All Tariffs, All the Time

Office of the U.S. Trade Representative (USTR) said it will impose tariffs on approximately $50 billion worth of Chinese imports and take other actions in response to China’s policies that coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises.

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No matter where you look, whether it is television, online, or good old newsprint, there is a good chance you are reading about tariffs. And it’s for good reason, too, tariff-related news is as ubiquitous as it gets these days.

And it continues to gain traction seemingly by the day. Think about it, it was only a little more than a month ago that President Trump called for 25% tariffs on steel imports and 10% on aluminum imports, even if it feels a bit longer than that.

In this space, I described this news as surprising in a previous column, as well as an understatement for a whole host of reasons, with many experts calling it an unwanted or unneeded initiative certain to spur on a global trade war, with the United States front and center in the middle of it all. The column added that aside from whatever the ramifications of a true trade war would look like, there is, of course, the fall out, or trickle down, impact on what this could mean for consumer spending i.e. the real lifeblood of economic activity, more so than any other economic driver.

Well, fast forward a few weeks and things still remain “all tariffs all the time,” or so it seems.

Since then, the Office of the U.S. Trade Representative (USTR) said it will impose tariffs on approximately $50 billion worth of Chinese imports and take other actions in response to China’s policies that coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises. 

And it added that its proposed list of products on which tariffs would be placed would target products that benefit from China’s industrial plans while minimizing the impact on the U.S. economy, noting that sectors subject to the proposed tariffs include industries such as aerospace, information and communication technology, robotics, and machinery. The USTR’s list covers around 1,300 separate tariff lines.

Not to be outdone, China announced yesterday that it is “targeting high-value American exports, from airplanes to soybeans,” according to a Wall Street Journal report. The report added that the types of goods China is looking to add tariffs on is somewhat more narrow in scope, with 106 types of U.S. goods, including soybeans, smaller commercial passenger planes, SUVs, and some agricultural products, among others.

One of the most telling takeaways in the article was an observation that Chinese government officials labeled its response to the U.S. as “defensive and forced upon Beijing in hopes of compelling the U.S. into trade talks to ease the countries’ trade fictions.”

So, what happens going forward? That is largely to be determined at this point, but it stands to reason that the process is going to be lengthy and replete with uncertainty along the way.  

Consider recent commentary from Ben Hackett, founder of maritime consultancy Hackett Associates in his firm’s Global Port Tracker report.

“One loser in all of this is the United States, mainly the consumers and the agricultural exporters,” wrote Hackett. “Surely a wake-up call for the President. The other loser is world trade, as the response to the Trump ‘art of the deal’ is impacting confidence and, as a result, potential GDP growth. Trump has also single handedly wiped off trillions of dollars of wealth from the global stock markets.”

It is hard to dispute Hackett’s observations, especially when factoring in that he knows more than most about global trade. Another person in that category is Chris Rogers, research director for global trade intelligence firm Panjiva.

Rogers explained to me that it stands to reason that imports might start trending down as a result of tariffs, but that will depend on whether (a) U.S. producers suddenly become economic, in which event imports will fall as consumers buy American or (b) whether Chinese manufacturers “country hop” their production to another country in which case imports stay the same or (c) whether customers simply end up paying more for the same products, which again would mean import volumes stay the same.

“It will probably be a mixture of the three, of course, but overall I would say we will see a decline,” he said.

With tariffs now formally a true talking point in industry circles, the subsequent impacts on the supply chain figure to be significant. Specifically how remains to be seen, but, in any event, it figures to be quite the ride.

 

 

 

 

 

 

 

 

 

 

 

 

 


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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