Are You Prepared For The Trade Wars?

by Kel Davis

A few years ago I wrote about the trade wars that will happen globally.

Recently, I also warned that retaliatory actions would be taken against the USA for implementing trade barriers. These actions are now underway. This is not good news.

To quote the article from www.news.com.au:

“CHINA will slap tariffs on $3 billion worth of US products in response to President Donald Trump’s recently-announced tariffs.

Beijing’s Commerce Ministry has announced the trade sanctions will target US-made products ranging from pork to steel pipes.

It says it is considering imposing 25 per cent increases on some goods and 15 per cent on others.

 Mr Trump has slapped China with tariffs on up to $60 billion of imports to retaliate against the “theft” of American intellectual property.

The move is certain to send tensions soaring between the world’s two largest economies and has already sent markets tumbling.

The President warned it would be the “first of many” trade actions and signed the order that also could result in restrictions on Chinese investment in the United States.

 Wall Street’s Dow Jones closed down 724 points following the announcement.

 Australian stocks have taken a dive at the open after US President Donald Trump hit China with a $60 billion imports levy.

The benchmark ASX200 index fell 95.0 points (1.6 per cent) to 5,842.2, at 10.15am, while the All Ordinaries index dropped 94.4 points to 5,948.8.

Beijing has vowed to defend itself against Mr Trump’s move, renewing fears of a trade war.”

What can you do about this?

First,  be aware that uncertain international trade and business relationships will be felt on all businesses that are exporting and importing. Consumers will be impacted long term.

  • The result will be increasing cost of international goods and services as duties are implemented worldwide.
  • Availability of goods, produce and products (including imported food items) will become uncertain.
  • Local supply and manufacturing will step in and deliver, however I expect the price will be higher than we currently have.
  • Some local skills (eg manufacturing) have been lost and difficult to recover.
  • Delays in getting parts and repair items we currently take for granted.
  • Inflation in the country implementing the trade tariff (tax).
  • Small businesses need to be careful of ‘a single supply chain’ (unable to get products).

I am normally optimistic, however also being a realist, I know we are heading into an uncertain trade future.

Looking ahead, consumers will feel the effect with inflation being the end result in each of the countries implementing these tariffs. Taking simple action like having fruit trees in your backyard, or a simple garden allows some independence on fresh food tariffs.

While short term predictions are difficult, my personal long term forecast is global inflation (maybe this is what our collective leaders are looking for and the reason behind the stance).

I suggest anyone in business check their supply chains for potential impact.