Crux Systems Insights

How the trade war affects supply chains

September 6, 2018 by Kathleen Kong |

Logistics

The so-called “trade war” started when the U.S. imposed tariffs on steel and aluminum imports from China, Canada, and some countries in Europe this past April. That was followed by another 25% tariffs on $34 billion worth of Chinese goods coming to the U.S.. China then imposed “retaliatory” tariffs on 128 products from the U.S., including aluminum, steel piping, airplanes, and cars, as well as pork, soybeans, fruit, and nuts.

There is no doubt that the trade war has a significant impact on the global economy, including stock markets, the gold price, and exchange rates. It's also had significant impact on the domestic economy in the U.S., especially multinational businesses. Some businesses have lost a certain number of international buyers because of the fluctuating exchange rate, and have had to increase the pricing for domestic buyers in order to maintain their profit margin.

Since the U.S. is still negotiating with Mexico, Canada, China, and Europe, we can expect the uncertainty to continue over the next few months. For businesses dealing with international supply chains, here are some things you can do:

  1. Understand your suppliers and their suppliers. To anticipate disruption, avoid dependence on sole suppliers and arrange backup suppliers.
  2. Buy inventory in advance, as you already know how long you can hold out before having to buy the higher priced products with tariffs.
  3. Use technology to scour new sources and datasets to identify emerging problems and achieve greater transparency for your supply chain operations.
  4. Adjust your manufacturing strategy to reduce cost if you have multinational manufacturing facilities. For example, you may manufacture products with tariffs, like aluminum, domestically rather than internationally.
  5. Get better visibility into your supply chain by tracking your incoming cargo on the Crux Systems platform, so you can coordinate with your supply chain partners.

So plan ahead, as the trade war has just begun and it’s bound to have a knock-on effect for businesses and economies across the globe.