The newly imposed tariffs (taxes imposed on imported goods) on steel and other manufacturing staples have sparked massive backlash from the world abroad. In a bid to reinvigorate manufacturing in the U.S., consumer goods are now paid back in full from the E.U., China and other nations that have their own trade restrictions in place against U.S. products. In theory, tariffs are designed to increase the price of imported goods within a country, thus encouraging that country’s consumers to buy locally produced items, which are not subject to the tariffs.

Most economists agree that the problem with this theory is that it is generally better for the economy if everyone involved sources materials from the most cost-efficient provider as it:

• lowers costs
• Increases the purchasing power of consumers
• Increases choice in product and sourcing

For instance, if steel manufacturers in China can provide less-expensive steel and other building products, the cost of building new infrastructure and buildings in the U.S. decreases. Regardless of these imposed tariffs, it is unlikely that the minimal increase in manufacturing steel and aluminum in the U.S. will completely offset the loss of jobs for manufacturers who rely on the less costly steel to remain competitive. This does not also include the industries affected by the response tariffs imposed by other nations.

In response to America’s tariffs, other countries have reacted by imposing their own tariffs on American goods, such as American Bourbon, tobacco, sweetcorn, orange juice, peanut butter and more, are being hit by 25-percent tariffs from the E.U., which is likely to hurt American farmers and food producers. These costs will likely be passed to American consumers as farmers struggle to find buyers for their product.

Everyone in the supply chain should be on the lookout for how these new policies will impact their business regardless of whether they have international sales. Businesses and consumers should anticipate additional tariffs on other goods and the furthering of the trade war’s reach.

All businesses should pay close attention and contact their business advisors to determine where their industry is impacted and to brace for this new closed global economy. At GHJ we can provide the resources to understand how these complex industry changes effect a wide array of businesses within the food space and brace for what could be economic turmoil ahead. Feel free to contact us at 310.873.1600.