Making Waves: Worldwide Tariffs

We all knew this was coming, we just weren’t sure when exactly and what it would look like. President Trump made no secret that he would put new tariffs in place when he took office. Of course, candidates say all sorts of things on the campaign trail, and you can never be certain when or how they will deliver. In this case, the President has acted quickly, forcing companies to respond with the same level of swiftness. We now have a much clearer idea of what these tariffs are going to look like, yet the real question is, what are companies going to do about it?

Technically, some of the most headline grabbing tariffs have been put on hold. The proposed tariffs on Mexico and Canada have been put on a 30-day break after the two countries negotiated with the U.S. The pause seems contingent on Canada and Mexico working with the U.S. to improve border security and stop drug trafficking. It is possible that they get delayed even further or disappear altogether. These tariffs were a clear negotiating tactic. Trump’s planned tariffs for China have not been put on hold, yet the President had said that he would speak with Chinese President Xi Jinping in the coming days. No agreement has been reached so far, and China has issued counter-tariffs as a retaliation. We could see other countries use the same tactics in the coming months.

All of these tariffs could have created a trade war, that certainly seemed to be on the table as recently as a week ago. While that crisis has been averted, it is not gone completely. These import taxes could resume at any time, and we can never know what the President will implement next. Eventually, one of these tariffs won’t be put on hold and the economy will have to shift. Companies have been granted a temporary reprieve, yet change is coming one way or the other.

New tariffs are likely to drive prices and inflation up. This is particularly devastating since these things have started to improve recently. For something like the restaurant industry, cooling inflation has finally started to drive up traffic. It’s something that the industry has been needing for years, and more inflation could hamstring that momentum. If these tariffs do take effect, we expect higher prices for common products and we can expect consumers to push back.

It’s no secret that companies have spent the last couple years convincing customers to return to their old habits amid increased prices. The sticker shock hit average consumers hard and most have pulled back on what they usually buy and if prices skyrocket again, it will spell disaster. This would be devastating across every industry. Negotiating with suppliers and adjusting pricing strategies are some of the best short-term options for companies looking to ease the pain of potential tariffs. Longer-term solutions involve diversifying the supply chain and investing in technology that can mitigate costs. All of these options and more should be on the table as we move into an uncertain future.

That uncertainty looms large over the next few months. On one hand, Trump used the Canda and Mexico tariffs as a negotiating tactic. On the other, he did implement the China tariffs. It’s impossible to know which tariffs he is using as a threat or which he plans to use until he actually does it. At the end of the week Trump is expected to announce reciprocal tariffs that will affect a multitude of countries. At this time, we do not know which countries will be affected or how severe the tariffs will be. We can be sure that it will happen, and companies will need to adjust again.

While we’re in a period of uncertainty, there is one thing that manufacturers and suppliers to the retail and foodservice industries can be sure of; the only way through is forward. Now is the time for more aggressive marketing and sales, to lock in additional clients, and mitigate rising costs with more revenue. Give us a call if you would like to know how CSG can help your business navigate these troubled waters.