It's fascinating to watch the power play between the US and China, but there are crucial issues at stake that directly affect the global supply chains. Although the negotiations seem to be moving towards a definitive agreement, it is not yet 100% finalized; it's advisable to look at what options you have to help to mitigate your risk.
The US customs and border protection collect the taxes on imports from the US-registered company that is importing the goods. Items imported from China hold a higher tariff. This means that increased consumer prices and/or lower profits for the US importer are the new normal. US importers will need to absorb the additional costs or pass them on to the customer, or china manufacturers will need to shoulder some of the cost indirectly or fear losing business to other suppliers. Regardless, there is an impact on all companies in the supply chain.
Nike has introduced innovative technology Apps in its product range. By offering extra value to their client base, they have managed to inflate their prices to cover increased costs without seeing any negative impact. But this is an exception and won't be the case for all US importers. Heavy-duty equipment manufacturer, Caterpillar has had to increase production costs by more than USD100m due to duties on Chinese products and the new tariffs imposed on metal imports.
US importers and China manufacturers should look at things they can add or change in their supply chain process to help weather the storm while both governments try to reach a suitable outcome. A few things to consider would be:
View these uncertain times as an opportunity to create a competitive advantage. If you have been running an optimized, cost-efficient, and agile business, there is no reason why you will not continue to operate successfully during these times.
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