We are living through troubling international times with the rapidly shifting sands of Middle Eastern volatility, the geopolitical uncertainty of the ongoing war in Ukraine and political instability in France and Germany, arguably Europe’s bellwether ‘engine room’ economies.
And, as we enter 2025, the re-election of President Donald Trump to the White House in January has already created an atmosphere of anxious anticipation, not least his assertion that he will resolve two of the above global conflicts overnight.
But the world is closely watching for the fallout of his stated intentions to impose tariffs on those international partners seeking to trade with the US. This is no longer election sabre-rattling, and it isn’t his first rodeo as far as punitive trade sanctions are concerned.
In his first term, the President-elect imposed tariffs on steel and aluminium imports and products from China. This now looks like a mere dress rehearsal for his second term, where he promises to supersize the same theme by imposing additional fiscal penalties on more countries, including the US’s closest trade partners, as part of an even more protectionist economic packet of measures.
From day one of his new presidency, he has openly talked about 25 percent tariffs on Canada and Mexico unless they agree to tougher border control – another Trump election pledge – and an additional 10 percent tariff on goods from China.
Such pledges understandably stoke concerns for international markets, global trade and domestic economies as fears grow over potential trade wars, rising inflation and interest rates, not to mention the potential for harm to the US’s own domestic market.
For example, in the automotive industry, imported components in complex just-in-time supply chains can cross international borders multiple times during the manufacturing process. The end result could be the self-defeating and unedifying spectre of US consumers paying more for their own vehicles.
International businesses hate risk, hidden costs and uncertainty. The changing face of compliance in the often-byzantine customs clearance process is seen as a necessary evil they need to be able to navigate at arm’s length, as it does not fall under a core competence in the world of supply chain economics.
Our recent Customer Radar survey presented key insights from a broad range of CSG’s clients, representing logistics service provider (LSP) and goods owner (GO), encompassing global freight forwarding companies and multinational manufacturers within the automotive, retail, consumer goods and FMCG industries.
Three themes were consistently outlined in their responses – the challenge of complying with the ever-increasing complexity of customs regulations; a shortage of internal expertise and talent to address these issues and the opportunities and threats posed by AI.
Ultimately, all three trends can be distilled to a common concern – the fear of non-compliance risks. Such concerns underscore the vital role of customs knowledge and expertise – what we call Real Intelligence – as the key to enhancing AI or navigating the complex and evolving regulatory landscape amid geopolitical disruptions.
Outsourcing to a specialised organisation in tune with the vagaries and nuances of customs clearance and knowledge of its digital navigation has therefore never been more attractive, which is why it’s important to try and explore the potential impacts of Trump’s tariffs on supply chain resilience through various macro predictions.
We are exploring various models - from maintaining the status quo to the likely impact of between 20 and 60 per cent tariff models and even the implications of the UK/US/EU trade agreement – and their effects on international trade dynamics.
There is no denying that tariffs typically lead to higher prices for consumers as businesses pass additional costs onto customers. This can reduce purchasing power and alter consumer behaviour.
They can also disrupt established supply chains leading to inefficiencies and increased costs for businesses relying on imported materials or components.
Furthermore, other countries may respond by retaliation – an arms race of their own tariffs on exports from the imposing country, leading to trade wars that can escalate and impact global markets.
But in the words of Donald Rumsfeld, there are still too many known unknowns at play, including the mired picture of US companies importing Chinese goods scrambling around for tariff exemption permits because of their criticality to the domestic economy.
During the first Trump term there were thousands of petitions for such exemptions.
Scenario mapping can help futureproof businesses as do trusted partnerships in the management of what will become complex customs arrangements. This expertise enables businesses to better anticipate various unforeseen developments and steer a calmer course through what could be internationally choppy waters.
https://www.customssupport.com/