Prevailing Through the Trade War: An Optimized Supply Chain is KeyOctober 19, 2018
New tariffs and a U.S.-China trade war have flooded headlines ever since a new tax was imposed on solar panels and washing machines, key Chinese exports, at the beginning of the year. In early April, China began to fight back and proposed tariffs against the U.S. in response to the threat of additional tariffs on $100 billion in Chinese goods.
Throughout the following months, threats continued to run high, ultimately leading the U.S. to implement duties of 25% on $34 billion of Chinese goods. China retaliated immediately, imposing an equivalent 25% tariff on 545 U.S. products on July 6, which is the move many people regarded as a signal of the trade war’s beginning.
Since then, tensions between the two economies have escalated, leading to several additional rounds of fresh tariffs. As of the end of September, the U.S. imposed tariffs on goods worth $250 billion, which means approximately half of all Chinese imports to the U.S. are subject to new duties. According to a letter from the U.S. Trade Representative, Robert Lighthizer, the duties are set at 10%, but plan to increase to 25% at the beginning of next year.
Tariff hikes hit apparel products, affecting brands and retailers
While these waves of tariffs cut across various industries and have the potential to affect all businesses and consumers, fear is especially setting in among fashion brands and retailers who know their products will only become more expensive for U.S. shoppers. Consumer goods such as bags, hats and accessories, as well as leather and fur materials, are specific targets for the new tariffs. Although the most recent round of tariffs had some effect on the apparel industry, an even bigger impact is expected to result from future rounds of retaliation.
At the brink of a series of taxes on popular products, most retailers will end up squeezing their margins or raising their prices, or both. The fast-approaching holiday shopping season, known for garnering an increased amount of sales, places an added hurdle in front of retailers. Despite the challenge, consumers and retailers are only facing the lower tariffs of 10% for the time being. The new year could bring more concerns with tariffs rising to 25% if the U.S. and China fail to come to an agreement before then.
A reliable supply chain is essential in the midst of an uncertain economic scene
For supply chain managers, the trade war is shifting their strategy, planning and processes as they look to alternative suppliers in countries where the new U.S. import tariffs do not apply. Finding new sources is only the start of an extensive process that includes completing risk and financial assessments, evaluating product quality and assessing other criteria. As reports of supply chain ethics suffering as a result of the trade war circulate, proper evaluation of vendors and subsequent onboarding become crucial tasks.
As the trade war evolves, fast-paced changes add incentive for companies to pursue a flexible, demand-driven supply chain. In the event of retaliation against new tariffs, additional product categories may be unexpectedly added, leaving a company with increases in the cost of raw materials, components and finished goods. In light of these uncertain circumstances, companies should be prepared on all fronts, starting with an optimized supply chain.
NGC Andromeda provides relief to today’s retailers
NGC’s cloud-based Andromeda Supply Chain Management solution helps retailers and brands optimize their supply chain to prevail through the trade war. In addition, Andromeda Vendor Compliance and Quality Control allow the digitally connected platform to evaluate and manage the details of vendor onboarding and management, as well as quality control. By streamlining these essential functions, retailers can enforce control and accountability, and gain the agility and responsiveness they need in the face of trade uncertainties.