Will the U.S. – China Trade War Impact on Supply Chain Operations?

Whisper it quietly, but the world is bracing itself for a trade war between the U.S. and China. This almost seems inevitable, with China having responded to Trump’s initial clampdown on exports by imposing a 25% tariff on a wide range of American imports.

Like most wars, however, we’re unlikely to see a winner in this dispute, while the fall-out could well impact on all trading nations across the length and breadth of the globe.

In fact, this trade war could have a particularly negative impact on supply chain operations, which remains a key part of global importing and exporting. Here’s how:

The U.S. vs. China in Numbers

On a fundamental level, a trade war between the U.S. and China represents a conflict between the two single biggest economies in the world.

In the case of America, their $19.42 trillion economy accounts for a staggering 25% of the gross world product, while the U.S. boasts exceptionally advanced technology along with superior natural resources. Not only this, but America also boasts an impressive GDP per capita, which is estimated at around $59,609.

While China may be categorised as a developing country, over time it has transformed itself from a centrally-planned and closed economy to a global hub for manufacturing and exporting. This is reflected by its unique GDP, which is estimated at $23.19 trillion and exceeds the corresponding figure for the U.S..

So, while its GPD per capita number is considerably lower at $16,676, there’s no doubt that China has grown into a true economic powerhouse.

How Will This Trade War Impact on Supply Chain Operations?

As we can see, a trade war between the U.S. and China has the potential to be seismic, while it may also have a considerable impact on global trade. This worldwide supply chain operations involving cross-border businesses, which play a fundamental role in driving exports, imports and global trade as a whole.

In order to analyse the impact of this prospective trade war on global supply chain operations, it’s important that we take this argument to its extreme. In the worst-case scenario, companies impacted by the implementation of hefty tariffs could be forced to relocate their factories or distribution centres, at considerable social and financial cost (such moves could cost high number of jobs, for example).

This could also have a knock-on effect for investment decisions, creating longer-term problems and sustainability issues.

The Last Word

This so-called war has only just begun, and it’s bound to have a knock-on effect for businesses and economies across the globe. Interestingly, it may also be compounded by the confirmation of Brexit in 2019, which will see additional trade tariffs imposed on all transactions between the UK and the EU. Simple operations such as sending a parcel from the UK to Germany would be affected.

As a result of these factors, global trade and cross-border enterprise could well suffer over the coming months. In the longer-term, much will depend on the ability of economies to resolve their issues and minimise the cost of international trade across the globe.

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