The Pulse -Trade Wars and Supply Chain Chaos

Trade wars have reached new heights with Trump administration tariffs on Chinese goods soaring as high as 245%, causing unprecedented disruption to global supply chains and shipping routes.

• US tariffs on Chinese goods have escalated rapidly, from 10% on April 2nd to cumulative rates reaching 245% by mid-April
• China has responded with retaliatory tariffs up to 125%, effectively excluding American goods from their market
• Global shipping patterns are changing dramatically, with vessels rerouting from US ports to European hubs
• The UK government has seized control of British Steel operations to save the last two functioning blast furnaces in the country
• Companies like Unilever are focusing on digital transformation across their manufacturing network, achieving 8% cost reduction
• Schneider Electric has invested $700 million in North American operations amid growing regional demand
• The Trump administration has closed the de minimis loophole that allowed Chinese companies to avoid customs duties on packages below $800

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Chapters

• 0:19 Happy Easter and Trade War Updates
• 2:18 Trump's Escalating Tariffs on China
• 4:57 Supply Chain Disruptions Explained
• 8:24 Global Shipping Rerouting and Impacts
• 11:05 British Steel Crisis in Scunthorpe
• 14:40 Unilever's Digital Manufacturing Transformation
• 16:35 De Minimis Rules and Customs Loopholes
• 18:26 Trump Policies and Closing Remarks

Transcript

Tony Hines: 0:19

Hello Tony Hines here you're listening to the Chain Reaction Podcast all about supply chain advantage. Great to be here, thanks for dropping by, great episode coming your way in just a few moments. So stick around, stay tuned and find out more. Well, in a moment we're going to take a look at all the things impacting global supply chains this week, all the things that are really influencing the changing nature of trade in the global economy. But before we do that, let's wish everybody listening out there a happy Easter. April is the cruelist month, so said TS Eliot, and that's certainly proving that way with the tariffs from the United States and the continuing trade war, particularly with China. On April 2nd, president Trump announced Liberation Day tariffs, imposing a 10% tariff on all imports, including Chinese goods. On April 5th, tariffs were increased on Chinese goods to 34%. On the 8th of April, the tariffs were raised by another 104%. On April 9th, the tariff reached 125%, and by mid-April the cumulative tariff rate on certain Chinese goods climbed as high as 245%, reflecting additional layers of tariffs. And these are all part of the measures the ongoing trade war with China, and China has responded with its own regulatory tariffs. Xi Jinping said he won't probably raise tariffs again because, to all intents and purposes, american goods are already excluded from the Chinese market with the tariffs laid on them presently. So how long is this all going to last? It's hard to believe, isn't it? Just three months ago, america was more open in its trading relations with the world, and here we are, three months into this administration not quite, anyway, but we're also now closing down trade.

Tony Hines: 2:21

The IMF said this week that they didn't think a recession was likely. Well, I think that's a bit optimistic, isn't it? Particularly when global trade is going to fall significantly and prices are going up everywhere, including the United States, and it's all due to tariffs. I think most people will find it very strange, because they've grown up with a United States that was always open and trading around the globe and now they find that perhaps we have the most protectionist economy in the world, probably ever. Are they the most protectionist economy ever? Well, we'll have to check on that, but it certainly seems that way right now. I can't remember an economy so protectionist in my lifetime as the United States has become right now.

Tony Hines: 3:16

And of course, it's damaging lots of critical infrastructure because obviously semiconductors and those sorts of things and the rare earths are 90% processed in China those rare earths and they account for about 60% of all exports in those minerals and metals. So this is going to affect all kinds of industries, even with Trump's waiver for tech companies and some electronics. Is that going to really keep the flow moving? Hmm Well, let's wait and see. One thing is certain, of course these policies aren't necessarily going to achieve the aims that Donald Trump has stated, which is to bring back jobs to America. It's likely to be the reverse there are going to be fewer jobs as prices rise and trade becomes more difficult for companies, and as profits fall, inflation rises and demand for products fall. Then there are going to be more people out of work. I think that's how it's going to shape up, and, in any case, sledgehammers and nuts come to mind. Because was this really all necessary? Couldn't this have been achieved in a different way, without well, let's call it the crudity of these enormous tariffs?

Tony Hines: 4:49

These Trump administration tariffs, particularly those with China, have had profound effects on global supply chains. They've disrupted just-in-time models. The imposition of tariffs has created instability, making it harder for companies to forecast demand and plan inventories accurately, and this has disrupted the efficiency of all those just-in-time supply chains which permeate many industries, including those industries that the Trump administration is claiming to protect. As for the relocation of supply chains, many businesses have been forced to shift their supply chains to other countries to avoid tariffs, and this has led to increased cost and further logistical challenges. There are also specific sector impacts. Industries heavily reliant on international supply chains, such as electronics, automotive and pharmaceuticals, have faced significant challenges. For example, the pharmaceutical industry has seen disruptions in the supply of critical drugs and raw materials, and I know that recently Trump wants to exclude some of those pharmaceutical products, but the damage is already probably set in train. Then there's increased costs. Tariffs have raised the cost of imported goods, which has been passed on to consumers and businesses, and it's particularly affected sectors like machinery, textiles and consumer electronics. And then what about global trade realignment? The trade wars have prompted countries to seek alternative trading partners and diversify their supply chains, leading to a realignment of global trade networks, and it's continuing. It's reshaping the global trading landscape, and the long-term implications for businesses and economies worldwide is unclear, but not looking good.

Tony Hines: 6:47

When it comes to those cited 245% tariffs, it's made up of various layers of tariffs, including reciprocal duties on fentanyl-related levies and Section 301 tariffs. Not all Chinese goods face that rate, but tariffs vary depending on the product category. Examples of things like syringes and needles are among those hit with the highest tariff rates, while other goods such as laptops face significantly lower tariffs, and the situation is part of the ongoing trade tension between the US and China, with both sides now imposing retaliatory measures. China's tariffs on the United States, I think, are around 125%, but of course, as Xi Jinping said, that's sufficient to keep American goods out of the Chinese market because the prices are too high with that tariff rate. Well, I suppose the question is, will Trump become as impatient with tariffs as he has done with the war in Ukraine? He's now, of course, threatening to pull out of negotiations of a peace deal between Ukraine and Russia because he doesn't think progress is fast enough. Of course, he did claim before he came to power he'd settle this war in 24 hours. Well, that hasn't happened.

Tony Hines: 8:08

The escalating tensions between the United States and China are causing significant disruptions in global supply chains Tariffs and fees as high as 145% on Chinese imports, while China has retaliated with tariffs up to 125%. Additionally, the United States has introduced a $1 million docking fee for Chinese-built vessels entering American ports, which is a significant increase from the usual charges. These measures have led to widespread rerouting of cargo ships. Many vessels are avoiding trans-Pacific routes and instead diverting to European ports, causing congestions in places like Antwerp, Rotterdam and Hamburg. The uncertainty and increased costs are reshaping trade alliances and market strategies. For instance, some businesses are opting to store and sell goods in Europe rather than completing shipments to the United States, and this has led to a surge in vessel traffic in European ports. The new fees and tariffs are expected to disrupt shipping patterns, increase costs for importers and potentially weaken global supply chain stability. Major shipping companies and industry leaders are lobbying for revisions to the policies.

Tony Hines: 9:29

On April 15th, china told its regulators to stop accepting imports of Boeing aircraft. It's yet another example of the fallout in the trade war. The United Kingdom is still hopeful of a trade deal with the United States, and JD Vance, the Vice President, said this week that it was highly likely a trade deal would be struck in the coming days. It's reported in the United Kingdom that the Prime Minister is continuing talks with President Trump to try and get tariffs lowered from the general rate of 10 percent, and also hopeful that the 25 percent levied on uk cars to the united states can be lowered too. Of course, the united kingdom is not part of the major problem for the United States in the sense of creating their trade deficit. The lion's share of that lies with China and that's why they're being hit so hard when it comes to tariffs. The one thing we know about the Trump administration's policies with regard to trade is that they are causing significant disruption to global supply chains which have become increasingly complex with their international dependencies. And it's something of a failure, I think, of the Trump administration not to acknowledge those interdependencies in a more sophisticated approach towards their tariff policies.

Tony Hines: 11:07

Well, this week the UK government has taken control of British Steel's operations in Scunthorpe. They decided to do this after the Chinese owner, jing Yi, refused to continue funding the production of raw materials into the site. It was to protect the last two functioning blast furnaces in the country. There's a thought, isn't there? The last two blast furnaces and prevent thousands of job losses. These blast furnaces, of course, can develop what's known as virgin steel, meaning that it's new, whereas most other furnaces, different types of furnaces, deal with reprocessing scrap. So it's a very difficult situation with the steel industry and, of course, without steel you haven't got the capacity to build railways, rsjs for building, for construction industries, you can't build ships without those raw materials and it means to get those raw materials you have to import all the steel you need rather than make it yourself. I wonder what the iron masters would think of this inheritance after 300 years of development of iron and steel in its modern construction from the industrial revolution. Well, we've got a special coming your way in the next week or so all about the iron and steel industry and you can learn about the history and the development of iron and steel in the United Kingdom.

Tony Hines: 12:40

The Chinese Foreign Ministry has warned Britain against linking trade and security. They don't seem very happy about this takeover, and there was a race on to make sure that coking coal because we don't make any coking coal anymore in the United Kingdom was imported in time to keep the blast furnaces alive. Because when blast furnaces cool down and switch off, it takes an awful long time to restart them, and they reckon that they couldn't get these restarted again. They have to be closed down properly for a restart to take place, and it's very expensive too to restart rather than to keep the furnace running. So hopefully they will have saved some jobs in Scunthorpe. But is it temporary, or is there an industrial strategy that's likely to build up capacity to produce steel in the United Kingdom? If there isn't, there should be. So an island of coal no longer produces coal. It's a strange world, and yet we're short of energy and we can't make the things that we developed in the industrial revolution, such as iron and steel, and those skills have gone and we don't build many ships and we can't build weapons and we can't build aircraft without importing steel. Of course, the Chinese government is the backer of Jingyi and all the other private investments that take place through Chinese companies around the world and this is not to condemn China for that situation. But of course, they want the monopoly of steel production because it gives them a very central role in the export trade of steel and steel products. With high energy costs, subsidised steel from China and tariffs of 25% from America, what does the future look like for British steel ?

Tony Hines: 14:40

Now, there was a very interesting report in Supply Chain Digital this week and it was about Unilever's digital system. The Unilever manufacturing system, ums, is at the centre of a transformation across 124 factories worldwide. The aim To reduce waste, agile production and develop growth using data and automation. It's part of the World Class Manufacturing Initiative, and if you don't know about World Class Manufacturing, you can read about that in my Supply Chain Strategies book. It's a model that Unilever started back in 2013, when they focused on lean operations and continuous improvement. Factories are now using smart tools to track performance, manage equipment and respond to changing demand in real time. They've had a 3% increase in overall equipment effectiveness and a 5% higher labour productivity, and their costs gone down by 8% over the network. So quite impressive numbers. Schneider Electric has made a US$700 million investment, which demonstrates the commitment to improving its supply chain operations in North America. The investment is said to support energy infrastructure improvements and an expansion of domestic manufacturing, along with growing demand for AI technologies. Regional demand is rising for data centres, utilities and industrial sectors, and that's what's driving Schneider Electric's largest single capital investment in its history of 135 years. It builds on previous investments in 2023 and 2024. It now has invested more than a billion US dollars in this current decade.

Tony Hines: 16:29

The Trump administration has already closed the loophole for de minimis in the United States. This removes the tax loophole that allows Chinese companies to send packages below $800 in the case of the United States directly to customers in the United States, so they can operate quite a mail-order business without involving any customs duties. But that loophole is now being closed. It's also being considered in the United Kingdom, but Royal Mail, dhl and Evry are urging the government to reject retailers' calls to remove the de minimis tax rules that allow shipments worth up to £135 to be imported without incurring customs duty. You can see that the figure is much lower in the United Kingdom and £135 is not that much. So it would cost more to actually operate the customs and import duty and collect the tax perhaps than it would give in benefits. It would lead to longer lead times and additional costs to consumers. So is it worth it? That's the big question for the UK. Many retailers have suggested that this could lead to a rerouting of goods from the United States to Europe, so they're worried about the flood that might occur as a result of the de minimis benefit in the United States being removed. Of course, a lot of the goods that come in under de minimis aren't necessarily subject to the same product safety or product liability rules or indeed ethical and environmental standards that UK consumers might expect, and that's another problem.

Tony Hines: 18:07

Apparently, the Trump administration in the United States are looking at how they might remove Jeremy Powell, who's the head of the Federal Reserve. They basically don't like what he's saying about the tariffs, that they're inflationary and driving up cost. Well, it's true, isn't it? So do you just sack people where statements are true? It might seem so this is new America, not the land of the free. So supply chains are different now. They're difficult to navigate.

Tony Hines: 18:36

In the United Kingdom we had Brexit. That was one shock. Then we had the pandemic that was a second. And now we've got Trump with his tariffs More problems, more issues, more slowdown in trade and, for small and medium-sized businesses, big cost. President Trump has also given permission for Rio Tinto zinc to mine copper on Native American land. It's owned by the San Carlos Apache tribe. He gave permission in his first administration. It was then put on hold by the Biden administration, but it's now up again for grabs because the United States says it could supply 25% of its annual copper demand, but the Native Americans are not happy.

Tony Hines: 19:22

Likely to be a little legal wrangling over this one. I thought President Trump didn't like lawyers, but it seems he does, because he's certainly putting a lot of business their way, isn't he? With all these executive orders and raising up 200-year-old laws to push through various policy shifts so a lot of money coming your way. If you're a lawyer in the United States, I think, well, if you like the insights that you glean about your supply chains and the news on business that you receive every week, then make sure you subscribe to the Chain Reaction podcast and you'll be first to know when new episodes come your way. And then, the next week, don't forget to tune in and listen to the Iron and Steel Industry Special. That's it for this week. I'm Tony Hines, I'm signing off and I'll see you next time in the Chain Reaction Podcast. Until then, take care Bye. For now. You've been listening to the chain reaction podcast, written, presented and produced by Tony Hines.