President Joe Biden’s recent announcement of new tariffs on Chinese imports marks a significant development in the ongoing US-China trade tensions. These tariffs cover a range of products, from electric vehicles (EVs) to solar cells and semiconductors and aim to protect strategic American industries. However, the implications for global supply chains are profound, necessitating careful navigation and robust contingency planning by businesses worldwide.
The current situation and its impact
President Biden’s tariffs, which will affect $18 billion worth of Chinese imports, represent an attempt to bolster American industries against subsidised Chinese competition. Notably, tariffs on EVs will quadruple to 100%, while those on lithium batteries and solar cells will also see substantial increases. These measures follow a historical precedent set by the Trump administration in 2018, leading to weakened cargo volumes and increased costs in the air cargo industry.
Peter Sand, chief analyst at Xeneta, emphasises the added complexity these tariffs will bring to supply chains. Increased red tape and higher costs are expected, ultimately burdening US consumers. Businesses may seek alternative routes, such as increased imports through Mexico or sourcing from other countries like Vietnam, though these options introduce new challenges.
The tariffs’ impact is already evident. For instance, the demand for container shipping imports from China into Mexico surged 34% in the first quarter of 2024 compared to the previous year. This shift suggests that businesses attempt to circumvent direct tariffs by re-routing goods through neighbouring countries. However, these alternative supply chains need time to mature, introducing additional volatility and costs.
Industries heavily relying on Chinese imports, such as electronics and renewable energy, will likely face significant disruptions. The US National Retail Federation has voiced concerns that these tariffs will raise costs for US consumers, highlighting the inflationary pressure on everyday products.
The need for contingency planning
Given the current geopolitical climate, contingency planning is more critical than ever for maintaining the resilience and integrity of global supply chains. Businesses must adopt proactive strategies to mitigate the impact of the new tariffs and other potential disruptions. One practical approach is diversifying supply chains by exploring new markets and suppliers.
While this may initially increase complexity and cost, it can enhance resilience against geopolitical risks.
Investing in technology and data analytics can offer enhanced visibility and control over supply chain operations. By harnessing the expertise of businesses specialising in urgent logistics support, companies can then use these investments to make timely and efficient adjustments to their supply chains, minimising downtime and cost overruns.
Furthermore, having a robust contingency plan involves identifying and preparing for potential risks, such as sudden policy changes, natural disasters, or other unforeseen events. This preparation enables companies to respond swiftly and effectively, ensuring the continuity of operations.
Solutions and recommendations
Considering these challenges, businesses must adopt proactive strategies to mitigate the impact of the new tariffs.
Businesses should regularly review and update their contingency plans, incorporating lessons learned from past disruptions and staying informed about emerging risks. By doing so, they can better anticipate and respond to future challenges, ensuring a more resilient and agile supply chain.
If you’re interested in learning more about how our control centres in North America and China are assisting businesses in developing contingency plans for potential disruptions caused by policy changes, feel free to reach out to our teams on either of the following:
Atlanta, USA: +1 (855) 738-6564 or info@evolution-timecritical.us
