Insights from Our CEO: Moonwalking Tariffs

  • by itradmin - Tue, 03/27/2018 - 09:53

The Trump Administration decided to exempt the European Union, Argentina, Brazil, South Korea, and Australia from the steel and aluminum tariffs that went into effect on March 23. Below is a list of the top 11 sources of imported steel into the US.

US Steel Imports Chart

This seems to leave Russia, Japan, Taiwan, India, and China paying a tariff tab since Canada and Mexico were previously provisionally exempted. Considering how draconian the initial decree was regarding these tariffs, the following comes to mind:

  • 1. I can picture Michael Jackson moonwalking the tariffs back from the precipice of the valley of protectionism.
  • 2. We are not likely to see the magnitude of trade issues (disagreements) with other countries as we once feared, which reduces uncertainties (which is good news).
  • 3. Inflation concerns and uncertainties derived from the law of unintended consequences are reduced.
  • 4. How does this stop Chinese steel from coming in through exempt countries? As previously discussed, it seems a certification of origination using blockchain technology could be useful.

What it means for most businesses is that the supply chain disruption will not be as significant as it could have been. However, use this experience as an exercise on how you will contend with disruptions going forward. The pendulum has swung from globalization to nationalism. Expect more pricing drills in the years to come.

Brian Beaulieu