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When Global Trade Gets Tough

APICS CEO

Friday March 30, 2018


U.S. leaders are levying new tariffs on Chinese imports and tightening restrictions on Chinese investments in U.S. technology, The Wall Street Journal reports. The efforts are an attempt to limit intellectual property theft and adjust a trade imbalance with China.

President Donald Trump signed a memorandum that could impose 25 percent tariffs on Chinese imports in 1,300 product categories. Trump’s administration estimates that this could affect $50 billion to $60 billion worth of Chinese imports, representing more than 10 percent of the nearly $500 billion the United States received in Chinese imports last year. The White House is citing Section 301 of the Trade Act of 1974 — which instructs the U.S. government to respond to Chinese practices — to justify this new plan. As part of his trade restrictions, Trump also plans to stem the flow of technology to China and impose tighter restrictions on acquisitions and technology transfers.

Marillyn Hewson, CEO of Lockheed Martin, praised the initiative at a White House ceremony, saying, “This is a very important moment for our country in that we are addressing what is a critical area for the aerospace and defense industry, and that is protecting our intellectual property.”

Officials in the U.S. Department of the Treasury are working to identify the technology sectors, such as semiconductors and 5G wireless communications, in which Chinese companies would not be allowed to invest. Furthermore, the Trump administration is considering enforcing strict reciprocity in investments, meaning that U.S. regulators would only allow Chinese investments in U.S. industries if U.S. investors can invest in the same industries in China. Additionally, the administration is considering invoking an emergency law that usually is reserved for national emergencies to impose restrictions on Chinese investments, according to Bloomberg.

U.S. Trade Representative Robert Lighthizer said that the tariffs would probably target high-technology products, including new-energy vehicle technology, agricultural machinery, aerospace technology, information and communications technology, and machinery — representing areas China hopes to dominate — The Wall Street Journal reports. Members of the technology and communications industries worry that they will face higher costs because of the tariffs and retaliation against their companies doing business in China.

There is a procedure in place to address these concerns. A formal list of the proposed tariffs will be published in early April, and U.S. industry leaders will be given 30 days to comment on which products should be selected for tariffs. This will help avoid any taxes that could negatively affect the U.S. market. U.S. leaders also hope that this timeframe will give Chinese leaders time to make concessions and avoid trade cutoffs. So far, Chinese leaders have warned that they will add retaliatory taxes on commodities such as soy, sorghum and live hogs in response to the new tariffs. 

These proposed taxes are an expansion of the tariffs on global imports of steel and aluminum, which took effect in mid-March. In response to these tariffs, the Chinese government announced plans to tax $3 billion in U.S. imports, including pork, fruit, recycling aluminum and steel pipes. After receiving criticism from U.S. allies about the steel and aluminum tariffs, the Trump administration is negotiating exemptions for Canada, Mexico, the European Union, Australia and South Korea.

Chinese officials report that the United States has suspended formal trade talks with them and that U.S. leaders have not clearly communicated what they want China to do. Chinese leaders recommend easing restrictions on exports of U.S. high-technology goods to China, suggesting that this could narrow the trade deficit, but that is the opposite of what the Trump administration plans to do. The leaders also note that they have improved the protection of intellectual property and that they are working to further liberalize the country’s economy.

A complex market

If enacted, these new tariffs could create challenges for companies that engage in global trade. For supply chain managers, this will increase the complexity of global trade management, which the APICS Dictionary defines as, “The management and optimization of shipments across international borders to improve operating efficiencies and cash flows; includes ensuring compliance with all international regulations and documentation and streamlining and accelerating the movement of goods.”

The APICS Certified in Logistics, Transportation and Distribution (CLTD) designation program helps professionals prepare for the nuanced world of global trade. APICS CLTD content includes global logistics considerations, which emphasizes an understanding of customs clearing and documentation requirements as well as how free and foreign trade zones influence duties paid and total landed costs. Coordinating these international trade elements is an essential skill set for today's logistics professionals. To learn more, visit apics.org/cltd.

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