HOW TRADE WARS ARE EFFECTING BUSINESS AND COMPANIES

World trade has been experiencing the biggest trade war in its history which is taking place between the world’s first and second largest economies. United States’ step for imposing the tariffs of $250 billion on Chinese goods is responded by China, as Chinese Government imposed tariff of $110 billion on USA goods. These moves are resulting a great effect on the value of the goods, international trading and global economy.

While US Government is in preparation of enabling new taxes, several positive comments on the taxes are being heard from company representatives. On the new tariffs, some executives are in the opinion that this will help eliminating the bad practices of China without any economic damage to the interests of the United States. It will also boost growth with bringing back jobs and allowing US companies raise to a more competitive level. However there are also alternative opinions approaching the situation more cautious as this may bring slower growth for US manufacturing sector. The big differences between opinions depend on the import export rates of the companies for their markets and their supply chains.

Manufacturer companies that are importing their supplies from China are more effected with this process. The new taxes are resulting a boost on production costs and push them to raise the prices, as a way of reflecting the situation to the customer. This doesn’t always seem to be a solution while at that point customers are heading to more economical alternatives unless they have high brand loyalty. That means companies have to find a more certain solution to handle this negative effect. Otherwise its obvious that the profit levels may noticeably decrease which would bring a great risk for low profit companies of being pushed out of business.

On the other hand companies that are not using Chinese imports for their production are more likely to benefit from the tariff. Especially the companies manufacturing articles of steel and iron are on the advantageous side against Chinese companies as they will be able to charge higher prices.

Globalized companies take steps to relocate their manufacturing plants overseas as a way of adjusting themselves. Finding new locations to avoid the tariff effect is not a cheap and easy step for companies with the labor costs and huge expenses. But this shows that a solution for the conflict is not expected in the short term.

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Categories: TRADE TRENDS

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