Anticipation of Retaliation over U.S. Tariff Approvals Hits Home

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With today’s announcement of the Trump Administration’s approval to enact a 25 percent tariff on $50 billion of Chinese goods (approximately 1,300 products), China has indicated that it will retaliate – affecting a long list of U.S. products which include soybeans, meat, and of course, manufacturing. The imposition of this tariff goes far beyond hurting a single industry, as the retaliation will touch so many products and industries in the U.S.

Retaliation Targets Farmers

Brian Kuehl, principal of K·Coe Isom’s Federal Affairs team, is assessing the potential impact of today’s approval on agriculture as a whole and says that this decision is not only a blow to farmers but a win for competitors.  Kuehl spoke on behalf of Farmers for Free Trade today in reaction to the news,

“For American farmers this isn’t theoretical anymore, it’s downright scary. It’s no longer a negotiating tactic, it’s a tax on their livelihoods. Within days, soybean, corn, wheat and other American farmers are likely to be hit with retaliatory tariff of up to 25% on exports that keep their operations afloat. When they do, they’re not going to remain silent.”

Bracing for the Uncertainties of Today, Tomorrow, and the Future – Across All Industries

If we have learned one thing from the steel tariffs, it’s that the actual tariff doesn’t have to be in place for the economy and industry to feel the effects.  From the time of that announcement, suppliers posted large increases on steel in response of what was to come.

The only certainty at this point is perhaps, uncertainty. Justin Mentele, principal and Manufacturing lead at K· Coe Isom explains, “People will be impacted in a number of ways. On one side, this imposition can mitigate some of the risk of customers going to China to get their products cheaper. On the other hand, many of the components that are used by U.S. companies to produce their products come from China. It will likely take time to understand what the ‘new normal’ for product costs are, to be able to fully understand what the true hit to margins are.”

He adds, “Business decisions that were made yesterday, and were financially correct, may not be today. In order to make the best decisions today, there really needs to be a fully developed analysis of anticipated costs to ensure that there isn’t a period of unacceptable sales quotes in which companies are losing money without knowing it.”

While much is uncertain, it is expected that the ramifications from this announcement will see price increases for U.S. suppliers stemming purely from anticipation of the increased demand. As it stands now, reactive decisions could be debilitating for some businesses.

K·Coe Isom’s Federal Affairs team will continue to monitor and communicate the latest developments around trade news, and its impact on your business.  Reach out to a K·Coe Isom advisor for more information about the impact of the tariff impositions on your business.  If you would like an assessment of your current situation, click here.

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