How Do American Tariffs On China Impact Supply Chains?

By Ferdinand Bada on January 23 2020 in Economics

The US and China have been embroiled in trade wars.

Introduction

In the past couple of years, the US and China have been embroiled in trade wars that have seen the two nations impose tariffs on one another. Naturally, these wars have had far-reaching impacts on several groups of people with the citizens being affected the most. In particular, the citizens are being affected by the disruptions in the supply chain. This in, turn, makes it difficult for companies to operate, which increases costs on customers as production costs increase.

Effects of American tariffs on China on the supply chain

The following are some of the effects of the American tariffs.

Companies move to other countries

Granted, the trade wars are showing signs of abating at the moment. However, companies these days have more room to maneuver, which means they will be seeking to avoid falling into a similar problem should the wars begin again in the future. As such, they will be seeking to move to other countries with better trade relations and stability. The idea is to produce products at lower prices so that they remain competitive in the harsh global market.

Demand on better transportation

Changes in the global economy normally translate to an increased demand for transportation. In the US, this presents another unique problem in the form of flooding, which is why flood transportation systems are in demand. For example, the Mississippi River is flooded thus making it difficult for farmers to move their products. They have to rely on barges instead to get the product to the Gulf of Mexico.

A chance for North American trade to increase

As companies seek out new markets, some experts state that American firms will look closer to the US for more business. A potential new market is North America because the US generally relates well with her neighbors. In addition, shipping costs to the nearby regions are low, which means a maximization of profits. This may actually be a long-term solution because people are unsure whether the tariffs will continue after this administration or not.

Increased prices on the consumers

Tariffs mean that there are increased costs on production and supply. Since finding new markets can be tough, some companies may be forced to transfer the cost to the final product and, by extension, the customer. Companies that will be successful in this period are those that can absorb the extra cost and sell at normal prices, which means they stay competitive. This also applies to Chinese companies and citizens.

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