THE BUSINESS IMPACT OF TRUMP TARIFFS: With the United States imposing new tariffs on imported aluminum, steel and other products, risk managers must assess the implications for their company's supply chain..

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Author: Lori Widmer
Date: June 2018
From: Risk Management(Vol. 65, Issue 6)
Publisher: Sabinet Online
Document Type: Article
Length: 1,862 words
Lexile Measure: 1340L

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In March, theTrump administration sparked an outcry by announcing that it would impose import tariffs of 10% on aluminum and 25% on steel, following earlier tariffs on solar panels and washing machines. Representatives from the retail, automobile, manufacturing, construction and information technology industries, the U.S. Chamber of Commerce, and various trade groups all expressed concerns about the potentially detrimental effects of the tariffs.

Although the stated intent of the tariffs was to protect American workers and the U.S. economy, not everyone was convinced. Financial markets plummeted after President Trump tweeted on March 2 that "trade wars are good, and easy to win," and other governments, including key allies, spoke out against the move. In a complaint filed with the World Trade Organization, South Korean officials labeled the steel tariffs as "unjust" and "inconsistent with the United States' obligations." The Chinese Commerce Ministry declared the tariffs "a serious attack on normal international trade order" and immediately slapped tariffs on 128 U.S. products in retaliation. Subsequent and sometimes contradictory comments from the Trump administration about whether the tariffs will actually be imposed, and against what nations, exacerbated market volatility and overall uncertainty.

The fallout could have a significant impact on U.S. companies. For example, analysts at Goldman Sachs reported that Ford and General Motors alone could see a combined $1 billion hit attributed to increased steel prices, which could ultimately have an effect on auto sales and industry jobs, while the American beer industry, which packs more than half of its products in aluminum cans and bottles, estimated that the tariffs would cost brewers nearly $348 million a year.


Of course, tariffs do have their supporters, with many believing levies on imported goods--particularly from China--are long overdue. The Department of Homeland Security (DHS) reported 34,143 import seizures for intellectual property rights violations in 2017, an 8% increase over the previous year. Based on the manufacturer's suggested retail price, this amounted to a total financial impact of $1.3 trillion, or $3.8 million worth of intellectual property rights violations per day.

These make up the majority of all import seizures and, according to DHS data, China is the top country of origin (although it is important to note that country of origin is not necessarily the same as where the seized goods were produced). "When you look at that, something has to change," said Jennifer Diaz, international trade attorney and founder of Diaz Trade Law. "China on the whole needs to understand how important intellectual property compliance is, and they need to respect it more."

Others believe, however, that the problems tariffs can create outweigh the benefits. According to Dr. Emily Blanchard, associate professor of business administration at Dartmouth's Tuck School of Business, the risks of U.S.-borne tariffs are significant and the effects can be more widespread...

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