After absorbing this report, Supply Chain Matters would add the perspective that the select listing of products that might be subject to tariffs may have more to do with political or lobbyist connections than to economically impacting China. Thus, both sides are undertaking a set of political moves that are destined to have individual company and multi-industry winners and losers.
While the product listings are now subject to an appeal process from individual companies, as to making the case for economic harm, it seems clearer that certain individual firms can suffer undue harm if they are not adroit at international supply sourcing options. Of course, some CEO’s have already relied on a strategy for speed-dialing their preferred industry association lobbyist as the contingency strategy.
Once again, we must reiterate our view that active sourcing scenario analysis and what-if planning remains an important action for any manufacturer, distributor or retailer that will be impacted by proposed import tariffs. Sourcing and direct materials procurement professionals thus have a important education role to-play long with supply chain strategists.
Judging from the various reports currently being featured by business and industry media, senior executives have indeed been briefed on cost and sourcing impacts and can articulate such.
Very soon, there will be additional tariff announcements until if and when a specific country moderates its actions and elects some form of compromise. While all of this occurs, contingency sourcing options become far more limited because global supply chains are operating with high momentum and limited upside capacity and flexibility.
In the current uncertain trade environment, the ageless yet simple proverb: “The early bird catches the worm” has special meaning. If you do something early or before anyone else, you likely have an advantage. Similarly, the words of professional hockey legend Wayne Gretzky: “Skate to where the puck is going, not where it has been” has added meaning.
This is where supply chain leadership has a voice and where supply chain capabilities of flexibility and resiliency meet the test.
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