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BMW CEO Advocates for EU Tariff Reductions on U.S. Car Imports

global trade car

BMW CEO Advocates for EU Tariff Reductions on U.S. Car Imports

This week, BMW’s CEO Oliver Zipse proposed that the European Union reduce its tariffs on U.S. car imports from 10% to 2.5%, matching the current U.S. import tariff. The proposal was reported by Reuters this Tuesday. This move comes amid ongoing concerns about potential U.S. tariffs, as new President Donald Trump had threatened to impose or raise tariffs that could impact transatlantic trade.

Read also: BMW and Yamaha Invest in U.S. Rare Earths Startup

The timing of Zipse’s proposal coincides with the upcoming European Commission talks on the automotive industry’s future, set to commence on January 30. These discussions are critical as European automakers face plant closures and layoffs due to shrinking demand and competition from China.

European Export and Import Landscape

In 2023, Germany dominated the EU’s passenger car export market with exports valued at USD 183.4 billion. Spain (USD 43 billion), Belgium (USD 44.2 billion), Slovakia (USD 34.3 billion), and the Czech Republic (USD 33 billion) also featured prominently among the top exporters. Meanwhile, Germany also led the imports for passenger cars with a value of USD 80.9 billion in 2023, followed by France (USD 47.9 billion), Belgium (USD 44.2 billion), Italy (USD 37.7 billion), and Spain (USD 24.5 billion).

Similarly, the United States emerged as a significant player in the global car export landscape, exporting passenger cars worth USD 26.3 billion in 2023. It was followed by China (USD 16.9 billion) and the United Kingdom (USD 16.3 billion). On the import side, the U.S. imported USD 8.7 billion worth of passenger cars, with Japan (USD 5.9 billion) and China (USD 5.3 billion) also being major importers.

BMW CEO Zipse’s call for reduced tariffs underscores the importance of unhindered trade flow between major economies and the need to mitigate potential disruptions caused by tariff impositions.

Source: IndexBox Market Intelligence Platform  

global trade

US Trade Deficit Expands Significantly as Imports Surge

The United States trade deficit surged in November, driven by the largest increase in imports since March 2022. This development has been largely attributed to businesses expediting shipments to avoid potential disruptions from a looming dockworkers’ strike and prospective tariffs by the Trump administration, as noted in a Bloomberg report.

Read also: United States Truckload Market Sees Surge in Rejection Rates Post-Christmas

According to data released by the Commerce Department, the trade gap in goods and services swelled by 6.2% from the preceding month, reaching $78.2 billion. This figure aligns with the median forecast of economists surveyed by Bloomberg. The value of imports rose by 3.4% to $351.6 billion, while exports experienced a 2.7% increase. These figures are not adjusted for inflation.

The broad-based import surge included consumer goods, capital equipment, and motor vehicles. This trend reflects US companies’ strategic move to secure shipments in anticipation of potential trade barriers and disruptions. The looming mid-January deadline for dockworkers to reach a deal only heightened these concerns.

The latest trade figures follow a deceleration in demand for foreign merchandise in October, as companies made efforts to stock up ahead of the holiday shopping season. The impact of goods and services trade on the third-quarter gross domestic product was negative, and similar effects are likely for the final quarter of 2024.

As per IndexBox, the continuous challenges faced by US manufacturers and service providers, such as frail overseas economies and a robust dollar, threaten to perpetuate the widening trade gap through this year. Furthermore, the inflation-adjusted merchandise trade deficit expanded to $96.5 billion in November, underscoring the challenges confronting the US trade sector.

Source: IndexBox Market Intelligence Platform 

global trade concrete

Best 10 Import Markets for Concrete Reinforcing Wire Rod

When it comes to construction materials, concrete reinforcing wire rod is an essential component for ensuring the strength and durability of concrete structures. This vital material is in high demand around the world, with several countries emerging as key import markets for concrete reinforcing wire rod. Let’s take a closer look at the top 10 countries by Import Value of Concrete Reinforcing Wire Rod in 2023, according to the IndexBox platform.

1. Israel – $829.4 Million USD

Israel takes the top spot as the world’s largest import market for concrete reinforcing wire rod, with an import value of $829.4 million USD in 2023. The country’s strong construction sector and ongoing infrastructure projects contribute to its high demand for this essential material.

2. United States – $573.5 Million USD

The United States is the second-largest importer of concrete reinforcing wire rod, with an import value of $573.5 million USD in 2023. The country’s booming construction industry drives the demand for this material, particularly in high-rise buildings and infrastructure projects.

3. South Korea – $475.5 Million USD

South Korea ranks third on the list of top import markets for concrete reinforcing wire rod, with an import value of $475.5 million USD in 2023. The country’s growing construction sector and investment in infrastructure projects contribute to its high demand for this material.

4. Romania – $456.0 Million USD

Romania is a significant player in the global market for concrete reinforcing wire rod, with an import value of $456.0 million USD in 2023. The country’s construction industry is a key driver of demand for this essential material.

5. Turkey – $436.2 Million USD

Turkey is another major import market for concrete reinforcing wire rod, with an import value of $436.2 million USD in 2023. The country’s ongoing construction projects and infrastructure development fuel the demand for this material.

6. Belgium – $428.7 Million USD

Belgium is a key player in the global market for concrete reinforcing wire rod, with an import value of $428.7 million USD in 2023. The country’s strong construction sector drives the demand for this essential material.

7. Thailand – $425.5 Million USD

Thailand ranks seventh on the list of top import markets for concrete reinforcing wire rod, with an import value of $425.5 million USD in 2023. The country’s construction industry and infrastructure projects contribute to its high demand for this material.

8. Netherlands – $379.8 Million USD

The Netherlands is a significant importer of concrete reinforcing wire rod, with an import value of $379.8 million USD in 2023. The country’s construction sector and investment in infrastructure projects drive the demand for this essential material.

9. Germany – $379.3 Million USD

Germany is a key player in the global market for concrete reinforcing wire rod, with an import value of $379.3 million USD in 2023. The country’s robust construction industry and ongoing infrastructure projects fuel the demand for this material.

10. France – $325.9 Million USD

France rounds out the top 10 import markets for concrete reinforcing wire rod, with an import value of $325.9 million USD in 2023. The country’s construction sector and infrastructure development drive the demand for this essential material. Overall, these top 10 countries are the world’s best import markets for concrete reinforcing wire rod, with high demand driven by robust construction sectors and ongoing infrastructure projects. As the global construction industry continues to grow, the demand for this essential material is likely to remain strong in the years to come.

Source: IndexBox Market Intelligence Platform  

global trade U.S

3 Strategies For Importing Goods From The U.S. To Europe

Bilateral trade between the U.S. and the European Union has been a longstanding phenomenon. According to the U.S. Census Bureau, the EU is one of the U.S.’s biggest trading partners—with $823 billion of goods traded in 2022.

Read also: Logistics Planning Information For Key U.S. Seaports

By definition, exports are goods or services produced in one country and sold in another, while imports are goods and services not produced domestically. The World Trade Organization identifies the U.S. as the world’s largest importer, followed by the EU and China, which has been the largest exporter of goods since 2009, Statista data shows. The U.S. ranks third in exports, behind China and the EU.

Exports to the EU totaled nearly $319 billion. Meanwhile, imports from the EU amounted to $504 billion, making the trade deficit $186 billion, U.S. Census Bureau data found. In simple terms, the U.S. receives more imported trade goods than it exports to the EU.

WHY ARE U.S. IMPORTS SO DIFFICULT TO MAINTAIN FOR E-COMMERCE IN EUROPE?

The COVID-19 pandemic, prolonged inflationary pressures, political unrest, new international regulations, and complicated logistics have created numerous trade challenges for retailers and e-commerce companies based in the U.S.

In my experience as the CEO and co-founder of Go Global Ecommerce, it is generally easier to import goods into Europe than the U.S. The U.S. has more restrictions on products and policy regulations, though every country has its own specifications, standards, and means of trading. 

FACTORS COMPLICATING THE IMPORTING OF GOODS FROM THE U.S. TO THE EU

The first factor complicating international e-commerce is the state of overall economic conditions. We know that economies can change daily. Add in possible recessions, changing regulations, and political unrest, and you have a case of complicated trade. A complication or change in one country—or at one level of the business landscape—can create a domino effect on trade worldwide.

When it comes to the economic outlook, nearly 90% of supply chain leaders surveyed for a Container LogTech report said they fear “inflation and recession will be the biggest factors that will impact businesses” this year. Of course, negatively impacted businesses will negatively affect trade.

Furthermore, trade regulations differ for every industry, product, business and sector. When it comes to customs, a free trade agreement or coalition is typically in place. A free trade agreement, such as the United States-Mexico-Canada Agreement (USMCA), is a pact that eliminates many barriers and tariffs between countries, making it easier to import and export goods.

However, some types of goods have custom duties, such as aluminum, alcohol and steel. A customs duty is a tariff or tax on specific goods the owner, purchaser or customs broker must pay. These are handled by governments and regulators. International regulations and logistics complicate the process of importing goods from the U.S. for sale within the EU. For example, U.K. e-commerce fulfillment is especially trickier post-Brexit.

Geography is another factor that can affect trade. For example, as a country equipped with big boats and high-tech shipping machinery, it is easier to trade goods in the Netherlands. Trade routes, shipping requirements and warehousing needs can impact shipping and trade in countries that don’t have the necessary ports, stations or equipment for handling a large influx of imports.

In sum, factors that impact trade include the type of product, economic conditions, geography and political agreements. Fortunately, governments and regulators can help facilitate trade flow, improve accessibility for U.S. imports, and boost the overall network of e-commerce in Europe.

BUSINESS MOVES TO MAKE FOR EFFECTIVE CROSS-BORDER E-COMMERCE

Smooth implementation of cross-border e-commerce solutions requires regulations and political agreements. Yet government and agencies aside, there are ways to expand your company’s e-commerce business across borders as well.

E-commerce in Europe is on the rise as companies like Shopify, Zalando and the Otto Group expand, and startups like Klarna and Flink continue to pop up on the market. There is a massive demand for e-commerce in the European market. To keep up with these changing tides, consider the following tips to expand your business’s cross-border e-commerce abilities.

1. Analyze the best route for your business.

Every country has pros and cons, regulations, and laws. First, determine which country has the best tax considerations and payments process for your business. Perhaps localizing your efforts in Europe instead of the U.S. would prove most beneficial. Ask yourself whether the location has a strong presence of business partners, market maturity, and your business’s target customers. 

Then, determine whether you want to expand physically to other countries. Your company could benefit by opening a warehouse in the EU. This move can help you save time and money on shipping and efficiency costs.

Establishing warehouses abroad can also ease transportation concerns, saving you the headache of mapping out the best shipping routes.

2. Invest in the experts.

Compliance is crucial. To ensure your business is set up for success from the start, invest in a legal department or a company with international expertise. Whether you hire in-house or outsource advice, these shipping experts can provide you with e-commerce regulations guidance and help you ensure your business displays all necessary legal information to customers.

Nowadays, more businesses are choosing the merchant of record model to stay compliant when selling internationally. International e-commerce experts can also guarantee that you abide by all trade duties, tax regulations, and laws no matter where your customers are located.

3. Put your customers above profit.

A strong and impressive customer experience is what keeps your customers continuously choosing your company. Find ways to simplify your return and exchange policy, but note how the cost of customs and duties will work when a product needs to be returned. Analyze the potential costs of returns and exchanges, but don’t make the customer bear the brunt of the transaction.

Cross-border e-commerce brings companies international market opportunities. It can be challenging for companies to keep up when faced with ever-changing trade regulations and agreements. Fortunately, by following these three strategies, you can expand your business internationally today. The opportunity and demand are ongoing, and the potential for e-commerce in Europe is continuous.

Author Bio

Simone De Ruosi is the CEO and co-founder of Go Global Ecommerce. With a background in engineering and business and sound knowledge of productive system management and strategic business management, he completed his MBA at the ESCP Business School (placed at No. 6 in the FT Global MBA 2022 rankings). When he co-founded and launched Go Global Ecommerce in 2020, he set out to assist brands that were ambitious about expanding on a global scale—an objective that has been fulfilled, having helped brands such as Nestlé, Kraft Heinz, Smeg, The Ridge, and Blauer USA grow internationally. He is a Mensa member, a keen sportsman, and, above all, a family man.

 

global trade machinery

U.S. Imports of Machinery Reach $3.8B in 2023

U.S. Loading Machinery Imports

In 2023, loading machinery imports into the United States fell to 5.1M units, with a decrease of -6.1% compared with 2022 figures. Overall, imports continue to indicate a slight decline. The most prominent rate of growth was recorded in 2016 with an increase of 12% against the previous year. Over the period under review, imports attained the maximum at 7.4M units in 2017; however, from 2018 to 2023, imports remained at a lower figure.

Read also: Top Import Markets for Machinery for Packing

In value terms, loading machinery imports expanded significantly to $3.8B (IndexBox estimates) in 2023. Over the period under review, total imports indicated a strong increase from 2013 to 2023: its value increased at an average annual rate of +6.7% over the last decade. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2023 figures, imports increased by +32.2% against 2020 indices. The most prominent rate of growth was recorded in 2021 with an increase of 25%. Imports peaked in 2023 and are expected to retain growth in years to come.

Imports by Country

Canada (956K units), Mexico (885K units) and South Korea (377K units) were the main suppliers of loading machinery imports to the United States, with a combined 44% share of total imports.

From 2013 to 2023, the biggest increases were recorded for South Korea (with a CAGR of +28.9%), while purchases for the other leaders experienced more modest paces of growth.

In value terms, the largest loading machinery suppliers to the United States were Mexico ($996M), Germany ($678M) and Canada ($476M), together accounting for 57% of total imports. South Korea, Italy, China and Japan lagged somewhat behind, together accounting for a further 23%.

South Korea, with a CAGR of +37.5%, saw the highest rates of growth with regard to the value of imports, among the main suppliers over the period under review, while purchases for the other leaders experienced more modest paces of growth.

Import Prices by Country

In 2023, the loading machinery price amounted to $451 per unit (CIF, US), jumping by 22% against the previous year. Over the last decade, it increased at an average annual rate of +2.7%. As a result, import price attained the peak level and is likely to continue growth in the immediate term.

Prices varied noticeably by country of origin: amid the top importers, the country with the highest price was Germany ($2,018 per unit), while the price for Belgium ($99 per unit) was amongst the lowest.

From 2013 to 2023, the most notable rate of growth in terms of prices was attained by Germany (+20.0%), while the prices for the other major suppliers experienced more modest paces of growth.

Source: IndexBox Market Intelligence Platform  

podcast cover art - port ny & nj

GT Podcast – Episode 129 – The Port Authority of NY & NJ – The Port That’s Doing Alot and Doing it Right

Welcome to another episode of “Logistically Speaking,” the podcast that delves deep into the pulse of global trade and logistics.  Today, we’re excited to welcome a very special guest, Bethann Rooney, the Port Director of the Port Authority of New York and New Jersey, one of the busiest and most significant ports in the United States.

In this episode, we will uncover why the Port of NYNJ stands out as a powerhouse in the global port community. Bethann will share her insights on how the port not only handles immense logistical challenges but does so with exceptional efficiency and innovation. We’ll explore the strategies that make this port a model of success, emphasizing sustainability and forward-thinking management.

Moreover, we’ll dive into a unique ecological concern—can a small marine organism actually threaten the accessibility of big container ships? This might sound minor, but it has the potential to create major ripples in global shipping logistics.

Stay tuned as we navigate through these fascinating topics, offering you a behind-the-scenes look at the complexities and triumphs of running one of the world’s most influential ports.

For more information on the Port Authority of NY & NJ, visit https://www.panynj.gov/port/en/index.html

Check out more of our GT Podcast – Logistically Speaking Series and more here!

december

December 2023 Sees U.S. Stationery Imports Plummet to $47M

U.S. Stationery Imports In December 2023, stationery imports into the United States shrank remarkably to 13K tons, reducing by -26% on November 2023 figures. Over the period under review, imports saw a relatively flat trend pattern. The most prominent rate of growth was recorded in April 2023 when imports increased by 69% m-o-m.

In value terms, stationery imports dropped remarkably to $47M (IndexBox estimates) in December 2023. Overall, imports showed a slight decrease. The pace of growth appeared the most rapid in April 2023 when imports increased by 44% month-to-month.

Imports by Country

China (4.3K tons), Vietnam (2.5K tons) and Mexico (1.8K tons) were the main suppliers of stationery imports to the United States, with a combined 68% share of total imports. India and Taiwan (Chinese) lagged somewhat behind, together accounting for a further 17%.

From December 2022 to December 2023, the biggest increases were in Taiwan (Chinese) (with a CAGR of +3.5%), while purchases for the other leaders experienced mixed trend patterns.

In value terms, China ($16M) constituted the largest supplier of stationery to the United States, comprising 35% of total imports. The second position in the ranking was held by Vietnam ($7.6M), with a 16% share of total imports. It was followed by Mexico, with a 14% share.

From December 2022 to December 2023, the average monthly growth rate of value from China totaled -1.2%. The remaining supplying countries recorded the following average monthly rates of imports growth: Vietnam (-1.5% per month) and Mexico (+0.8% per month).

Imports by Type

In December 2023, registers, account books, order books and receipt books (8.9K tons) constituted the largest type of stationery supplied to the United States, with a 70% share of total imports. Moreover, registers, account books, order books and receipt books exceeded the figures recorded for the second-largest type, paper binders, folders and file covers (3.4K tons), threefold. The third position in this ranking was taken by blotting pads and book covers (194 tons), with a 1.5% share.

From December 2022 to December 2023, the average monthly growth rate of the volume of import of registers, account books, order books and receipt books was relatively modest. With regard to the other supplied products, the following average monthly rates of growth were recorded: paper binders, folders and file covers (-1.2% per month) and blotting pads and book covers (+2.2% per month).

In value terms, registers, account books, order books and receipt books ($34M) constituted the largest type of stationery supplied to the United States, comprising 72% of total imports. The second position in the ranking was held by paper binders, folders and file covers ($11M), with a 23% share of total imports. It was followed by albums for samples, collections, stamps or photographs, with a 2.2% share.

Import Prices by Country

In December 2023, the stationery price stood at $3,663 per ton (CIF, US), stabilizing at the previous month. Overall, the import price, however, continues to indicate a relatively flat trend pattern. The pace of growth was the most pronounced in August 2023 when the average import price increased by 14% against the previous month. Over the period under review, average import prices reached the maximum at $3,931 per ton in October 2023; however, from November 2023 to December 2023, import prices stood at a somewhat lower figure.

Prices varied noticeably by the country of origin: the country with the highest price was Taiwan (Chinese) ($3,792 per ton), while the price for Cambodia ($2,102 per ton) was amongst the lowest.

From December 2022 to December 2023, the most notable rate of growth in terms of prices was attained by India (+0.5%), while the prices for the other major suppliers experienced mixed trend patterns.

Source: IndexBox Market Intelligence Platform 

turbo-jet

World’s Best Import Markets for Turbo-Jets (Over 25 kN)

When it comes to turbo-jets, there are several countries around the world that dominate the import market. These countries not only have a high demand for turbo-jets but also possess a flourishing aviation industry. According to the latest data from the IndexBox market intelligence platform, the top 10 countries in terms of import value of turbo-jets (over 25 kN) in 2022 are listed below:

1. United Kingdom – $9.5 billion

2. Hong Kong SAR – $8.0 billion

3. United States – $6.7 billion

4. Singapore – $6.1 billion

5. Germany – $4.6 billion

6. France – $4.4 billion

7. China – $3.9 billion

8. United Arab Emirates – $3.3 billion

9. India – $3.1 billion

10. Brazil – $2.5 billion

Let’s take a closer look at these countries and their import markets for turbo-jets.

1. United Kingdom

The United Kingdom leads the world in turbo-jet imports, with an import value of $9.5 billion in 2022. This can be attributed to the country’s strong aviation industry and its significant role as a global transportation hub.

2. Hong Kong SAR

Hong Kong SAR comes in second place, with an import value of $8.0 billion in 2022. The region’s strategic location, advanced infrastructure, and well-developed aviation sector contribute to its high import demand for turbo-jets.

3. United States

The United States ranks third in the world for turbo-jet imports, with a value of $6.7 billion in 2022. The country boasts a thriving aviation industry and is home to several major aircraft manufacturers.

4. Singapore

Singapore is another prominent player in the import market for turbo-jets, with an import value of $6.1 billion in 2022. This can be attributed to the country’s strategic location as a major international transportation and logistics hub.

5. Germany

Germany has a strong presence in the turbo-jet import market, with an import value of $4.6 billion in 2022. The country’s advanced manufacturing capabilities and renowned engineering expertise contribute to its high import demand.

6. France

France is also a significant importer of turbo-jets, with an import value of $4.4 billion in 2022. The country boasts a long-standing aerospace industry and is home to several leading aircraft manufacturers.

7. China

China has experienced tremendous growth in its aviation industry in recent years, and this is reflected in its import demand for turbo-jets. The country imported turbo-jets worth $3.9 billion in 2022, making it a key player in the global import market.

8. United Arab Emirates

The United Arab Emirates has emerged as a major importer of turbo-jets, with an import value of $3.3 billion in 2022. The country’s rapid economic development and ambitious aviation infrastructure projects contribute to its increasing import demand.

9. India

India’s growing aviation industry has led to an increased demand for turbo-jets. The country imported turbo-jets worth $3.1 billion in 2022, positioning it as a significant player in the global import market.

10. Brazil

Brazil rounds off the list of the top 10 import markets for turbo-jets, with an import value of $2.5 billion in 2022. The country’s robust aviation sector and its role as a prominent player in the Latin American market contribute to its import demand.

These top 10 import markets for turbo-jets highlight the strong demand and growth potential in the global aviation industry. As the demand for air travel continues to rise, the import market for turbo-jets is expected to thrive in the coming years. The data provided in this article has been sourced from the IndexBox market intelligence platform, which provides comprehensive and up-to-date information on various industries and markets.

Source: IndexBox Market Intelligence Platform 

sourcing

The Pros and Cons of Local Sourcing

The Pros and Cons of Local Sourcing

Local sourcing is the practice of contracting suppliers located within your country or even city. This term also applies to the suppliers in your home county. However, there is always considerable debate over whether to prioritize the local suppliers or cast your net wider. To help decide, it is wise to look at the pros and cons of local sourcing.

The pros of local sourcing

Local sourcing means faster and more predictable delivery times

The news of supply chain disruptions is prevalent. Also, planning for survival in the new normal the pandemic has left us with is complex. So, it is no wonder that perhaps the most significant advantage of local sourcing is its reliability. Considering that the distance your cargo would need to travel is vastly reduced, the problems it can run into are fewer as well. You would not need to worry about ports or airports closing down and leaving your goods stranded. And, with that increased reliability, it becomes much easier to handle the risk factors of high-profitability deals.

You can work with suppliers much more closely

Another of the advantages of local suppliers is that you can work with them more closely. When dealing with an international supplier a whole sea away, it is natural that you can have at most one or two meetings in person a year. On the other hand, a short trip is all that would take to reach and discuss business with a local supplier. Of course, this means that you can also get them to customize some of their services for you, particularly if you need certain parts that need to be custom produced for your needs or a similar demand.

You would not need to manage your warehouses as meticulously

When your supplier is just down the street or a city or two away, timing deliveries right becomes easier. It means that, instead of having huge shipments that take up lots of space and cause logistics problems, it is possible to have a string of smaller deliveries. And, with the reduced risk and delay factors that we have already discussed, you can also order them, so they arrive before you need to have them shipped out. In turn, this would ensure that your warehouse is kept busy but never overflows or has shipments clogging up space better used for something else. And you could even manage with much smaller warehouses.

You could more easily make last-minute orders

Making a last-minute order is not something you should turn into a habit. However, if any of your suppliers run into problems, or you have a sudden order of goods yourself, you would be able to resolve the situation much more easily. A quick trip or a phone call would allow you to check in with your partners and look for additional goods. And the proximity would make getting the goods to you a breeze, as well. In the end, this extra wiggle room would let you approach your business in a much more relaxed way than ordering goods from overseas. After all, a missing shipment in such cases might take weeks to make up for.

You would not need to deal with import taxes

It is impossible to avoid worrying about taxes when trying to import goods. For any legitimate business, it is not too difficult a hurdle to cross. However, it can be tough to manage when you are just starting, and they are cutting into your profits. That is why, especially for brand new businesses, local suppliers that allow them to bypass this expense are an excellent choice. There are plenty of rare and common U.S. customs clearance issues you would entirely avoid by choosing to go through a local supplier, too.

Enhancing Sustainability and Reducing Carbon Footprint

One of the most significant advantages of local sourcing is its positive impact on the environment. By reducing the distance that goods travel, you contribute to lower carbon emissions and minimize the ecological footprint of your supply chain. With growing awareness of environmental concerns and increasing consumer demands for sustainable practices, opting for local suppliers can significantly boost your company’s reputation and attract eco-conscious customers.

Fostering Community Growth and Support

When you source locally, you actively contribute to the growth of your community and support the local economy. By providing business to nearby suppliers, you help create job opportunities and stimulate economic development. This, in turn, can lead to increased consumer spending within the community, benefiting other businesses as well. Additionally, building strong relationships with local suppliers can foster a sense of camaraderie and collaboration among businesses, creating a supportive network for mutual growth.

The cons of local sourcing

The local supplier might grow over-dependent on your business

It might sound odd. But be it for the supplier or the business, over-dependence is not great. If a supplier starts to prioritize the demands of the company they rely on for the majority of their profits, it can seriously impact their competitiveness in the market. They can grow too specialized to grow their business, and it can be challenging to secure new contracts. There is also the matter of their new product development slowing or halting entirely. It means that they might eventually be left behind and lose their chief source of income as well. It would make demand planning for the buyers difficult as well if planning to branch out to new products.

Canceling a contract can incur a lot of backlash

Hiring local suppliers and helping the local economy is fantastic for PR. However, if you ever need to move on from those contracts, you would be facing an equal amount of backlash and ill-will. No matter how justified your decision might be. The public could still view it as abandoning those same businesses and economies you were lauded for helping.

You might not be able to obtain the best or latest products

Local suppliers might not be able to offer you top-of-the-line goods. They are likely solid and reliable manufacturers, yes. But with the world as a stage for your business, it is always possible to find someone producing better versions of the product you are interested in. So, you are more or less choosing between reliability versus quality. Of course, there are exceptions.

Local suppliers can be less efficient

Even though they are more reliable, local suppliers can have efficiency problems. They tend to be smaller and have a smaller production capacity. Of course, as you work together and prosper, they might expand their business and build more facilities. But then you run the risk of our first cons: their reliance on your purchases growing to the point they practically only cater to you.

It is hard to ensure objective supplier selection

You might, over time, develop a tight-knit bond with the local suppliers, especially if they have been there for you since the foundation of your company. That is natural. However, if your company is developing faster than they are, you might find yourself in need of new partners to keep up with the demand you are facing. At such a time, due to your friendship or perhaps fear of public backlash, it wouldn’t be easy to objectively select another supplier better suited to your needs.

Limited Access to Specialized Products

While local suppliers offer reliability, they may not always have the capacity or expertise to provide highly specialized or cutting-edge products. In industries where innovation is crucial, you might need to explore international options to access the latest advancements and unique offerings.

Higher Costs and Reduced Cost Competitiveness

Local sourcing might come with higher production and labor costs compared to countries with lower manufacturing expenses. This can affect the cost competitiveness of your products in the global market. As a result, careful cost-benefit analysis is essential to ensure that the benefits of local sourcing outweigh the potential price disadvantages.

Dependence on Regional Vulnerabilities

By relying heavily on local suppliers, your supply chain could be susceptible to regional vulnerabilities. Natural disasters, economic downturns, or political instability in the region could disrupt your supply chain and affect your operations. Diversifying your sourcing strategy can help mitigate these risks and ensure a more resilient supply chain.

Final word

Now you know the pros and cons of local sourcing, so it should be easier to make an informed decision. Whether you decide to pursue local or international suppliers, remember that your priority is always the development and future of your company.

 

Ukraine

Five ways the war in Ukraine will change the world’s economy

The war in Ukraine is a tragedy that will continue to play out for months, with an uncertain ending as far as the sad cost in human life, new alignments in global geopolitics and the stunning damage that will be done to the economies in countries beyond just Russia and Ukraine. Even though the repercussions of this war will reverberate for decades, we can already identify some trends that will impact the global economy in the future.  As with any volatile trade and economic situation, there will be clear losers (the Russian economy), but there will also be potent secondary developments that arise as a result of this aggressive invasion of a democratic, Western-oriented Ukraine.


 

Energy Security / Renewable Energy

The U.S. and EU have spent decades wringing their hands over the Transatlantic joint dependence on oil and gas from ‘bad actors’, including Russia, Saudi Arabia, and Venezuela.  In the last few weeks, attempts to punish Russia economically have been hamstrung due to the fact that much of Europe still receives about half of its gas from Russia, an impossible dependency when it comes to confronting Russia for its illegal actions in Ukraine. While the ‘fracking revolution’ has assisted the U.S. to a certain level of energy independence, a sizeable portion of the nation’s oil still comes from unreliable external sources. The irony of Russia’s attack on a democratic Ukraine is that it might finally push the U.S. and EU to commit to a substantive, immediate and dedicated pursuit of renewable energy sources for which environmental activists and innovative business leaders have been lobbying for decades.  Renewable energy’s strongest proponent just became the national security crowd.

Defense Spending – Globally

The same national security concerns will also lead to a huge rise in defense spending from EU and other nations.  Germany’s proposed budget increase alone will be a critical shot in the arm for the European defense industry, but we can assume that other nations that have put off investments in this area were shaken by Russia’s willingness to break global norms and attack Ukraine and will respond with substantial budget increases.  Images of Turkish Bayraktar drones destroying Russian armor and video of the U.S.-made Javelin helping to stymie the 7th largest army in the world are going to change how smaller nations structure their arms inventory.  More importantly, Russia’s actions have disabused any remaining doubters of the notion that a country like Russia will ‘play by the rules’ of international law in the modern era.  If Russia can so brazenly violate their international agreements and obligations, then so can China – and that realization will have a substantive domino effect on the planning and defense expenditures of everyone from Finland to the Philippines.

Wheat and Foodstuffs – Even Greater Price Inflation

Russia and Ukraine accounted for 30% of the global wheat trade prior to this conflict. But that is not the only food product that will be taken off of the market as a result of the war – sunflower oil, corn and other key products will either be destroyed (or unplanted) as a result of the fighting or will be locked inside Russia’s domestic market due to sanctions and the inevitable tariffs.  The rest of the world will see massive price increases and shortages in certain foodstuffs.  Combined with the global surge in inflation and increasing transportation costs, many global food-producing companies will struggle to provide products that are affordable for their usual clients.  If there is a silver lining to this cloud, it is that locally-sourced products and wheat-alternatives (rice, corn, bulgur) should see a boom in demand.

Cybersecurity and Information Warfare

Russia and China have been fighting a shadow war with the U.S. and EU in the cyber realm for years, but this conflict has pushed that fight into the light of day.  U.S. and European struggles with Russian governmental and pseudo-governmental cyber strikes (from denial of service attacks to outright hacks for information and funds, as well as documented attempts to impact elections in both regions) should have the same impact on corporate and governmental cybersecurity spending as watching Russian tanks roll into Ukraine did for defense spending.  No one wants to be the easy target in this war and corporations that took some risk and saved money on cybersecurity will be scampering to close those gaps as quickly as they can.  Russian desperation to get at global fund sources in the next few months dramatically increases the risk of pseudo-governmental ransomware attacks, and the information warfare we are seeing between Russia/China and the rest of the world is astoundingly blunt (and for Ukraine, remarkably effective in generating global support).  The gloves are off.  Is your company ready to defend its business interests from cyber and information / reputational attacks?

A More Unified, Emboldened EU

The last month has been a litmus test for EU leadership, and they have come out looking much more poised and united than anyone would have believed.  Should they have taken this threat more seriously in the last decade?  Absolutely.  Have they tolerated Putin-loving populists in the EU club for years (Orban, Zeman, Le Pen, Salvini)?  Sadly, yes.  But all of that changed when Russia headed for Kyiv.  Member state leaders closed ranks and the EU turned from a reluctant bystander into ardent supporters of Ukrainian defense efforts in a few short weeks.  From an economic perspective, this more unified and confident EU will disrupt a number of patterns.  They’re likely going to be much more aggressive in nurturing and protecting their internal innovation in technology and defense.  They will redouble efforts to reduce their dependency on external energy sources (to the benefit of renewable technologies, electric vehicle innovations, the nuclear industry and even public transportation ventures).  Most importantly, they can be expected to be stronger proponents of democratic ideals in their foreign political and business affairs.  Countries (and companies) that interact with this new EU will likely find that they are much more insistent on ESG concerns and support for human rights, democratic principles and adherence to the rule of law.

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Kirk Samson is a Director at the International Trade Association of Greater Chicago.  He is a former U.S. diplomat and spent ten years as an international law advisor for the Department of Defense.