August 29, 2019
Over the last week, news outlets have been rocked by flip-flopping stories on the outlook of the trade war with China. Last Friday, the President announced that he would increase all tariffs on Chinese goods—both currently in effect and planned for later this year—by an additional 5%. In other words:
- On September 1, List 4A will go into effect at 15%
- On October 1, Lists 1, 2, & 3 are set to increase to 30%
- On December 15, List 4B will go into effect at 15%
The move, which is a retaliation for a 10% tariff imposed by China on roughly $75 billion worth of American goods, only cements the feeling that nothing is certain or lasting in international trade.
The impacts of this increase will be felt far beyond the borders of the U.S. and China. China and the United States, which collectively comprise about 40% of the global economy, are the number one and number two largest exporters of goods and services, respectively. A decrease in economic activity from either of these powers creates a cascading effect on the rest of the global economy.
Germany is one of the most visible examples of this. As a result of the increased costs of exports to the U.S., China has slowed production whilst consumers have slowed their spending as a result of economic uncertainty. Their demand for German-made automobiles, steel, and medical equipment have all stalled, causing Germany to experience repercussions of the trade war very much like those felt by the U.S. and China. The difference, however, has been demonstrated as they crawl toward a recession. The German economy—while being the largest in the EU—is far smaller than that of China and America, making it much less capable of propping itself up with domestic activity and much more vulnerable to changes in the economic environment.
The point being made here? No matter where your supply chain is based, it’s important to ensure that you have control and visibility over it so you can react to changing forces with speed and agility. The state of international trade can change in the time it takes to type a tweet, and the effects of such measures can impact economies around the world for years to come. The potential recession looming over Germany will certainly have impact for far longer than it took for the latest tit-for-tat move to be decided in the trade war.
Any business with dependencies on importing or exporting internationally is subject to the effects of the decisions being made between these two global powers. The best way you can insulate your business from the raw wrath of these moves is by giving yourself the power to react to them. Visibility into shipments and the ability to react quickly can be the difference between paying the newly increased tariffs or clearing customs before they hit.
For questions on how you can prepare your supply chain, how the latest tariff changes may affect your business, or what your options are, contact a Navegate Customs broker today.