The U.S. has imposed $550 billion in trade actions in the form of Section 301 tariffs on U.S. importers bringing in goods from China. In response, China, the European Union, India, Turkey and Russia have each levied their own retaliatory tariffs against U.S. products. The climate is tremendously volatile and continues to change. A recent World Trade Organization report finds that $460.9 billion of trade is covered by new import-restrictive measures imposed by major economies during the period from May to October 2019. This has reduced world trade growth to just 1.2% in 2019. Yet none of these actions has resulted in improved national security for the U.S. or changes in China’s unreasonable and discriminatory acts, policies and practices related to technology transfer, intellectual property and innovation.
We are seeing imports from China into the U.S. dropping. However, manufacturing in the U.S. is not increasing. This has brought new realities:
This constantly changing environment is not a good one for business. As a result, businesses are developing radically new models to mitigate or avoid tariff actions altogether. There are four ways in which they are doing this:
Even if a company finds a way to avoid the tariffs, it’s likely that the alternative will result in increased labor or transportation costs. Which leaves us in the same place as where we began – experiencing increased costs that are being pushed to the consumer.
If the current U.S. administration remains in place, global trade will continue to be volatile and near-impossible to plan for. If a new administration comes into power, it is unlikely that the tariffs will go away. Companies and candidates must develop new strategies on how to protect America’s assets. It’s time to see a new plan on how to utilize tariffs in a way that helps American consumers and businesses alike, rather than penalizing them.
Beth Pride is president of BPE Global.
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