Taking on the Tariffs: Strategies for Success in an Unpredictable Environment
In terms of global trade, industry players tend to default to expressing concerns over the unpredictable trade tariffs under the Donald Trump administration. It goes without saying 2018 saw its ups and downs, sparking controversial Twitter wars and leaving business operations between a rock and a hard place, particularly in regards to China’s involvement and what the future holds. Global trade has to keep moving, but the question of how to proceed in an evergreen market continues to be the intricate question. What many don’t realize is the longevity of the issues with China, affirming the issues are not going to be solved with an all-in-one solution.
“Obviously, the U.S. has some concerns about Chinese policy and practice. The world has to deal with that and the U.S. in particular has decided – and not just in the Trump administration, it goes back to Obama administration – that we have to be more aggressive in responding to and even in deterring some of the practices in China that are affecting the rest of the world and affecting the U.S.,” explains Hughes Hubbard’s International Trade partner Dean A. Pinkert. “It’s a long-term trend and I think that the problems aren’t going to be solved overnight.”
Pinkert’s perspective thus highlights the importance of staying the course regardless of the uncertainty, through strategic approaches and utilizing the tools at hand. A successful business won’t allow the current issues in global trade to distract from their vision. Instead, smart companies will use them to their advantage and leverage the opportunity to prevent potential issues through a holistic evaluation of current operations and compliance within the supply chain. Management strategies and technology integration solutions, such as the use of blockchain technology, are recommended by Pinkert to help successfully navigate supply chain management while avoiding issues in compliance and visibility.
“I encourage people to look at blockchain as a possible way of increasing their ability to manage the supply chain and to have the knowledge and information about the various links within the supply chain. Blockchain is a tool they can use to get more control over the supply chain, it doesn’t solve all the problems, but it certainly has a very positive impact on the flow of information and that could be useful to companies trying to figure out, for example, whether there’s a vulnerability to government action,” Pinkert comments.
Additionally, industry players need to understand that government controls with imports are not the only area needing attention, but export controls hold equal importance. Without a thorough understanding of what governments are looking for, supply chain management can become easily complex and create more issues than solutions.
“When governments are looking at controlling the activities along the supply chain, it’s important for companies to know exactly what they’re dealing with – and that’s what blockchain can do,” Pinkert said. “Look into blockchain as a source of information flow and see whether it can be used to increase flexibility for dealing with a rapidly evolving policy environment. And the policy environment we are talking about is not just import controls, it’s also export controls. There are lots of things going on in the supply chain, and if companies know what they’re dealing with and take action to increase their flexibility, depending on circumstances within the industry, it can be very positive for them.”
The implications are far-reaching. When implementing new strategies, companies should focus on the fine details as well as the big picture, considering each product’s needs, and the best way to maximize positive impacts on the supply chain. Additionally, the theme of flexibility cannot be stressed enough. In an ever-changing industry, all parties involved with global trade – from manufacturers and shippers, to logistics companies and ocean ports – need to consider flexibility as a key factor that may make the difference between progression and stagnation. Consider regional opportunities as well and don’t restrict suppliers to a specific region just because it’s worked in the past. And if your company does decide to outsource to a new supplier, take plenty of time to consider how the switch will impact operations and customers on a short-term and long-term scale.
“When it comes to supply chain management, it’s going to vary from product to product. In some cases, there will be an ability to source more from U.S. suppliers, and in some cases there will be an ability to source from alternative foreign suppliers,” Pinkert said. “In many industries you can’t make a quick switch to the extent that the trade policy is moving more quickly than the ability to switch suppliers, which makes it very difficult for companies to manage their supply chains. We don’t know from week to week or month to month what’s going to happen, particularly when we talk about this China issue. For companies that are trying to make decisions based on how policy is going to evolve, I think my best advice is to try to maximize their flexibility.”
As Pinkert emphasizes, solutions vary from industry to industry. What works for one company isn’t guaranteed to work for another. Consequently, instead of looking for a fixed algorithm, identify how your company can improve visibility while increasing operational flexibility, and the rest will follow. The reality is, there’s no such thing as a quick fix. Unpredictable changes with global trade tariffs are inevitable. Consider the fact that competitors are in the same position and analyze how you can leverage your company strategies to gain competitive advantage. Beyond strategic solutions, companies should consider integrating predictive planning into the mix as well as vetting opportunities with partners that can add value to operations and customer relations. Stay focused on both the customer and the changing policy environment. In doing so, companies protect valuable relationships and maintain a reliable, positive reputation.
“Is there a possibility or probability that there is going to be a reduction of some of the tensions? I think so. The process of actually getting China to look into intellectual property issues differently and look at the role of the state in the economy differently, that is a long process and it’s not going to be resolved this or next week.”
Dean A. Pinkert is a partner in Hughes Hubbard’s International Trade practice. He is a former Commissioner of the U.S. International Trade Commission. Dean was nominated by President Bush and confirmed by the U.S. Senate in 2007, and was designated Vice Chairman by President Obama in 2014. Before his appointment, Dean was a senior attorney in the Office of Chief Counsel for Import Administration at the Commerce Department.