Here's What You Need to Know
It can be difficult to reconcile all of the news flying around about trade wars, tariffs, and tweets. The main difficulty is deciding what to believe and what to disregard. That can be a difficult task in our current political climate.
President Trump has been threatening a trade war with China for months now, claiming that we are losing billions of dollars to them and that a trade war is an easy way to bring all of that money back to the United States.
But what does this mean for business within the United States that depend on shipping internationally? We'll cover the whole situation in this article.
Will Trump's Tariffs Hurt Businesses at Home?
You may or may not be entirely caught up on the situation, and some of the terminologies might be unfamiliar to you. We'll go over the basics of the situation before giving an idea of what businesses might be facing.
What is Going On?
Whether you are a fan of him or not, it is hard to argue that Trump tosses around a lot of rhetoric that he may not be able to back up. It's difficult to discern what is true and what is false when so many of the statistics that he sites have been shown to be inaccurate.
When Trump says that there's a 375 billion dollar trade deficit with China, images of a world takeover and Chinese domination of the economy start to emerge. These images might be a little different when you understand what a trade deficit is.
This simply means that we buy 375 billion dollars more in goods from China than we buy from them. This would seem like we're indebted to them for some ungodly amount, but it doesn't mean anything close to that.
The United States has a predominantly service-based economy. In fact, 90 percent of our economy is based on services, not goods. That means that we need to buy our goods from elsewhere, which is why we buy so much from China.
What is Trump Proposing?
Trump is pushing a tariff on all Chinese imports, making doing business with China significantly more expensive for businesses here. He's proposing a 25 percent tax on all steel, and 10 percent on all aluminum imports.
Some of the rhetoric used to support this decision is based on the idea that the United States wouldn't be able to create enough weaponry on its own as it is. His rationale is that the tariff will incentivize a boost in U.S. production of metals, helping the domestic economy and providing a better foundation of production should a war break out, especially with China.
Is This Logical?
Trump's proposition that the problem lies in China may not be entirely accurate. Data shows that the United States' largest import of steel actually comes from Canada. In fact, European countries, South Korea, Mexica, Brazil, Japan, and Taiwan all rank before China in terms of steel imports.
This begs the question, "why is Trump focusing on China?" It's difficult to say, but it could just be that he doesn't know. The push for this tariff is rooted in the idea of protectionism.
The problem for consumers, and you, business owners, is that there will be a far more limited supply of steel within the United States. We've grown accustomed to a price and quantity of steel from foreign countries, leaving us with ample materials and decent prices.
Production of steel within the United States will take a while to pick up steam, meaning there will be a lower supply and higher demand. This means that prices will be relatively higher for domestic businesses.
How Could the Trade War Affect Us?
At the surface, it doesn't seem that a trade war with China would affect a domestic company's ability to ship internationally. That being said, there are some foreseeable consequences that could significantly impact domestic businesses.
China is rightly upset with this tariff because it will challenge their ability to profit internationally. They have the power to leverage Trump's threats with threats of their own. For example, China is where much of our essential technology is manufactured.
Think of Apple. A large part of our economy relies on Apple products for point of sale, communication, entertainment, and more. China could significantly raise the tax on Apple products, making that essential technology much more difficult to afford.
This could escalate into a number of different markets, especially those that do business with China. While domestic production of metals may increase, bringing jobs to those who work in that industry, there is likely to be an adverse effect for workers in many other industries.
Who Supports This Action?
There is little support for Trump's plan, even within the Republican party. Republican are huge proponents of free trade. Free trade is supposed to allow the production and purchase of cheaper products all over the world, allowing us to have cheaper, high-quality products at our disposal.
Free trade also promotes a sense of unity among allies, making them more dependent on one another and therefore less likely to break out into war. It's confusing to think about why president Trump seeks to isolate the United States from the rest of the world, often leaving other nations angry and skeptical about the state of the United States.
Speaker of the House, Paul Ryan is even opposed to the trade, holding that poor trade practices should be targeted individually, not with sweeping tariffs that could potentially harm many nations. He stated that our economy and security benefit from healthy trade among nations.
Make sure to keep up to date on the state of affairs among out most powerful nations. Whether or not you support the actions of our leaders, you're still affected by them.
How Do Other Nations Feel?
The World Trade Organization has stated that Canada and the European Union have complained about the tariffs, stating that they violate the WTO's 1994 General Agreement on Tariffs and Trade, in addition to violating the Agreement on Safeguards.
The U.S. plans to enact a number of tariffs that serve as a retaliation against the United States. These will work to tax over 3 billion dollars in American exports. Some of the markets included are liquor, motorcycles, and blue jeans.
If these actions develop and Trump imposes more tariffs that violate the WTO's agreements, other markets may be affected, impacting more and more domestic businesses.
Find Ways to Effectively Ship Internationally
We can't just up and stop doing business in the face of tariffs and trade wars. You still need to get your business done, so make sure to find ways to ship parcels internationally that allow forwarding.
If you're looking for information on forwarding and shipping services, we've got everything you need.