Commentary: Who does trade protectionism protect? Not U.S. jobs and not the supply chain
While the U.S. tariffs on steel and aluminum may provide a short-term boost to American metal manufacturers, in the long term, they may cause increased prices and scare away business.
President Trump's recent decision to impose significant tariffs on steel and aluminum imports has sparked concern across every industry and around the globe. The announcement saw a fierce wave of backlash from the global community, as well as from U.S. companies worried that the implications of this move could go far beyond economic loss or gain for the nation. While the impacts on global trade, commerce, and the supply chain remain to be seen, one thing that's for certain is that these tariffs mark a move by the U.S. to embrace a protectionist trade policy. Yet the question remains, who exactly does it protect?
A 25-percent tariff on steel and a 10-percent tariff on aluminum send a clear message, signed, sealed, and delivered, to global competitors: The U.S. wants to protect and prioritize its domestic industries by elevating its metal manufacturers. The immediate impact of this move is fairly predictable—with steel and aluminum from other countries becoming more expensive for U.S. buyers due to the new taxes, consumers of these products will purchase American-made metals, boosting these industries and allowing for job creation.
But what the administration is not looking at is how these tariffs will affect the U.S. in the long run. While President Trump insists that the tariffs will reinforce national security and increase jobs for Americans, there seems to be limited thought around how a shift to American labor will affect the U.S.'s ability to maintain sustainable price points for goods made from aluminum and steel and to retain manufacturing business in the country.
To President Trump's credit, these tariffs will force the U.S. to become less dependent on foreign steel and aluminum. However, it will also drive up the prices of these goods. Americans may be willing to pay a premium for American-made goods—as evidenced by the growing movement to buy local—but without coinciding job creation, not all of them will be able to afford to do so. Likely, the cost of U.S. labor will drive the price of American-made steel and aluminum so high that companies will be forced to take an "all or nothing" approach to U.S. manufacturing—where businesses either commit all their manufacturing activity to the U.S., or more likely, move it out entirely to avoid raising the price of their products.
From a supply chain perspective, the most obvious way for brands to keep their supply chain in the U.S. is to invest in automation. U.S. companies will have to invest in automated machines that can produce steel and aluminum rather than hiring humans. Automation and artificial intelligence (AI) will help companies keep prices lower and preserve the industry but will also lead to fewer jobs. This pokes a significant hole in President Trump's plan, given that American job creation has been core to his administration from day one.
There has long been a debate over whether automation takes jobs or makes them. In the supply chain industry, as well as many others, automation is implemented to absorb tedious and time-consuming labor, enabling workers to take on more strategic tasks. In this case, however, the technology would be leveraged as a necessary cost cutter rather than for the American worker's advantage.
Beyond these technological changes and some noticeable upward pressure on prices, these tariffs will affect the supply chain minimally in the short term. The contracts that bind suppliers and supply chain partners are long-term commitments, and ramping up any revisions to the supply chain is a time-intensive undertaking. The real change, however, is a ways down the road. Seemingly, perhaps, right beyond the administration's line of vision.
The long-term shift driven by President Trump's announcement—which the U.S. should be worried about above all else—is the likelihood that manufacturers will start to move their plants to other countries not affected by these tariffs. If U.S. companies are currently importing steel and aluminum from the European Union or China, strategic manufacturers will likely relocate their manufacturing operations to those countries to avoid the tariffs, achieve lower costs, and employ cheaper, non-U.S. labor. This potential migration of business is the antithesis to the motive behind imposing the tariffs in the first place.
Such a shift could also deter international companies currently considering building home factories in the U.S. Importing various parts or metals will add costs throughout the supply chain, making conducting international business in the United States only harder. With the mounting complexities that exist around the global supply chain already—from customs, taxes, and even now the implications of Brexit—brands will have yet another obstacle to overcome.
In the end, a protectionist trade strategy is entirely self-defeating. President Trump seems to believe that the U.S. is capable of winning any trade war, but in reality, there are no true victors when it comes to tampering with free trade. The whole point of free trade is that it's supposed to move freely—protectionism will not protect U.S. trade, it will only end up restricting it.
Rather than building a shield around the U.S. economy as the administration anticipated, the steel and aluminum tariffs may end up forming a cage around the country. This case may serve as an example of how protectionism, when approached in the short-term, can succeed in driving away those from whom we seek protection, but somehow leave the nation weaker and more exposed in the long run.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.