Political decisions often evoke a lot of discourse.
Last week’s decision by the Trump Administration to move ahead with imposing steep tariffs on imported steel and aluminum from Europe, Canada and Mexico has resulted in a lot of ongoing discourse, much of which was not complimentary to the decision, and further amplifies the broader multi-industry supply chain impacts.
Editorial, Global and Industrial Feedback
On the Editorial opinion front, the decision brought forward rather pointed feedback.
In its editorial, Trump’s Steel Destruction, The Wall Street Journal opened with the following:
“So much for Donald Trump as genius deal-maker. We are supposed to believe his tariff threats are a clever negotiation strategy, but on Thursday, he revealed he’s merely an old-fashioned protectionist.”
The editorial went on to declare:
“American businesses rely on complex cross-border supply chains that take time and money to change. Most will have to internalize the tariff costs, which will mean rising prices or hiring fewer workers and paying lower wages.”
The New York Times published editorial, The Economy Can Handle Steel and Aluminum Tariffs. The Real Risk Is Erratic Policy, opens with the statement:
“Today, we take pity upon the supply chain managers, the financial planners, the logisticians and procurement chiefs at every American company that uses steel and aluminum in its products.” The piece later declares:
“Even more remarkable is that the Trump Administration is willing to make threats against all the nation’s major trading partners at the same time. A trade war with China would be a big deal; a trade war with Europe would be a big deal; a trade war with Canada and Mexico would be a big deal. The United States is flirting with all three at once.”
The Washington Post editorial, Trump’s trade policy is stuck in the 80’s- the 1680’s, journalist Catherine Rampell argues that White House trade policies are reflective of 17th-18th century mercantilism., that trade is not zero-sum; it’s positive-sum. Later in this piece is the statement:
“In protecting U.S. steel and aluminum, he (Trump) is threatening the much larger manufacturing industries that purchase these materials to make, and then sell, high-value exports such as cars and appliances.”
Finance Ministers from the six non-U.S. members of the Group of Seven industrialized nations released a joint statement last Saturday conveying their “unanimous concern and disappointment” with the U.S. decision.
Equally direct, various industry associations and individual businesses are voicing significant concerns regarding the implications of current U.S. trade policy. Industries such as domestic steel producers support these moves while manufacturer’s dependent in foreign metal supplies expressed pointed concerns.
Industry associations are quick to articulate the tradeoff of a few thousand jobs directly associated with U.S. steel and aluminum production, with the thousands of jobs that could be impacted across multiple manufacturing supply chains. Many encourage that the Administration rethink its current course.
Today, business media is citing the Business Roundtable’s recent quarterly survey indicating the first decline in CEO optimism in two years, amid concerns about trade policy. Roundtable President Joshua Bolton indicated in a press briefing:
“What I can tell you is anecdotally is that the administration’s trade policy is a huge concern to almost every member of our organization to the extent they see clouds on the economic horizon. The risk of trade wars and the administration’s policies that are contributing to that are very high on the list of things our members are concerned about.” He added that there are important issues that the administration is trying to correct including concerns about Chinese trade practices on such things as intellectual property.
Post Tariff Developments
Prior to last Thursday’s tariff announcement. U.S. negotiators were scheduled to sit-down with a China delegation last weekend in talks to resolve the imposition of $50 billion of tariffs on Chinese goods. Reports indicate that the talks in China concluded without settlement.
While China had expressed willingness to expand purchasing of U.S. products, the nation will not do so if the U.S. goes ahead with threatened sanctions on China’s shared technology policies. The Wall Street Journal, citing people with knowledge of the discussions, indicated that the outcry from U.S. allies provided additional reasons for the Chinese to not to cut a deal. This afternoon, the WSJ, also citing informed sources, reported that China offered to purchase nearly $70 billion of U.S. farm and energy products if the Trump Administration would abandon the threatened tariffs.
Today, U.S. Economic Advisor Larry Kudlow told Fox News that the President was re-thinking the U.S. stance on NAFTA talks, and is now inclined to have separate individual trade agreements with Canada and Mexico instead of a bi-lateral agreement.
That news will likely be little comfort to multi-industry supply chains and agricultural interests with the prospects of separate trade rules across North America’s inherent supply network movements.
Despite such direct feedback and expressed concerns, industry supply chain teams have little choice but to assist senior management and line-of-business teams in determining the various options that must be addressed given the current levels of high uncertainty related to global supply network material flows.
As noted in last Friday’s Supply Chain Matters commentary, the worst-case scenarios regarding a period of global trade barriers and added landed cost factors are becoming ever more evident with each passing day and each passing week. Various contingency options could likely be moot given the current Trump policies for aggressive trade actions among the three most dominant economic and supply network regions.
Indeed, supply chain managers, CFO’s, procurement chiefs and logisticians are highly concerned. We quickly stress that rather than pity, consider that many teams now have better information and scenario-based decision-making tools that can better assess the impacts of various strategy options. Then again, those that relied on spreadsheets are likely working very long hours.
One of our 2018 Predictions published at the beginning of the year was that changing global trade policies would provide a challenging tactical and strategic landscape for manufacturers. We declared the key competency for 2018 to be international sourcing and supply management strategy.
At this point, we wish that our prediction would have not turned out to be correct.
© Copyright 2018. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Initial Postscript to U.S. Steel and Aluminum Tariff Action
Political decisions often evoke a lot of discourse.