2018 Trade Mania Roundup: Who Wins, Who Loses and Who Should Cut the Cheese

sustainability jcpjr/Adobe Stock

Without a doubt, global trade in 2018 has seen the most fireworks since, arguably, the Great Recession — or even before.

As much else in the world has for the last year and a half, the story begins with U.S. President Donald J. Trump and his administration’s actions on the trade front, namely how it has chosen to review the country’s approach with its existing trade partners.

The search term “trade war” has likely seen thousand-percent spikes in the first half of this year compared with past years, going by the key events of 2018.

What Happened, and Who Is Affected

The crucial battleground on which this “global trade war” plays out is perhaps across the different sectors of industry in the United States — the U.S., of course, being the intended beneficiary of Trump’s America First policies.

Ostensibly, the Trump administration has targeted countries and trading blocs — such as China and the E.U. — on which to impose significant import tariffs for steel, aluminum and a host of other goods, as though the U.S. (and all its businesses) comprise a single, unified team playing against the others as though it’s a World Cup match.

However, within the U.S., businesses that sit farther upstream in the supply chain, such as steel producers, and procurement organizations that sit downstream and have global operations, are often not in agreement with each other about the policies being instituted (and not only the implications of those policies, but potential effects).

Ultimately, much has been made of these policies as tools to help the few (namely U.S. producers of commodities, such as metals and paper, and their comparatively small and mostly blue-collar workforces) at the expense of the retail and services sectors with global footprints.

So how is that strategy going? As my colleague Fouad Egbaria wrote recently, “so far, it’s been a bit of a mixed bag (although we are still, of course, in the early stages of this post-Section-232-tariffs world).”

According to MetalMiner’s Stuart Burns, Alcoa is restarting its Warwick smelter in Indiana, which closed in March 2016. According to a media report, Alcoa is reopening three of five smelter lines, leading to an additional 275 jobs.

The effects of the tariffs and the intended goal of restarting American production will have to be revisited in the longer term, wrote Egbaria.

“It would seem the U.S. will never (or not for years) be able to replace the 5 million tons it imports,” Burns wrote. “Rather than generate American jobs, it will simply mean American consumers will have to pay more.”

Meanwhile, the E.U. has slapped new tariffs on U.S. imports from Harley-Davidson bikes to cranberries, according to the Associated Press, as recently reported by my colleague Nick Heinzmann — much earlier than originally expected, to boot.

Indeed, while this type of measure is “a drop in the approximate $500 billion bucket the U.S. exports to the E.U.,” as guest contributor and Mintec market analyst Michael Liberty wrote back in March, it has “the potential to spiral out of control if Trump retaliates with further protectionist measures.”

Oh, and last we heard, NAFTA negotiations have come to a braking halt — pun intended, as they stalled (ooh, another one!) over automotive production — with no clear resolution in sight.

How to Deal With All This as a Procurement Organization?

A few months ago, we took a look at how procurement organizations can mitigate risk and manage costs amidst a trade war.

When it comes to sourcing, sourcing optimization essentially allows you to overlap sourcing and supply chain network design, in effect tackling the supplier-related challenges inherent in this quickly evolving trade climate.

“If you're really worried about a trade war and you do not believe it's just rhetoric, it's really important to think about ‘split of business,’” said Jason Busch, founder and managing director of Spend Matters.

For instance, “I might not want to award more than 10% of business to Chinese suppliers, because of that potential impact on total costs. Or maybe I'm comfortable with 50% or more. Sourcing optimization allows you to collect lots of data points, design a supply chain, apply your own constraints against it and look at all of this from a sourcing standpoint.”

In addition, spend analysis alone is valuable to understand what you're buying, from whom, in what quantity and all the data associated with it. Ideally, if you're buying from abroad, understanding total cost, various terms and having all the other harmonized classification data in one place is extremely valuable, according to Busch.

Consider reading the full article, or getting in touch with the Spend Matters analyst team on how best to tackle trade wars. (Note: tackling trade wars is a tall order, but mitigating the risks they pose can be done with the right tools.)

Back to, and Wrapping Up With, Commodities: Please Cut That Cheese

Turns out that we’re still in a cheese glut — and it’s worse than ever.

According to a Washington Post report, “the 1.39 billion-pound stockpile, tallied by the Agriculture Department last week, represents a 6% increase over this time last year and a 16% increase since an earlier surplus prompted a federal cheese buy-up in 2016.”

Woe to American dairy producers if China, Mexico and other nations decide to put U.S. cheese on their import-tariff list! Although it would probably be better in the long run for American waistlines as one of the chief U.S. exports continues.

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.