How the Trade War Between the U.S and China is Affecting Logistics
by ashleynblair Made in America
Complicating concerns over the disruption the tariffs will have on the supply chain is the fact that many brands who make and produce goods in America rely heavily on components made cheaper overseas. These components are "invisible" to the American consumer and are not considered for the price of the item. This puts companies in a tough spot as they work to either insulate themselves from the tariff increase or pass the cost along to the consumer.
Altering Supply Chains
Companies may start to consider swinging back to regional supply chains rather than the global supply chains that peaked around 2000. Localizing supply chains does have some advantages. GEP's Vice President Laura Powell explains local supply chains means a faster response to quality issues, reduced logistics cost, and help facilitate innovation across the supply chain.¹
Warehouses are at capacity storing goods retailers are buying ahead of the tariffs. Warehousers are even having to turn retailers away, unable to take on more storage responsibility. The National Retail Federation reported a 13.6% surge at retail container ports in October 2018.
The 90 day cease fire negotiated between the U.S. and China allows some time for companies to further consider how they will be affected by the tariffs and how they will respond. One silver lining to the 90 day delay is soy bean futures rose 1.1% giving soy beans farmers some relief from the 25% tariff China imposed on soybeans from the U.S.²
Retailers are also considering switching production sites and seeking alternate suppliers away from China to other countries like India, Cambodia, and Bangladesh. This can help them keep cost of production down and limit disruptions in the supply chain.