Trade and Geopolitics Top U.S. Businesses’ Global Expansion Worries, Survey Finds

Geopolitical uncertainty, trade disputes and compliance issues are top of mind for U.S. businesses with an eye on global expansion, whether that’s opening new international offices, expanding the supply chain or acquiring non-U.S. businesses.

These findings come from a recent study by Tipalti and Censuswide Research, surveying more than 500 decision-makers at mid-sized U.S. businesses on challenges they’re facing in during international expansion efforts.

When it comes to trade, 71% of respondents say they’re concerned about the renegotiation of the North American Free Trade Agreement (NAFTA). They’re also warily watching the tit-for-tat trade dispute between the U.S. and China, with 69% of respondents reporting they’re concerned about the mounting trade war.

Businesses located on the West Coast are particularly worried about the latter, with 81% of Los Angeles-based respondents reporting they are “concerned or very concerned about trade disputes between the U.S. and China affecting their international growth strategy.” Nearly three-quarters of West Coast respondents agree, more so than any of the other U.S. regions.

East Coast businesses, on the other hand, tend to be more preoccupied with the implications of Brexit (the official exit date of the U.K. from the European Union is March 29, 2019).

While 29% of respondents say that Brexit has negatively affected their companies’ plans to expand operations in Europe, this figure increases to 44% for respondents from Boston-based businesses. Overall, however, Brexit does not loom as large as NAFTA renegotiation talks or the U.S.-China trade dispute, with 61% of respondents saying that they are concerned by the effect Brexit will have on potential expansion plans.

Companies that were considering London as their EMEA hub, for instance, are now delaying the decision. One respondent reported that many business leaders are taking a “wait and see” approach.

Furthermore, nearly all (97%) respondents expressed significant concerns over expanding their supply chains internationally. Top worries include maintaining quality from global vendors (40%), avoiding tax and regulatory compliance penalties (34%) and paying vendors in different countries and currencies (27%).

Source: Tipalti

Only 12% of respondents think their businesses can successfully address all aspects of global expansion. As the chart above shows, knowledge of local markets, tax codes, foreign exchange volatility and compliance risk are all challenges that respondents think their companies are ill-equipped to address.

Chen Amit, co-founder and CEO of Tipalti, points to the variety of tax codes and regulations as a particularly tricky issue. “Many businesses that are expanding internationally find themselves in situations where they are faced with a tax audit and find themselves ill-prepared to deal with the complexities of payment regulations in new markets,” he says.

Fortunately, respondents report that their organizations are taking steps to meet these challenges. Fifty-seven percent are using technology to help enable their international growth, and 51% are bringing on new vendors to assist in operating in new markets. And 41% of respondents say that their businesses plan to establish back-office operations to help keep pace with international expansion.

Check out the full report here.