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Supply Chain Leaders, Be Prepared, Trump’s Campaign Promises of Import Tariffs May Have Unintended Consequences

By Jim Szakacs

Editor’s note: To coincide with the inauguration, Supply Chain World is running a series of articles from industry experts about how they expect the policies of the Trump administration to impact the supply chain. Read Part 2,  Part 3,  Part 4 and Part 5.

As the world watches the inauguration of the 45th president of the United States, regardless of political affiliation, there are feelings of anticipation, trepidation, anxiety, eagerness and definitely uncertainty. But one thing is certain, change is coming and supply chain leaders must commit to an assessment of their processes and the potential impact new policies may have on them. More importantly, the political changes in 2017 may not be unique to the United States as both France and Germany also hold presidential elections.

For U.S. companies with a global supply chain, the biggest threat a Trump presidency proposes are punitive tariffs on imported goods as well as restructuring NAFTA and the Trans-Pacific Partnership, all of which would have serious implications. But this would not be the first time that the United States has passed similar tariffs with the same expectation to increase the employment rate. The McKinley Tariff of 1890 increased the import tariff by 30 percent but ultimately caused a drop in the gross domestic product (GDP) while unemployment skyrocketed. The Fordney-McCumber Tariff of 1922 attempted to do the same but this time the global community retaliated by increasing their tariffs as well thus reducing American exports. Again, in the heart of the Great Depression, the Smoot-Hawley Tariff was passed as a protectionist measure that ultimately caused a 67 percent drop in American exports followed by a 40 percent drop in GDP. History often repeats itself and we’ve seen first hand the historical impact of increased tariffs on American exports and trade. Considering we thrive in a much more dynamic global economy than we did during the Great Depression, the impact would likely be immediate.

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You read about companies undergoing “digital transformation” all the time. Mostly this means that companies are taking digital applications from the back office to the front lines and using digitized processes in marketing, sales, procurement, and other functions to gain competitive advantage.

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Many retailers are moving toward a model where new collections are made immediately available to shoppers, rather than having consumers wait six months for a collection to go on sale. Consider the apparel space, where runway-to-retail lead time has always been notoriously long. Ralph Lauren is one of the biggest brands to recently implement the “see-now-buy-now” concept, and Burberry, Vivienne Westwood, Tom Ford and Tommy Hilfiger have taken similar steps in their recent fashion shows.

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