Ramping up U.S. import tariffs or attempting to decouple the U.S. economy from China will mostly damage U.S. consumers, retailers and exporters, according to leading supply chain experts on a recent episode of the Dimerco-sponsored Freight Buyers’ Club podcast.
Here’s an excerpt from the show, featuring Jason Miller, Eli Broad Professor in Supply Chain Management at Michigan State University, and Jessica Dankert, Vice President Supply Chain, Retail Industry Leaders Association (RILA).
Dr. Miller of Michigan State said authoritative research into U.S. tariffs since 2018 shows no clear economic benefits to the U.S. heartland. He noted that retaliatory tariffs on U.S. exports have had clear negative impacts on employment, primarily in agriculture.
Miller argued that any increases of existing tariffs would exacerbate these negative impacts, as retaliation from China and other countries would harm U.S. export industries.
“I see no economic upside to this,” he said. “It will be a tax on consumers. And frankly, I think it’s one of the dumbest economic policies I’ve ever heard of.”
Jessica Dankert, Vice President Supply Chain, Retail Industry Leaders Association (RILA), said “tariffs are taxes on American businesses, consumers and workers”.
She added: “Retailers basically want to see the U.S. government focus on smart trade policy that opens up new markets, reduces tariff and non-tariff barriers and addresses unfair trade practices, without this unnecessary collateral damage to American businesses and consumers.”
Decoupling the U.S. Economy from China
Robert O’Brien, former President Trump’s last national security advisor, recently stated that Trump’s plans to escalate the trade war with China did not go far enough.
“As China seeks to undermine American economic and military strength, Washington should return the favor,” O’Brien wrote in Foreign Affairs, adding that “Washington should, in fact, seek to decouple its economy from China’s.”
However, Dankert argued that a 100% decoupling of the U.S. economy from China is “simply not realistic” in a global economy.
Jason Miller was even more dismissive, saying, “We’re not decoupling with China short of a war. There’s just no way at this point; the two economies are so intertwined.”
Friendshoring Brings Complexity
At Dimerco, we agree that the new tariffs have a clear downside, and the accompanying friendshoring trend creates complexity on a couple of fronts.
For one, the tariffs will accelerate China Plus One strategies. As companies diversify production beyond China into Southeast Asia, India, Mexico and other countries, they often encounter huge challenges related to the different legal, regulatory and logistical realities of new markets.
According to Dimerco CEO, Jeffrey Shih, more and more of Dimerco’s services go beyond logistics and involves advising companies on complex issues like trade compliance.
“Just because a product label says something was made outside China is not a guarantee that tariffs would not apply,” says Shih. “The new factories could be run by Chinese companies or use China-made components. Companies need guidance on these country-of-origin issues to make sure the benefits they seek through relocation are real.”
Shih also points out that tariffs will increase the cost of trade for business. “It could be difficult for companies to pass on all the added costs to their customers,” he says. “If they absorb some of these costs, then the pressure on profitability will require an even greater focus on running highly efficient global logistics operations.”
Elsewhere in the podcast, Dankert and Miller discuss global supply disruptions in 2024, restocking strategies, U.S. domestic freight market dynamics, and the looming threat of union strikes and natural disasters on logistics.
Check out the full episode.
About the Freight Buyers’ Club Podcast
The Dimerco-sponsored Freight Buyers’ Club podcast is produced for anyone with a professional interest in international trade, shipping, procurement, logistics and air cargo. The podcast features leading decision-makers, analysts, journalists, operators, and shippers who share their take on current freight and logistics markets and the challenges and opportunities. Want to receive alerts on new episodes? Sign up here.
Do you need help navigating tariff-related supply chain challenges? Reach out to Dimerco for solutions and expert guidance.