How will a Trump presidency affect global trade and supply chains? Well frankly I don't know. But the President Elect has clearly stated that his administration will move quickly, after assuming the Presidency, to "level the playing field" with targeted trading partners. And as president he has very strong discretionary powers to impose trade action without the consent of congress. If this happens there certainly will be retaliatory tariff measures and other actions that will affect trade between partners. There has been a lot written about the implications of President-Elect Trump's trade threats and the response from trading partners. If implemented they will result in a highly uncertain, and therefore very worrying, state of affairs.
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These actions, if implemented, will directly impact the way global trade is done and this will most certainly impact both import and export supply chain performance. Here are some thoughts on how the global supply chain might be affected.
- Increased administrative burden for export certification and documentation. The president elect has indicated that he will target China and Mexico with punitive trade tariffs to level the playing field - by as much as 45% and 35% respectively. The impact of any such action will certainly affect the current trading relationship with these two countries and lead to resulting counter-measures which would, in all-likelihood, significantly increase the export administrative burden on certifications and documentation required to support the import at the port of entry. However, it is likely that the punitive measures will be extended to other countries which will lead to additional trade retaliation. All in all, a headache for supply chain performance and service levels.
- Increased enforcement at the border. Although not explicit, Customs and other government agencies have incredible power to affect the inbound flow of merchandise. It is already well documented that CBP has increased the number of officers dedicated to enforcement and inspections as opposed to security. Any overhead related to importing product because of additional enforcement from either CBP or the PGAs can have significant detrimental affects to the supply chain by impacting the importer's ability to predictably move shipments through the ports of entry into commerce. The pressure on the import supply chain will increase to respond to the increased burden imposed by the regulatory agencies.
- Increased post-entry scrutiny. Customs involvement with the import community is on the rise with increase use of CF-28 and CF-29 letters (CBP Field Instructions On Form 28 And Form 29 Notice Of A Formal Investigation). This is before a more import-hostile administration is even sworn in. The result is that CBP may become much more aggressive with the result that importers who have poor or weak import compliance process control will find themselves burdened with much more administrative work just responding to these requests. If the response is not satisfactory, the importer will find that they are even more involved with CBP with the dreaded audit,
Will any of this come to pass. I don't know. However, what is certain is that there is a reasonably good probability that impact on supply chains will increase and the companies trade risk exposure will magnify.So what to do.Well, there are basically 2 options. The first is to maintain the status quo until there is a clear need to change. The second option is to be proactive and seriously look at how the entire global supply chain, and trade compliance operations, are being managed and look for ways to insure that your processes are solid and the company can respond quickly and comprehensively to any increase in operational or trade compliance demands.A Trump Presidency will, in all likelihood, make the global supply chain environment more unstable and hostile.
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