The Supply Chain Matters blog features added commentary and perspectives on growing realities occurring across global trade regional landscapes. We advocate that global supply chain management is no longer a spectator sport, that teams have to be engaged deeply in advocating business strategies and customer support contingency plans and actions that manage global supply network risks.
In a prior Supply Chain Matters April Fools spoof commentary focused on ongoing global trade developments, we noted that that tariffs are weighing on global business and industry interests as well as multi-industry supply chain management teams. It seems that with every passing day and week, global trade tensions and threats have become the norm, and with that, various industry supply chain management teams must deal with the consequences, whether they are threats or actions.
Our reading of the ongoing discourse leads us to now believe that there is a discernable change occurring in managing line of business and supply network supply risk mitigation actions related to global trade uncertainties.
United States and China Trade Tensions
In equity investment and global stock market circles, there is a growing consensus that the Trump Administration will not waiver from an aggressive trade stance. Regardless of whether the U.S. and China come to some form of a trade agreement over the coming weeks, the threat of continuing tariffs and trade tensions seems inevitable as a means of policing perceived trade imbalances, lack of protections or adequate trade policing mechanisms.
The U.S. trade stance favors punitive tariffs as an ongoing mechanism to assure perceived equity in trade practices. That tenet alone is believed to be the current stumbling block in coming to an agreement. Further, global trade observers opine that the longer the U.S. and China talks, and ongoing tensions prolong, the added risk of more electoral politics influencing an outcome. Announcements of massive new buying agreements are not likely to change that backdrop.
Last week, the International Monetary Fund (IMF) warned that that this is a “delicate moment” for the overall global economy, and that resolving the ongoing U.S. and China Trade war, and resolving Brexit, could go a long way toward mitigating a deeper global economic slowdown.
As we recently highlighted for our readers, the latest global-wide PMI data reflecting on Q1-2019 manufacturing and supply chain activity levels points to added trade induced slowdowns.
Obviously, we do not need to reiterate the importance of China as the go-to region for global manufacturing needs across multi-industry supply chains.
Europe and the United Kingdom
The Trump Administration continues to threaten added tariffs with the European Union, and this week, the office of the U.S. Trade Representative initiated a process under Section 301 of the Trade Act of 1974 to ultimately impose tariffs on $11 billion of imported EU products as a retaliation for perceived World Trade Organization (WTO) rulings, or lack thereof, of “launch aid” subsidies provided to Airbus for development of new wide-body aircraft. The coincidence of the perceived damage to U.S. domestic commercial aircraft manufacturer Boeing during that company’s ongoing global grounding crisis concerning the 737 MAX aircraft is certainly a topic for debate.
President Trump continues to threaten the EU with imposing added import tariffs on U.S. imported automobiles manufactured in Europe, because of perceived trade practice inequities.
As we pen this global trade risk commentary, UK Prime Minister Theresa May is again conferring with EU officials seeking yet another extension of Brexit in light of a failure of Parliament and the ruling government to reach a consensus plan. Reports indicate that while the Prime Minister seeks an extension from April to now, June, some EU ministers are leaning toward a one-year extension in order for the government to come to a full consensus on an EU exit plan.
As we noted in our prior Brexit focused commentaries, such extensions continue to impact various industry supply chain risk contingency plans, and the longer the extension, the more uncertainty permeates future UK focused supply network investment decisions.
Pending USMCA Trade Agreement
Last week, after threatening to totally close the U.S. southern border to all traffic because of an immigration influx crisis, and then backing off from that threat, President Trump indicated intent to impose added punitive tariffs on Mexico if that country does not follow through on cracking-down on large numbers of asylum seekers traversing Mexico to the U.S. border over the coming year.
From or lens, that very threat is an affront to the recently agreed to USMCA trade agreement among Canada, the U.S. and Mexico, which has yet to be ratified by all three countries. That threat action will add to the ratification debate or to potentially calls for amendments related to protections against added tariffs.
What it all Means- Added Perspectives
What is becoming obvious is that heightened geo-political trade conflicts and Trump Administration policies for threats or actions toward punitive tariffs are not subsiding any time soon. Neither are the inherent economic and industry supply network risks.
Today, Drewry Shipping Consultants warned clients that U.S. ports, leading global container lines and specialist car carriers will be adversely impacted should U.S. proposed auto tariffs be implemented in the coming quarter. The most negative impact is expected between 2020-2021.
We state the above to make a specific point. Supply chain executive leaders and associated teams need to come to grips with practices related to either risk-taking or risk mitigation. This is the notion of being rewarded or criticized for fire-fighting efforts at times of supply chain risk disruption, such as the ongoing Brexit situation, or taking the initiative to advocate and initiate risk mitigation strategies and actions related to global product sourcing in order to assure access to key growth markets.
Like it or not, businesses and their supply chain management, procurement and logistics management teams cannot continue to be in reactive mode, let alone, wait and see. If in 2017, teams adopted a let’s wait and see defensive stance, then the consequences of today’s global trade landscape have likely resulted in some finger-pointing. The continued pursuit of the seeking out the lowest cost region for product sourcing or passing on added tariff or cost increases for suppliers to adsorb is not the panacea.
The agenda has dramatically changed to that of definitive strategy and continuous global-wide risk management. Leaders will be those that embrace scenario-based supply chain management actions that weigh various risks and incorporate backup plans for adverse global trade developments.
Global supply chain management is no longer a spectator sport, teams have to be engaged deeply in actively advocating business strategy and customer support contingency plans and actions.
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