In an effort to encourage stateside consumers to purchase American-made products, President Trump has imposed taxes on imports from China, Mexico, Canada, and the EU. Each country has retaliated, yet the retaliation with the most eyes on it comes from China. The U.S. has imposed not one but three rounds of tariffs on Chinese products, totaling $250 billion worth of goods.
With the rising uncertainty created by these protectionist tariffs and the resulting retaliations, manufacturers need all the facts they can gather to manage marketplace uncertainties. Manufacturing software systems offer transparency, real-time data from cloud-based products, and solid reporting capabilities to help you manage costs in an uncertain environment.
The Tariff Battle
Tariffs began in September at 10 percent but will be up to 25 percent by January 1, 2019. This helps the holiday shoppers not feel the sting of the price hikes, but still gives Americans plenty to worry about. While the tariffs are aimed at China, the second round of tariffs specifically may pain the American economy.
Many retailers and manufacturers, along with other businesses, are concerned about the new tariffs hurting profits, hiring, and growth, while other companies warn that the U.S. doesn’t currently have the capacity to make products here to replace Chinese imports affected by the tariffs.
The tariffs could even damage the United States’ economic growth, reducing it by 0.1 percentage points already in 2018, and likely growing as China retaliates against the tariffs.
Who Gets Hurt in Retaliations?
Sadly enough, it’s looking like retaliations intended to hurt the U.S. may also negatively impact the retaliating country. For example, Beijing has placed a tariff on U.S. liquefied natural gas, raising prices for buyers across Asia. This tax cuts U.S. LNG suppliers out of the Chinese marketplace, and while that may seem like a fair retaliation, unfortunately for China, it also gives the remainder of its sellers a golden opportunity to price hike like mad.
The Chinese tariff raised prices on U.S. LNG by 10 percent. Their gas production and pipelines are not up to the task yet to meet supply demands, so China must purchase LNG from outside sources. This means that suppliers from Australia, Qatar, and Southeast Asia can pump their prices as well, so long as they stay just under the 10 percent hike China imposed on itself with U.S. LNG. China will have no choice but to pay the higher-but-not-quite-10-percent prices to get the LNG they need for the upcoming winter months.
These uncertainties are unintentional consequences of a change in tariffs. While your business cannot change the laws surrounding exports of products into other countries, it can use the data available to manage around such uncertainties.
Manage the Uncertain Environment with Manufacturing Software Systems
When tariffs tack on fees to imported raw materials and crucial electronic elements, what should you do? You can increase your prices to cover the increased costs, but that can result in lost business. Or, you could keep prices the same, but recognize that the new tariffs have cut into your profit margin.
There’s another way that helps you manage the uncertainties around trade wars, tariffs, and everything in between, and that is: managing from your data.
With manufacturing software systems in place, you’re collecting a lot of useful, valuable data. You’ve probably read in countless business journals that you should be using data to drive decision-making. Now is the time to use that data from your manufacturing software to make your decisions.
For example, you can:
- Review your supply chain vendors and favor those without restrictive tariffs to keep costs down
- Find new, local, or in-country sources of raw materials needed
- Consider offsetting the additional costs from tariff-based items by finding lower-cost alternatives to other elements used to make your products
- Find other methods to lower the final cost of goods sold without sacrificing quality
While we don’t have the answers to all your tariff and retaliation questions, we do know that navigating these changes in business will be a lot easier using data run from manufacturing software. While Washington and China duke it out, you can feel confident in the ways your software empowers you with data to make smart moves and maintain profitability.
Let PositiveVision help you make the right choice. Contact us today to get started.