One of the main thoughts on a lot of people’s minds right now is what tariffs implemented by Trump will mean for industries and how that will affect consumers. Before we get to that point, let’s look quickly at what tariffs are.
Tariffs are taxes implemented by the government on goods that are being imported into the country. This could be a blanket tariff, like we are seeing with China, or a targeted tariff, like what we are seeing with Canadian steel and aluminum. This might have you asking, “tax on goods, why would I want that,” and that is a great question. Trump’s administration has stated they want to impose tariffs for a multitude of reasons and they are listed as follows:
Fairer Trade Practices
Imposing tariffs that charge the same rate as what is being charged by those countries on American products
Promote and Protect Domestic Industries
Imposing a tariff increases the price of foreign goods in a market making it a better environment for domestic goods, in theory this should promote domestic production and make it more competitive
Increase Government Revenue
Increasing/Imposing tariffs is a way for the government to increase revenue since it is a tax and not a normal supply and demand cost. This tax would be paid to the government for any foreign good included in the tariff
National Security
By promoting domestic production and goods, less reliance on foreign goods would increase national security by reducing the products the US relies on from potential adversaries, for example, products from China.
These all seem like good things, so why is the act of imposing tariffs so controversial right now. While the reasons above are why Trump wants to impose tariffs, there are other effects that can be caused by this. Some of the possible
negative effects are as follows:
Increased Costs
While tariffs promote domestic products, if those products cost more to produce then the increased prices will increase costs on consumers
Supply Chain Disruption
Companies that use suppliers that are hit by the tariffs may need to find new suppliers if costs become too high, which could lead to delay in production
Reshoring, Nearshoring, and Adjusting Trade Routes
Companies that may have to move to new countries to avoid the tariff or change where products are shipped through could face very high costs of moving these nodes in the supply chain
Inventory and Stockpiling Issues
In order to get ahead of potential tariffs, companies may stockpile products before their effects, which reduces available stock space and increases stocking prices.
Impact on Small Businesses
Businesses that have less room for adaptability in these changes or that having lower monetary abilities to change to the new norms will have a hard time keeping up with bigger companies
Conclusion
As these new supply chain paths and nodes evolve, pathways may become very complicated in order to find the most efficient way to handle these tariffs. Growth in technology in supply chain visibility looks to benefit from this. Tracking and documenting the condition of cargo as it moves can help lower costs and ease the transition on companies. While these are possibilities on what could happen with Trump’s new tariffs, there are no certainties on exactly what will happen. If you’re interested in increasing your supply chain visibility check us out at CargoShot and see if we can be of help now or in the future!
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