The Cost of Protectionism: How Trump's Tariffs Impact Supply Chains

Dive into the complexities of global trade as we explore the immediate and long-lasting effects of tariffs introduced by President Trump. From the automotive industry to supply chain dynamics, this episode uncovers how protective measures against imports have triggered widespread economic repercussions. With tariffs forcing prices higher, consumers are left grappling with the realities of increased costs for everyday goods. The episode features key insights from industry leaders concerned about job stability and production expenses, painting a vivid picture of how these policies reverberate through the economy.

As we dissect the global response to these tariffs, the dialogue opens up vital questions on the trust and ethics within international trade agreements. Our analysis reveals how tariffs may inadvertently reinstate trade barriers that could affect U.S. exports and consumer prices at a critical time. We invite you to stay informed about the evolving landscape shaped by this protectionist approach, filled with strategies businesses employ to adapt to impending hurdles. Join us for a compelling discussion and consider how these developments might impact your daily life and the broader economy. Subscribe to our channel for more insights and stay updated on upcoming episodes.

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Chapters

• 0:35 Introduction to Supply Chain Advantage
• 7:03 Stock Market Reactions and Economic Implications
• 8:43 The Ripple Effects on Global Supply Chains
• 17:00 The Arrival of Tariffs: What to Expect

Transcript

Tony Hines: 0:07

Hello, tony Hines, here You're listening to the Chain Reaction Podcast, all about supply chain advantage. Thanks for dropping by, great to be here, stick around, stay tuned, stay informed. Well, president, donald Trump has applied the tariffs. So it was on the 4th of the 3rd, so don't know what all that talk about the 2nd of April was Some confusion there, thrown in Curveball from Donald Trump Not unusual. And here we are. Tariffs have arrived 25% on Mexico and Canada and an extra 10% on China. All three countries have said they'll retaliate. Stock markets around the world have fallen on the news of the tariff applications.

Tony Hines: 0:57

So this is very bad news for the global economy. It will backfire, of course, on the American economy. It won't do what President Trump thinks it will do. It will rather push up costs and there's all kinds of evidence for that already around. Don't know what he doesn't read, doesn't see, he just believes what he says and takes no account of reactions or what other people will do.

Tony Hines: 1:21

But this will be very bad for supply chains. Global supply chains will add friction cost and, of course, the price of everything will do. But this will be very bad for supply chains. Global supply chains will add friction cost and, of course, the price of everything will rise, from metals, fuel, everything, absolutely everything will go up, and that will have a big impact on US businesses and US consumers, as well as businesses elsewhere around the globe, the globe. It's like applying a sales tax of 25% to everything that comes under the tariff regime from Mexico and from Canada and from China 10%, an extra 10% on top of what's already there. So anything coming from those countries, prices will go up. And, of course, lots of auto parts come from Mexico and from Canada, so it'll be damaging the home automobile industry. You might as well just put the price of cars up in the US by 25% or something similar, because it's components and finished cars from those countries that will be impacted. And, of course, many of the automobile manufacturers are already very unhappy. They've come out and spoken against these tariffs, but Trump doesn't have a listening ear. He simply only listens to one person, and that's himself.

Tony Hines: 2:41

President Trump has gone on about how the European Union and other countries don't accept US products. Well, they won't be accepting them now that he's piled on the tariffs, because that makes them a lot more expensive in those countries, instead of tackling the cause, which is perhaps a marketing issue, a production issue, a quality issue? A quality issue or something else? A reason why those cars aren't selling elsewhere apart from the United States? Until that particular issue is tackled, then tariffs will not settle anything. It's going to remain a problem and it's going to get worse. The competition from China and china evs is already particularly problematic for car makers in europe and in other countries where chinese cars are being imported to the lower priced, often with high quality production, and this is not the way to go. But he's going to learn the lesson hard. But the problem is US consumers will be hit extremely hard by these tariffs and businesses in the US, far from improving their position in the world market, it will weaken it significantly. I don't think he understands economics.

Tony Hines: 4:01

So far, three major stock market indices have fallen. Ftse 100 in the UK, which is the top 100 companies list, opened sharply lower on Tuesday. Stock markets in Asia are also down and, of course, the United States stock market down too. Of course, what you have to remember with tariffs tariffs are just like a tax. When Trump talks tariffs, he's talking taxes and he's putting taxes on imports to the United States, which is going to cause retaliation from other nations that he places them on, and that means goods going to the United States from other places. They're going to cost a lot more. So prices are going to go up and the assumption when you place tariffs on those imports is that it hurts the supply nation. But actually that's partially true, because there'll be falling demand, because it makes them slightly higher in price. But those products coming from those other nations will go in to production areas in the United States and if you haven't got the capacity to substitute those products from homemade products which they haven't, because that's why they're importing them and these companies are global and they're switching things around they have lots of parts from all over the world going into their production chains then it's going to cost. There's only one way for things to go and that's up. And that means, if the costs go up, the finished products coming out of the United States and trying to win export markets. Well, that won't happen because people will switch supplies where they can. Tariffs will push up prices for US households and they'll have a knock-on effect on consumers all over the world. So basically, trump has just put the price of everything up everywhere. Feel a recession coming on. Well, we might do.

Tony Hines: 5:59

Canada said it will retaliate against the 25% tariffs and £150 billion worth of US goods. They say there's no justification for the US action. The first target's going to be £30 billion worth of products and they'll target £125 billion worth of products over the next 21 days. So we've got a trade war in progress and the Canadian Prime Minister said any fresh duties that Canada imposes will stay in place until the US trade action is withdrawn. China also swiftly announced its own countermeasures, which include 10-15% tariffs on some US agricultural goods, including wheat, corn, beef and soya beans. China's the US biggest buyer of these goods, so that's going to affect farmers in the US and food production companies. Lin Jian said China will fight these tariffs to the bitter end. The Mexican president said that they had plans also, but they haven't said what they are yet. But there's no doubt a response on its way soon.

Tony Hines: 7:03

The Hang Seng, the Nikkei all dropped Hang Seng only by 0.3%, the Nikkei by 1.2% and Standard Poor's 500 was down 1.8% and the Dow Jones was down 1.5% yesterday, but they might fall further today. So great for business, driving the costs right up and the value right down. It's estimated it could cost US consumers about $2,000 more a year, just at a time when they don't really want more price increases, and it could have a similar impact elsewhere around the globe. Japanese and Korean automakers might find their way to the market in the US as a result of Trump's tariffs, unless he decides to whack the tariffs on everybody. I mean, that's the whole point, isn't it? We don't know where the wacky stick is going to point next. He's got an insatiable demand for attention. I think Donald Trump he just likes to be in the news every day Could be tariffs today, gone tomorrow, or it could be tariffs today. I think Donald Trump he just likes to be in the news every day Could be tariffs today, gone tomorrow, or it could be tariffs today, more tomorrow. We just don't know where US policy is heading right now, and this creates a tremendous amount of uncertainty for the whole world and, not least of all, for the US itself. Running a business in the US at the moment must be a very difficult business Difficult times, not knowing where you're going to get whacked next. Let's take a look at the ripple effect of Trump's tariffs on the auto industry.

Tony Hines: 8:38

The recent implementation of tariffs by Trump and his administration sent shockwaves through the global economy, with the auto industry bearing a significant brunt. These tariffs, targeting imported materials like steel and aluminum, have sparked concerns about rising costs, disrupted supply chains and potential job losses. Industry voices have spoken out. They've been very vocal about their apprehensions. One major spokesperson for a US manufacturer said the tariffs will inevitably increase production costs and unfortunately, these costs will have to be passed on to consumers. Similarly, an executive from a European automaker highlighted the challenges of maintaining competitive pricing in the face of new trade barriers. For US manufacturers, these tariffs are effectively a tax on input costs, while for consumers they mean higher prices on finished goods.

Tony Hines: 9:35

One of the responses will, of course, be savvy adaptation in the face of tariffs. Tariffs often spark creative adaptation and in this case it's no different. Savvy exporters look to sidestep tariffs. Many reroute export pathways or adjust country of origin data to avoid additional costs. Others are establishing production or assembly facilities and tariff exempt countries, showcasing how interconnected and adaptable global markets can be. While these strategies mitigate some impacts, they also highlight the unintended complexities of protectionist policies. And let's be clear, that's what Trump's trying to do. He's installing lots of protectionist policies.

Tony Hines: 10:20

Automakers themselves are employing various strategies to navigate the challenges, from localising production, diversifying supply chains and engage also in lobbying efforts. Manufacturers are trying to absorb the shocks. However, for many, the increased costs are unavoidable and some have already begun passing these expenses on to consumers through higher vehicle prices. So what does the road ahead look like? Well, the long-term effect of these tariffs remains uncertain. While some argue that they could boost domestic production, the majority voice is warning of a potential slowdown in the global auto market, with potential price hikes, strained supply chains and shifting trade dynamics. The industry is at a pivotal moment. The key question remains how will manufacturers, consumers and governments adapt to the evolving landscape of Trump's tariffs, and what will the retaliators do that will make the situation better or worse, I think. Unless Trump backs down with these tariffs, we're in for a very torrid time in the global economy and it's not going to help anybody, least of all the United States, which, of course, the President did hope it would help.

Tony Hines: 13:03

There was an interesting chart that came from the US Census Bureau and it was adapted by the BBC for publication on their website and it was all about Trump's tariffs and what products will be affected. If you look at the range of products that tariffs are placed on coming in from Mexico, china, canada and elsewhere, then the US Census Bureau estimates 78% of delivery trucks are coming in from Mexico and 15% come via Canada. Insulated wire 53% Mexico, 11% China, a small amount from Canada. Computers 34% from Mexico and 26% China. Cars 23% Mexico, 13% Canada. Telephones 9% Mexico, 45% China. Broadcast equipment 9% Mexico. Smaller men from China 16% from Canada. Refined petroleum 7% from Mexico, 22% Canada. Crude petroleum 58% Canada, 7% Mexico. And electric batteries for cars and automobiles 56% from China so significant. So it's interesting when you look at the tariffs on the countries he's placed them on.

Tony Hines: 14:31

Trump has completely ignored the successor to the North American Free Trade Agreement that's in place and he's just trashed that by placing tariffs on near neighbours, mexico and Canada. So much for agreements with the United States. You may recall, the free trade agreements with Mexico and Canada underwent significant changes In the last Trump administration. The original North America Free Trade Agreement, nafta, was renegotiated and replaced by the United States-Mexico-Canada Agreement, usmca, and that came into effect on 1st July 2020. The USMCA introduced updates to various aspects of trade, including stricter rules of origin for automobiles, increased labour protections and provisions for digital trade, while it preserved many elements of NAFTA. The new agreement aimed to address modern economic challenges and rebalance trade relationships among the three countries.

Tony Hines: 15:35

Trump has been able to introduce the tariffs on Mexico and Canada despite the USMCA, and that's because tariffs can be imposed under certain circumstances, even within free trade agreements. For example, the US government can invoke national security provisions or other trade laws to justify tariffs. In this case, trump cited concerns over issues like fentanyl trafficking and economic imbalances as the reason for tariffs. Interestingly, the Prime Minister of Canada said, less than 1% of fentanyl comes through Canada. I think what's more disturbing about the introduction of tariffs is perhaps the lack of trust and the ethics involved in introducing tariffs. It's not just about economics, but it's trust, reliability and ethics. And you have to say that the trust between the immediate neighbors and the US current administration seems to be under threat here, and they're concerned about the reliability of the US as a trading partner, as indeed are many other countries at present. The global corporations that operate outside of the United States are probably tearing their hair out at present over these tariffs and figuring out ways of how to avoid them as best they can and to minimise the impact of any risk and uncertainty created by the American presidency. And as we finish the episode, here's a short poem that might help everyone understand what's going on.

Tony Hines: 17:18

In the name of protection, the tariffs were laid, but the cost of their weight? A heavy cascade For trade and for business. The burden is clear A ripple of risks that all must now bear. Inflation ignites as costs climb high, the price of goods reaching the sky. Jobs hang in the balance. Industries strain as fragile economies feel the pain. Supply chains disrupted, their rhythm, askew Roots, rerouted origins, renewed, unforeseen consequences. A tangled web spun when once there was plenty, now there is none. The lifeblood of commerce now slowed to a crawl. As barriers rise, economies stall. A lesson emerges, though, bitterly learned that trade, when hindered, leaves everyone concerned.

Tony Hines: 18:13

The sweeping tariffs laid down by President Trump have had a swift response from Canada, and Mexico said they'll be having retaliatory tariffs by Sunday. China responded immediately too, as we discussed in the episode. So what next? Another midnight moment, another day of more tariffs, a change of heart and a turnaround. Well, who knows, you can't predict the unpredictable.

Tony Hines: 18:44

Well, if you like the Chain Reaction Podcast, subscribe. You'll be first to know when new episodes are dropping your way. Keep a lookout for the Pulse, where we will continue with the chronicles of what comes next in Trump World Tariffs. And that's it for today. I'll see you next time in the Chain Reaction Podcast. Just before I go, pick up any episodes you've missed, there's a whole number of programs now about tariffs and their impact on the global economy, and you might want to just go back backtrack and get familiar with some of the arguments involved in the process of imposing tariffs. I'm Tony Hines. I'm signing off. I'll see you next time in the Chain Reaction Podcast. Take care Bye. For now you've been listening to the chain reaction podcast, presented and produced by Tony Hines.