Threats of steep, targeted tariffs, which could lead to trade wars, have been making the headlines lately. If you are worried about the possible effects on your international business you are not alone.
In response to this somewhat tumultuous trade environment we took to Twitter last week and gathered trade experts from North America, Europe and Asia, to discuss what the concerns are and how international businesses can protect their companies from the effects of incoming tariffs and prepare to weather the storm of a potential trade war.
What followed was a lively discussion with some useful insights, too good not to share. So check out the chat recap below and share your thoughts, questions and concerns in the comments below.
Moderator:
Leah Goold-Haws (@LeahGlobal), Director of the Center for International Trade Development in Los Angeles and Founder of Girls Gone Global (@GlobalBizGirls), based in Long Beach, USA
Panelists:
Varun Anthony, CITP (@VarunAnthony) International Trade Specialist based in Mumbai, India
Audrey Ross (@TresAudrey) Logistics & Customs Specialist at Orchard International Inc., based in Toronto, Canada
Clarecia Christie, CITP (@ClareciaChriste) Project Manager, Trade Information Services at TFO Canada, based in Ottawa, Canada
Cathy Morrow Roberson (@CMRoberson06) Founder and Head Analyst Logistics Trends & Insights LLC, based in Atlanta, USA
Craig Atkinson, CITP (@CraigAAtkinson) Trade, Technology and Sustainable Development Specialist at the International Trade Centre and Founder/Director of Lexmerca International Trade, based in Switzerland, England and Canada
Michael A. Smith (@WTCLosAngeles) International Trade Manager at World Trade Center Los Angeles, based in Los Angeles, USA
Julie Samson (@sbentrepreneurs) Director and Deputy Sector Navigator at Center for International Trade Development and Executive Director at Scheinfeld Center for Entrepreneurship & Innovation, Santa Barbara City College, based in Santa Barbara, USA
What is the definition of a tariff?
A1: “#Customs duties on merchandise imports are called #tariffs. Tariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments.”https://t.co/YfHZJzaLkp #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
Quick teaser – which of these US products have benefited from tariffs? Tuna, Paperclips or Tobacco?
Q2: All 3, with Tuna at a 35% tariff, paperclips having tariffs against China since 1994 and Tobacco having tariffs as high as 350% #TradeElite https://t.co/qiEpTOLI4J
— Scheinfeld Center (@sbentrepreneurs) March 22, 2018
Does every country institute tariffs? Do you have any examples of current tariffs?
With each new bilateral #FTAs or Multilateral FTAs countries tariff rates are lowered so can we say we will soon have most products enter in a country tariff-free? That’s another topic. However under the #GATS all countries who signed on to the WTO can institute #tariffs.
— Clarecia Christe?? (@ClareciaChriste) March 22, 2018
Most G20 countries operate on a very low tariff schedule. On average US tariffs on all goods hover at around 1%. In the past, countries have used this practice to help foster domestic industries, South Korea is one of the best examples where this worked – “Miracle on the Han”
— WTC Los Angeles (@WTCLosAngeles) March 22, 2018
A3: The @ITC_MktAnalysis tools are a good resource learn more! #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
A3. The Level of the tariff depends on how strong the sector lobby or domestic industry is, how protectionist you want to be & what FTA or political dispute you may have with another country. #TradeElite
— audrey ross (@tresAudrey) March 22, 2018
A3: Its mostly the countries who tend to lesser developed in terms of their economy or are looking to protect their domestic economy apply/institute tariffs. Looking at the tariffs that India has lately applied on several agricultural products/commodities #TradeElite
— Varun Anthony (@Varunanthony) March 22, 2018
If tariffs are utilized by many countries, then how do tariffs potentially lead to trade wars?
Because the other country will likely impose tariffs as well or could potentially cut off trade with the country that originally imposed the tariff.
— Cathy Roberson (@cmroberson06) March 22, 2018
A4: When countries break their commitments and increase tariffs beyond allowable levels. This can result in a “race” to increase tariffs by both sides in order to countervail. #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
Do tariffs really protect domestic workers, as President Trump claims with the steel/aluminum tariffs, or is there a flip side to this argument?
Q 5 Good question. According to an article I recently read, US Steel was planning to reopen a US steel manufacturing facility and calling back 500 workers. #tradeelite
— Cathy Roberson (@cmroberson06) March 22, 2018
@LeahGlobal A5: Not necessarily. Costs for industries that use these metals increases. US workers in the metals industry could increase by over 33,000 jobs, but the decrease in other industries could be over 179,000 jobs. Net loss! (Source: Trade Partnership) #tradeelite
— Scheinfeld Center (@sbentrepreneurs) March 22, 2018
A5: No, they don’t… and they make the cost of goods more expensive for consumers.
Non-tariff measures or barriers (#NTMs / #NTBs) are a bigger trade issue anyway. That administration is a joke and talking in pre-@WTO #trade language. #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
A5: The flip side is you protect uncompetitive jobs that will result in long-term losses while simultaneously increasing prices on these inputs. This results in production costs being passed on to consumers. This drags down the economy and the labor market . #tradeelite
— WTC Los Angeles (@WTCLosAngeles) March 22, 2018
A5 they do in the short run but cost could be raised due to possible higher in-source manufacturing cost that would never be offset by the revenue from tariff #tradeelite
— Mike A (@mike_au1) March 22, 2018
Any thoughts on how China might retaliate against the latest tariffs? Will these maneuvers impact the consumers – in China or elsewhere?
. @LeahGlobal A6: China has already identified agriculture as a US. weak point and has said it would target soybeans, a $14 billion-a- year business. America’s farm states heavily backed Trump in his presidential election win. #tradeelite
— Scheinfeld Center (@sbentrepreneurs) March 22, 2018
A6: It might make sense to wait it out and not hurt their own consumer market… the US decisions will be flipped once the administration is gone. In the interim, China may diversify with better trading partners. #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
A6 their “one belt one road” is one free trade deal that can stand against the US #tradeelite
— Mike A (@mike_au1) March 22, 2018
Q6 – China’s plan is to move in the opposite direction and liberalize access to the Chinese market. Markets like physics will flow towards the path of lest resistance. #tradeelite
— Paul Diamond (@pjdiamond63) March 22, 2018
With the integration of the global supply chain, what are some consequences to trade wars even for nations not directly involved?
A7: Unexpected increases in prices and disruption of supply. #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
A7 also potential delays at ports. #tradeelite
— Cathy Roberson (@cmroberson06) March 22, 2018
A7: While not a trade war yet, slow NAFTA talks have made Mexico look to Argentina and Brazil for wheat and corn instead of the US. The result is wheat farmers in Kansas can’t move product. Extrapolate to other industries and the problem is clear and bold. #tradeelite
— WTC Los Angeles (@WTCLosAngeles) March 22, 2018
A7. Those countries not directly involved are supplying materials to the manufacturing countries that would be short changed in the short run if production declines #tradeelite
— Mike A (@mike_au1) March 22, 2018
A7. It’s a good time for other trade blocs to unite, Canada is aggressively pursuing deals with everyone else (CT-TPP & Mercosur) as NAFTA talks slow. Africa is working on their own trade bloc. #TradeElite
— audrey ross (@tresAudrey) March 22, 2018
So who is most likely to really feel the impacts of tariffs and trade wars? Businesses? Consumers? National economies?
A8: All of the above, but particularly consumers. Governments may increase revenues at the costs of both businesses and their customers. #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
A8: The businesses take on the initial impact, which is passed on to consumers, ultimately affecting the national economy. #tradeelite
— Scheinfeld Center (@sbentrepreneurs) March 22, 2018
A8. Everyone really. Uncertainty breeds fear. Caution means saving & hesitation. Limits risk & innovation. Media is running around like the sky is falling down, the whole thing stresses people out. Stress makes people unpredictable. #TradeElite
— audrey ross (@tresAudrey) March 22, 2018
A8. A review of the effects of the softwood lumber duty assessments into the US will show that ultimately, the consumer ends up paying. The softwood lumber duties increased the cost of new homes in the US over $1,000. #tradeelite
— Paul Diamond (@pjdiamond63) March 22, 2018
If everyone pays some price in a trade war, is there anything businesses can do to prepare or offset the inevitable?
A9. Do business in more than one market. Focus on what you do really, really well. Stay positive. Pay a living wage to your employees. #TradeElite
— audrey ross (@tresAudrey) March 22, 2018
A9. Diversification of your supply chain is one strategy to avoid the negative consequences of trade wars. Consult with in country experts for any programs or solutions. #TradeElite
— Paul Diamond (@pjdiamond63) March 22, 2018
A9: Trade associations must be vocal to ELECTED officials about what’s important to their bizs. Ag groups have gone to countries without official gov reps to explain the importance market access. While proactive, it still comes down to voting for reps that align | #tradeelite
— WTC Los Angeles (@WTCLosAngeles) March 22, 2018
A9: Yes! Be proactive. Build regular SWOT analysis into your operational plan, assessing reliance on overseas supply chains and impact to costs if the supply chain is affected. Identify alternative sources. #tradeelite
— Scheinfeld Center (@sbentrepreneurs) March 22, 2018
So, is a trade war inevitable? In light of the protectionist strategies, how do we articulate the benefits of globalization?
A10: Well, in the short run, retaliation tariffs will become increasingly prevalent, but in the long run an extended global trade war seems unlikely, as it would reverse decades of globalization that have contributed to global prosperity. #tradeelite
— Scheinfeld Center (@sbentrepreneurs) March 22, 2018
#TradeElite as an exporter, one must think about adding value. Be disruptive. Look at your VRIO framework for long term export success. Even with all this trade uncertainty. https://t.co/Rn02XGK98b
— Professor Lora (@CitpLora) March 22, 2018
A10: This is the biggest challenge. Globalization is a process and cannot be reversed, so the focus should be on making trade work better for all… not any particular country or people “first”. #TradeElite
— Craig A. Atkinson (@craigaatkinson) March 22, 2018
I LOVE our trade community! #globaltrade @FITTNews and thankful for the experts who can help you take your business global @Varunanthony @sbentrepreneurs @tresAudrey @ClareciaChriste @cmroberson06 @craigaatkinson & @WTCLosAngeles #tradeelite #GoGlobal
— Leah Goold-Haws (@LeahGlobal) March 22, 2018
Read the rest of the chat and follow future discussions by following the #TradeElite hashtag. And stay tuned for the next #TradeElite chat, coming up Thursday, April 19 at 2:30-3:30PM ET, and if you haven’t yet, join us on Twitter at @FITTNews.
Are you worried about tariffs and trade wars affecting your international business? What have you done to mitigate the risks to your bottom line?
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