Global trade management tools can help companies succeed despite trade complexities

The combination of tariffs, evolving free trade agreements and the coronavirus (COVID-19) pandemic have created an environment of uncertainty for U.S. manufacturers that rely on global supply chains and trade. Never has there been more uncertainty with global trade or more to keep up with on a day-to-day basis. This is the perfect time for manufacturers to consider investing in a global trade management (GTM) software to manage and automate their supply chains.

Tariffs remain a burden

Trade tensions continue to take a toll on global trade and if recent events are any indication, tensions are expected to only increase with both shippers and consumer feeling the brunt. According to the International Monetary Fund (IMF), it is estimated that up to $700 billion in global trade could be lost by the end of 2021, mainly tied to reduced trade between the U.S. and China.

Importers in the U.S. have been hit hardest when it comes to tariffs. Since February 2018 (when the current round of tariffs started) until the end of 2019, U.S. importers paid $46 billion in tariffs, with $37 billion related to goods imported from China.

As a signal the U.S. expects China to follow through on commitments to buy more energy and agriculture products in exchange for the U.S. lifting tariffs as part of the “phase 1” trade deal, the Trump administration is considering new tariffs on goods from China

In addition, the Trump administration is now threatening tariffs on France in retaliation to its 3% digital tax on total annual revenue generated by American companies providing services to French users. (France has delayed implementing this tax until the end of 2020.) Brazil and Argentina have also been threatened with tariffs related to steel products.

As tensions continue to grow with China and expand to other counties, U.S. companies continue to struggle with the choice of absorbing the cost of the tariffs or passing the cost on to consumers. While companies have received temporary relief on some tariff payments, with unemployment skyrocketing and demand for most products lower due to the pandemic, this decision becomes more complicated.

Trade pacts also come with some uncertainty

While the passing of USMCA does remove questions in the trade community surrounding what replaces NAFTA, there are also uncertainties with the new United States-Mexico-Canada Agreement (USMCA) which goes into effect July 1, 2020. Companies need to understand changes between the USMCA and NAFTA, in particular if products that qualified under NAFTA still qualify under USMCA. Companies not only need to understand the impact to the qualification of parts and duty rates but to how it influences sourcing decisions.